How to Lower Your Property Taxes (Part 1) Half of All Homeowners May Be Paying Too Much. Here’s What You Can Do About It

by The Real Estate Faction on September 6, 2011

By JEANNETTE NEUMANN And SAABIRA CHAUDHURI

Home prices are still going down in many markets. But your property-tax bill might well be going up.

The good news: There are ways to fight back.

Property taxes across the U.S. have increased by nearly 20% from 2005 to 2009, the most recent data available, according to an April study by the National Association of Home Builders. The median annual real-estate-tax payment was $1,917 in 2009, up from $1,614 in 2005.

Over the same period, home prices in major urban centers fared badly, decreasing 31%, according to the Standard & Poor’s/Case-Shiller 20-City Composite Index.

Property taxes don’t move in lockstep with home values because local governments typically don’t measure values every year and some have limits on annual property-tax increases, says Natalia Siniavskaia, a housing-policy economist at the home-builders group. That means your current property taxes might reflect your home’s value when the market was healthier. Property-tax adjustments lag behind changes in home prices by an average of three years, according to the Congressional Budget Office.

There isn’t much you can do about your property-tax rate, which is set by your local government. But homeowners can often get their assessment lowered if they appeal to their local assessor. That can translate into a lower tax bill.

More than half of homeowners are paying too much in property taxes, says Jim Kane, Chicago-based managing director of True Partners Consulting, a tax advisory firm.

One key to a successful appeal: fact-checking the assessor’s work. About half of all successful appeals come from homeowners pointing out an error in the assessor’s description of their home, Mr. Kane says. Such errors can drive up a home’s value.

To understand how these mistakes happen—and how to correct them—it is important to keep in mind how your local government assigns a value to your home.

Local officials can assign a value to your home using house-by-house appraisals, computer models or even aerial photos to gauge how many rooms are in a house or whether there has been a new addition, such as a deck or swimming pool. But it’s difficult to look closely at each home every year, so officials will also update home values based on recent home sales in your area.

The superficial nature of the assessments means details can be overlooked.

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