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Real Estate Tax

Challenging Property Tax Assessments

Your annual property tax bill is based on your county government’s valuation of your property. Assessed values are often very different from the actual fair market value of your home. If your county assessment is too high, resulting in a property tax bill that is more than it should be, you can contest the property valuation in an attempt to reduce your tax bill.

The fair market value of your property is represented by the price that a typical home buyer would be willing to pay for your house. Arriving at the fair market value of your home without actually selling the house is accomplished by comparing your home to other houses that have sold. A proper comparison requires that the other houses be as similar to your house as possible. The best comparable properties will have nearly the same square footage and number of bedrooms and bathrooms as your house. In addition, they will be in the same neighborhood and will have sold within the last few months. This process is very similar to how appraisers determine the vale of your home.

There are two types of assessed value that local governments use to determine your property tax bill: Market assessed value and tax assessed value. Market assessed value is the government’s estimate of the fair market value of your home. This valuation is often based on the last sale price of the property, adjusted occasionally for appreciation. Since many counties multiply all properties by the same appreciation rate, the assessment may not take into account unique features of your home, location, or the modern realities of your local real estate market. Some localities will further multiply your market assessed value by some other fraction in order to arrive at the tax assessed value, and then apply your local tax rates to this number.

When the assessed value on which your property tax bill is based is higher than the actual fair market value of your your home, you may end up paying too much property tax. Most counties offer informal hearings at which you can challenge the assessed value. To prove your case at this hearing, you should be armed with an appraisal, a Broker Price Opinion from a licensed real estate agent, or your own list of recent comparable sold properties. You may also have the option of appealing the assessment valuation to a review board. In rare cases, you may need to take your case to court in order to have the proper value of your property assessed.

Even if you disagree with your property tax bill and are challenging the valuation assessment, it is advisable to still pay your property tax bill. Failure to pay your property taxes can result in a lien being placed against your home. This lien takes precedence over all other liens against your property, including federal tax liens and your mortgage. The danger here is that your property could end up being sold to a tax lien investor, further complicating your tax situation, and running you the risk of losing your home if the lien is foreclosed on. Your challenge against the tax assessment may take time, and it is thus best to pay your property tax bill during the time you are challenging it.