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Tips for Challenging Valuation of Property

Property taxes are a significant aspect of ownership in the real estate industry. All real estate assets are taxable. That includes commercial properties and residential properties, which are assessed yearly property taxes.

From Los Angeles to New York, every government has a regulatory arm for local taxation. It is dedicated to collecting yearly taxes from the real estate market. You might own commercial real estate investments like office buildings. Or perhaps you're just a homeowner. In either case, you may experience property tax headwinds.

The impact of a tax assessment can be expensive for property owners. This is especially true during a financial crisis or pandemic. Tax assessors have different methodologies for calculating how much you owe. Amid the volatility of real estate values, they are tasked with using stable valuation methods. This is to ensure fair real estate valuation for tax purposes. Fair market value estimations may be based on recent real estate transactions in a neighborhood.

But government assessors aren't expert valuers because they're not real estate professionals. As a result, challenges to the valuations of real property can happen. In most cases, owners are free to meet with the government assessor to present their cases. However, any changes must be based on evidence. Complaints that taxes are too high, without any proof, will not lead to a reduction.

Tips for Challenging the Valuation

Property owners will need all the records pertinent to the valuation of their property. This is to make a successful argument for changing the valuation. It's important to ensure you've reviewed the assessor's records for mistakes.

Suppose the assessor accidentally added an extra bedroom or bath in their assessment of the property. Or maybe they figured the tax using the wrong taxing authority. These mistakes can make an enormous difference in your property tax. One way to correct errors is to review comparable sales data the assessor used for their valuation process. Examine these documents and compare your property's assessed value with nearby properties.

A valuation challenge may be successful if the appraisal overlooked hidden conditions such as:

  • Pest infestation
  • Cracked foundation
  • Other undesirable environmental conditions

Such factors could lower the property's value, resulting in a lower appraisal. Additionally, certain exemptions in the property may negatively impact its value. For example, exemptions may be available for veterans.

Comparing Property Sales

Most of the time, recent property sales can be the best proof of property value. Comparisons of properties in the same neighborhood can be made using public information. But getting the information alone isn't sufficient. The data must be analyzed in the context of an owner's circumstances. For instance, buyers and sellers can have different goals in every transaction. The underlying purpose for a sale can affect sales prices.

It can also be difficult to make comparisons without recent sales. Maybe there were no recent transactions in a property owner's neighborhood. In this situation, you can look for comparisons in other familiar neighborhoods with similar properties. Consider factors like:

  • Location
  • Style
  • Age
  • Square footage and lot size
  • Number of rooms

Following Procedure

Every state provides formal and informal methods to challenge tax bills. In both, adherence to procedure and time limitations are critical. In most jurisdictions, homeowners must pay the assessed taxes even while their challenge is pending. If they do not, the taxing authority (municipal or county government, in most cases) may charge interest and penalties on the unpaid balance.

The laws and procedures for disputing a tax bill vary considerably from state to state. There are some common mechanisms for appeals. For example, most states have between two and four steps for appeals. The level of appeal after a complaint to the local assessor usually occurs at an administrative agency.

Examples include the county review board or county commissioner. Property owners may present evidence supporting their contrary opinion of an assessment or tax bill there. Should they not convince the authorities at that level, there are usually additional procedures at a higher state level. Ultimately, taxpayers can seek recourse by going to court. If litigation is the owner's next step, it is wise to hire an attorney whose specialty is representing property owners in these types of disputes.

Inability to Pay

Property owners have little recourse if they feel that they cannot afford the taxes assessed. Personal hardships are not considered in the assessment of taxes. Ailing from coronavirus or living on a fixed income will not justify an inability to pay.

For a government assessor, the property's worth is the only criterion for assessing taxes on that property. Property taxes are NOT based on:

  • Earnings
  • The original price of a piece of property (except in some states like California)
  • Disposable income, or one's ability to pay

Property owners may receive a large tax bill that strains their ability to pay it. Applying for a hardship exemption or a tax deferral may be their only recourse. Not all states have these procedures. Delinquent property taxes can result in hefty interest and, ultimately, foreclosure. If owners cannot pay their taxes, they may check with their local collection office for the options available to them.

Need Help With a Property Valuation Appeal?

If you're struggling with your property taxes or disagree with an assessed value, don't give up. A real estate attorney can represent you before the government. They can speak with your county's appeals board. If they cannot reduce or eliminate taxes by negotiating, they can escalate the matter to court.

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