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Wednesday, February 20, 2008

Appealing your property tax assessment...

OK, you’ve received your new property assessment and your taxes are going up again. And you thought that your taxes would go down with the market. What can you do? Like any fight with “City Hall”, fighting your tax assessment means doing your homework and being prepared. You should probably call your local City/Village/Township offices immediately to find out when the appeals process will be conducted in your area and to get yourself a reserved spot at the hearings. I certainly do not purport to be an expert on this area, so here’s some advice from a recent article on this topic (with my comments and extensions – ed.). As with all advice columns that are written somewhere else in the country, you should check out which of these tips really apply to your local laws and review/appeal procedures.

1. Learn your system (Always good advice before jumping into anything- ed.)
Taxing authorities use different methods to calculate home values. Some look at recent sales of similar homes. In rural areas where sales are few, they might estimate the cost to rebuild. Others use some combination of methods. Call your assessor's office and ask how it pegs values. In some locales your tax liability is based on a percentage of your property's estimated value. You'll want to know what that percentage is so you can figure out whether the actual value the assessor is assigning to your home is fair. Understand that in Michigan, while we have “capped” the rate of increase of the SEV of your home, we also have a second number – the “Taxable Value”; which can continue to increase by the rate of inflation or 5%, whichever is smaller, even while your SEV stands still or may even slide down. Homeowners who have owned their homes for longer than 5 years likely will see a difference between those two and may have a harder case to make if the Taxable Value is well below the SEV. For newer homeowners those two numbers are likely the same, so a separate Taxable Value may not even appear on your assessment notice.

2. Get your assessor's evidence
The assessor didn't pull his estimate out of a hat, even if it seems that way to you. Visit the tax man's office and ask for the evidence used to value your home. Get your home's property card, which lists basic details like lot size, square footage and number of bathrooms. Assessors are supposed to use the sales values on foreclosed houses this year, which means that the values of entire neighborhoods or subs may be coming down because of foreclosures that sold during the year. Find out what formulas the assessor used for putting values on the land and any buildings that are a part of the property.

3. Make sure the description is right
When municipalities or counties re-assess property values, they typically hire an outside contractor who looks at hundreds or thousands of homes in a tight time period. The appraiser has to come up with shortcuts. Three vent stacks on the roof? That must mean three full baths. Never mind that an upstairs laundry room could be the culprit. This can be a two-edged sword, if you have, in fact, made improvements without reporting them to the local building authorities (i.e. no permits for a major remodeling project). I find that the Public Records Database (PRD), which lists what the local government knows about your house, is often wrong because of unreported homeowner improvements. You may have to think twice about squawking too loudly about your taxes if that is the case.

4. Build your case
You won't have much time to file an appeal, generally 60 days or less from the time your annual tax assessment was mailed. (That just occurred within the last two weeks locally.) And you can't just march into an appeals board with a newspaper article showing price declines and expect to win. First you need to get an appointment for a review; otherwise you won’t get to march into anywhere with anything.

If the issue isn't a simple error on your property card, you'll need to arm yourself with recent comparable sales or assessments that show your house has been valued too high. You can look up your neighbors' home valuations at the assessor's office. Real estate agents are not allowed by Michigan law to do full comparative market analyses for homeowners for this purpose, only licensed appraisers are allowed to do that type of work. Most local papers also carry weekly lists of sold houses in their coverage areas, so you might look back through old issues to find data there. I keep track of sold houses in my little four-township market area – Milford, Highland, White Lake and Commerce Townships; so you can go look on my Web site and click on Real Estate Statistics and then on What’s Sold Locally. I have monthly files going back 5 months now, so there should be some data there that could help you make your case.

If you're in a new community, she might find homes with an identical floor plan that sold for thousands under your appraised value. Your ideal comparable homes will be of the same square footage and age as yours and sit on almost the same size lot. To make your case you'll need at least five sales - 10 is better - from around the time of your assessment. Builders have been dumping unsold spec homes and condos, so there has likely bee a significant decrease in the prices of homes just like yours in any new sub or condo complex.

Take a critical eye to the homes and make sure there aren't circumstances that an assessor could use to explain a huge difference. Is one of your comps next to the railroad tracks? Did you just replace the roof on your 25-year-old home or add a garage?

Put together a spreadsheet listing the addresses of the comparables, the sales prices and dates, the price per square foot and a description of what makes the homes similar to or different from yours. Finally, to complete your homework, drive out to the properties and take photographs of the exteriors.

If you can't find comparable homes that sold for at least 10% less than your property's assessed value, throw in the towel. Some areas require the valuation to be off by even more than that to win an appeal. Look for foreclosed houses that sold in the area, since they have often sold for dramatically lower prices and must be considered in assessment work beginning this year.

5. Try to meet the assessor informally
Go over the evidence you found in support of a lower value. This meeting might be hard to arrange in larger towns, but it's worth trying. It might be especially difficult to get to the assessors right now, due to the appeals process starting soon. If the assessor more or less agrees with you, the rest of the process will be a lot faster and smoother.

Attitude is important. You need to take a calm and logical approach to this process and not hurt your chances by putting the assessor or the review board on the defensive with an bad case of irate homeowner attitude. You're showing the assessor how his appraiser messed up. Don't add to his defensiveness by tossing verbal grenades like "I pay your salary." If the assessor won't budge, make him explain why. Take notes: He's handing you his battle plan for the formal appeal.

6. File the appeal
Usually this is with a Village, City or Township board. You may be able to just call into the local government offices to schedule a hearing slot, otherwise you should prepare a letter and hand deliver it and get a receipt or use certified mail. Within a couple of weeks you should get a notice acknowledging receipt. You must go through the local process before you can appeal to higher panels.

Most assessment appeals are heard over the course of a couple of weeks. Before your day arrives, attend a hearing to get accustomed to the proceedings. Certain board members might raise the same objections all the time. So make sure you're ready to answer those questions.

Prepare visuals with photos of your home and the comparable homes, then write out and rehearse your presentation. Keep it to eight minutes or less. Brevity will score you points and leave time for the board to ask questions.

7. You lost?
First, you'll likely appeal to a county or state review board. If that fails, you'll probably have to go to court, if that’s worthwhile. At this stage of the game you'll need help from a lawyer and probably an appraiser. That needn't cost a fortune. You can retain a lawyer for a contingency fee that varies based on your potential tax relief. An independent appraisal will cost $400 or so. If the potential saving was great enough for you to see this as a possibility, you probably should start by hiring an appraiser at the outset. You might want to make a quick attempt at a pre-trial settlement with the state and then re-examine your options and the potential costs and paybacks if this whole thin goes to a trial.

No one is ever happy about taxes and especially about tax increases; however, ranting and raging will accomplish nothing. Once you have vented on your family co-workers and friends, settle down and get logical about how to proceed with an appeal. The local authorities are expecting a deluge of appeals this year, so get your spot reserved early.

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