To help offset the loss you are taking on your falling home prices, you should consider have your property re-assessed for tax valuation.
I am going to need some help with this subject as I do not own a home. Also, please remember that everybody’s situation is different. Different states have different tax laws (or even close to zero property tax).
In general, however, the taxes you pay on your property are determined either at the time of a new purchase, or at semi-random intervals of anywhere from one to ten years. If the tax assessor last gave a valuation on your home anytime AFTER 2004, there is a good chance that the valuation was more than what it is worth now. This means that you are paying more property taxes than you should be.
Now, I do not know if assessors will jump at your demand to reassess, so you will need to test it. You also would need to prepare for future declines in home prices. If prices are down another 10% in 3 months, will the assessor be willing to come back out to re-evaluate? Or will he put some limit on your frequency and not come back for a year. There could even be rules for these limitations in each state. It needs to be checked out.
However, assume you are in New Jersey (nations 6th highest property taxes) and have to pay 1.6% property tax on an average home value of $334,000. If your home value has dropped by roughly 20% from its high (or more importantly, the last assessment), you could save yourself over $1,000/yr by a simple call requesting an updated tax assessment.
Be careful to make sure that you think your home value is much less than the last valuation. It could be painful to have that valuation go higher.
I appreciate any tips or feedback from anyone who has had this done previously.
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In most of the areas I’m familiar with, the County assessors send you a yearly notice of your valuation, on which your taxes are based. You have x number of weeks to protest or object. If you do there is a process for reevaluation, you usually need to provide information, comparables, etc. If they disagree, an independent judge evaluates your claim. The system works, but poorly. You are right,- I’m not sure the assessors offices are ready for the onslaught they are going to get this year, when everybody’s valuation has dropped. They had better be ready to respond or the system will get turned upside down. The assessors countrywide have always been very smug about their power, have generally undervalued the properties a little, and have had their way most of the time. This will be the next big battle that will be fought domestically. It may well be like gas prices. When oil goes up, so does the cost of a gallon of gas. When oil goes down, it hasn’t seemed to follow that quickly, at least not in my area; I paid almost $4 a gallon yesterday, when with oil at the price it is now 6 mos ago it was more around $2.50 – $3.00. Can you explain that?
Yes, indeed you can be successful at reducing your property taxes.
Some years ago, I petitioned for a review after purchasing a home in northern California and enduring a market slide the very first year we occupied the house.
It was a very easy (one page) process and they did reduce our taxes to the appropriate level for the current market. Fortunately, the market recovered and we sold that property for a handsome profit. But, in the meantime, we were able to save our tax dollars during the “off” years.
Great Blog. I will be interested to see how the potential decline in proprety taxes will play out with Municipalities. I would not be suprised to see some municipalities go belly up. Think about all of the master planned developments that required extra schools to be built. What happens to the construction of these schools when a shrinking tax base exists? Based on this alone I just cannot forsee many houses being assesed downwards as what you do for one you will have to do for all in this situation.
Thanks for the color Mom and Dad. Shiphouse, you bring up a good point. Just another reason that the government would need to print money. That, or a bunch of half-completed, empty, schools, which is also possible at the moment.
Great idea!
I am a realtor in Downtown Vancouver and we are starting to see prices come down here. It will be tough on cities to see their revenues fall, but they’ve got share the pain.