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In recent years, falling market values have inspired millions of homeowners to appeal their property tax assessments in hopes of lowering their tax bills, especially in "sand states" where values have fallen the most since 2006. But this year, the rush to judgment may be over.

Improving Values Discourage Property Tax Appeals

If its springtime, it must be time to appeal property tax assessments. In recent years, falling market values have inspired millions of homeowners to appeal their property tax assessments in hopes of lowering their tax bills, especially in “sand states” where values have fallen the most since 2006. But this year, the rush to judgment may be over.

In Los Angeles County Assessor last year, for example, 500,000 requests we received from property owners seeking to have their values reassessed. In San Diego, requests for reassessments grew from fewer than 100 in 2006 to 56,140 last year. Miami-Dade County, Florida is so overwhelmed by property owner appeals that it’s two years behind hearing them. Miami-Dade’s Value Adjustment Board expects to start hearing its 143,517 total 2009 tax appeals next month as it wraps up 2008 appeals, which means last year’s appeals won’t be done until sometime in 2011. The Ohio Board of Tax Appeals is so overwhelmed with appeals and struggling with staff cuts, the state board has more than 6,100 active cases – a 72 percent increase from just a year ago. The board is so far behind that it’s just getting around to scheduling hearings for appeals made in the summer of 2008.

The boom in property assessment appeals in the past two years has generated a mini-industry of lawyers and advocacy groups eager to sell guides and represent appealers. It’s also spawned an underground of scam artists preying upon angry homeowners and promising results they can’t possibly achieve. The Attorneys General of California, Arizona, Nevada and Oregon have issued consumer alerts and scammers have been sued and arrested in California and Arizona.

A sizable percentage of appealing homeowners have been successful. In Clark County, Nevada, homeowners achieved about a 76 percent success rate for all the appeals that were filed. Many of the assessment reductions were in the 30 percent to 40 percent range. In San Diego, assessments were reduced on more than 216,636, or 22.2 percent, of the 978,011 parcels of land in the county. The total represented new as well as continuing reductions from previous years.

A study at the University of Illinois found that a greater number of appeals does not improve the likelihood of success. In 2000, 9 percent of Chicago property owners filed appeals and almost 33 percent of those applicants were successful. Three years later, 14 percent of property owners appealed their assessments and 31 percent of them won.

The study found that most appeals were sought in census tracts with high median home values and larger or newer homes, the homeowners were more likely to be white and educated, and they decided to file an appeal because their neighbors were doing the same. And possibly one of the reasons they sought an appeal was because their incomes were proportionately lower than the run-up in neighborhood property values and assessments

This year, however, there are signs that relief may be in store for overwhelmed tax assessors and hard times ahead for the scam artists. Property tax appeals may be waning with the awareness that property values have bottomed out in many markets and there is little to gain by appealing assessments that already reflect the drop in valuation since 2006.

In San Diego, requests for temporary tax-assessment reductions have dropped 88 percent since last year, the latest indication that the local housing market has hit bottom, the county assessor’s office reports.

So far this year, only 7,000 owners have asked the county assessor to reduce their assessed valuation because they believe their homes have dropped in value. More than 54,000 appeals were filed last year.

In January 2009, the median home in San Diego was valued at $280,000, according to MDA DataQuick. Prices have started rising and the median price stood at $330,000 last month.

Will stabilizing prices in other markets bring an end soon to the tax appeal revolt?

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