Your property assessment definition can make the difference between a property that moves in the market and a property that stays stagnant. It is very important that you have an appropriate assessment of your property in order to approximate the tax that you owe on it annually. Here is what that assessment entails and what to do if you disagree with it.
What is a property assessment?
A property assessment is a value that a professional assessment agent assigns to your home for the express purpose of calculating your property tax. Because property tax usually includes a factor that depends on a percentage of the home value, assessing this value is vitally important in determining the annual tax payment.
Is a property assessment the same as a property appraisal?
A property appraisal is not the same as a property assessment. They are done by two different entities for different purposes. Although the results of the assessment are public and may be used as a benchmark value for a property appraisal, they do not formally affect each other.
The property assessment is done by a government agency. It is done solely to give the property a value for tax purposes. Even if the property tax payment is rolled up into the private monthly mortgage payment, the assessment is calculated separately. The property appraisal is done by a private contractor, and the value that is found is only valid to the lender, not to the government. The property assessment and the property appraisal may be similar simply by coincidence.
Why is the property assessment value sometimes much lower than the list price of a home?
Because the list price of a home is determined completely by the seller, it may not be contingent upon the same criteria as the checklist that the municipal tax assessor takes into account. The seller also has the freedom to add a profit margin directly into a listing sales price, while the tax assessment value does not consider any profit margin.
Property assessments may not be conducted for 10 to 20 years in some cases, and the property value may certainly fluctuate over that amount of time. Some municipalities do not order a re-evaluation of properties until the assessed value drops below 80 percent of the current market value. Local governments do not have much of an incentive to reassess, as the aggregated property tax it collects does not change enough to warrant any consistency in the process. Private sellers and lenders will always have an incentive for the latest appraised price, because the amount of the immediate cash outlay of a property transfer is at stake.
Why would I disagree with the property tax assessor?
Because property assessments are not taken with any sort of consistency, property taxes can become outsized if the real estate in an area falls in value.
What is the procedure for a formal disagreement with my property tax assessment?
In order to submit a formal disagreement, you must first contact the local tax assessor’s office. Find out when the state sends out the annual letter with the official tax assessment on it. To begin a formal appeal, you must write a letter back stating the disagreement. This return letter must be postmarked within 45 days of receiving the letter from the state.
In your letter, you must detail the concrete evidence that showcases your reasons for disagreeing with the tax assessment of the state. Although there are no hard and fast rules for showing a certain type of evidence and winning an appeal, you will probably have more leverage if you can show the following:
First, if you have a recent home appraisal that shows a substantially different number from the tax assessment, you should include this information. You will probably need to have your property assessed professionally. Expect this assessment to cost around $300-$400.
Secondly, include comps around your neighborhood. Comps are real estate shorthand for the prices of comparable properties that are in your area. For instance, if your tax assessor is saying that your property is $300,000, but you can show that seven properties around your area with the same bedroom/bathroom count are selling at $150,000, then you have a strong case for an adjustment.
What happens after I send my letter?
After you send your letter to the tax assessor’s office, they will get back to you with a ruling. They can either stand by their decision or adjust their original ruling. If you disagree with this second letter from their office, you have the right to appeal it again. Once this letter is sent, the office must reassess and send you another letter. If you continue to disagree, then you have the opportunity to appeal the ruling a third time by going in front of the county Board of Commissioners personally. This is where the final judgment will be rendered either way; there are no more appeals after this point.
Is the process worth it?
Around one quarter of people are successful in their appeals to the tax assessor’s office, resulting in a 10-15 percent reduction in the amount of property tax they pay. Most people would say that this is worth it, but only you can know for sure!
2 Point Highlight
Local governments do not have much of an incentive to reassess, as the aggregated property tax it collects does not change enough to warrant any consistency in the process.
For instance, if your tax assessor is saying that your property is $300,000, but you can show that seven properties around your area with the same bedroom/bathroom count are selling at $150,000, then you have a strong case for an adjustment.
