Today I present the second and final installment of my property tax saga — the informal hearing. (You can check out the first post here.)
To briefly recap, I'm a new homeowner and my assessed property value shot up by 31 percent from last year. So that, along with the fact that I have a tax-protesting father to please, landed me in County Appraiser Brad's cubicle for an informal hearing.
The bad news
First, County Appraiser Brad pulled up three comparable properties, meaning they were in my general area and fairly close in size, year built, etc.
“Well,” he said, “the thing is, you bought right before we hit a seller's market. So you got a great deal, but now you can see that similar properties in your area sold for much more, because a seller's market means higher sales prices.”
He showed me the comparables, and how the values compared to my house when adjusted for the market and differences in square footage and other improvements.
“So you can see here that what your property is assessed at is actually lower than the average of these comparables,” he said.
Hmm. This wasn't looking good.
“Okay,” I said. “But I thought that property taxes on a homestead couldn't increase by more than 10 percent from one year to the next. That's what I read on the county's website. Does that not apply here?”
“Were you living in the house on January 1 of last year?” he asked.
“No, we closed on January 18.”
“Well, you have to be living in the home from January 1 for that 10 percent rule to apply.”
“Huh,” I said. “So I miss it by 17 days and my taxes can go up 31 percent? That is sneaky!” (I said this in jest, and it seemed to amuse him.)
Knowing that I didn't really have an argument on those points, I moved on.
My Hail Mary
“Okay, Brad, but I have this other issue,” I said. “When my septic system was inspected, the inspector said she recommended a full replacement. The system is 40 years old, too small by today's standards, and it had a leak. When she found out that the city was annexing our area, she said that repairing the leak would suffice until city sewer was available.”
County Appraiser Brad asked for the septic inspection report, which I handed over.
“Well,” he said, “the problem is that the septic is working right now.”
“So I would have to have a non-functioning septic system right now to get my property value lowered?” I asked. This seemed kinda crazy to me. If the septic wasn't working, I'd of course have to have it replaced or fixed immediately. The point was that the thing was running on borrowed time.
“Okay, do you have an estimate to have it replaced?” he asked.
“No, we're not going to replace it,” I said. “We're going to hook up to the city sewer now that it's available.”
“Do you have estimates to do that?”
Ugh. No, I didn't. I knew I should have done that, but I just plain forgot. Also, the city just finished installing the pipes on our street not too long ago.
“We're just now in a position to have the work done, so no, I don't have estimates with me,” I said. “I could get that this week…”
“You would have had to have brought it in today,” he said.
“I've talked to my neighbors, and they've paid between $8,000 to $12,000, depending on how far back their house is from the street,” I said. (This was 100 percent true, but I knew that without an estimate in hand, my argument was pretty weak here…)
“Okay, how about this?” he said. “Since you don't have estimates, I'll split the difference and take off $5,000.”
“You drive a hard bargain, April Dawn.”
So $5,000 off isn't too bad. I certainly felt it was worth my time, especially because next year my assessed value could go up as much as 10 percent. That means that keeping the value as low as I can saves me money now and in the future.
In review, the best thing I did was to bring documentation about a major repair/replacement issue — the septic system. On the other hand, my biggest mistake was not getting written estimates before my hearing for connecting to city sewer. Had I done that, I probably would have been able to lower the assessed value even more. Lesson learned!
One last thing…
Finally, I want to touch on something that I should have explained better in my first post about property taxes.
In the comments on my previous post, some readers had questions about whether it's a good thing to have your assessed value lowered.
“It seems like if you are planning to sell in the next few years, it would be better to have it assessed higher,” wrote one reader, “or am I looking at it wrong?”
And reader “cd” had a great explanation:
“Your tax appraisal value and your market value are different things. I don't think many people use the property tax amount as a gauge for how much to pay for a home. Also, the appraised value is what your home was worth last year. In our county, tax appraisals can vary widely (always lower) than what homes actually sell for. Supply and demand should dictate what your home is worth, and your buyer will be required to get a third party appraisal in the selling process anyway by a company that does not assess values for taxation.
“Most importantly, getting the value lowered works the same as compound interest. If you get it lowered by 5 percent one year, that's less you pay every year forward. In addition, if they raise prices as a percentage of your current home value, then shaving dollars off that value saves you money in future increases as well. It's a no brainer for a few hours of work.”
That actually clarified a couple of things for me too!
So, readers, that's what the property tax protest process was like for me. I'm happy with the result, especially because I think County Appraiser Brad was being pretty lenient. And that reminds me of one final tip: Be nice. Appraisers are people too, and they're not out to screw you over.
On that note, maybe don't accuse the appraiser of being sneaky, although it seemed to work out okay for me. It's a judgment call, really.
Author: April Dykman
As a freelance writer, editor, and blogger, April Dykman specialized in personal finance, real estate, and entrepreneurship topics. Her work has been featured on MSNBC, Fox Business, Forbes, MoneyBuilder, Yahoo! Finance, Lifehacker, and The Consumerist. Now she does direct response copywriting but, in her free time, April is a wannabe chef, a diehard Italophile, and a recovering yogi.