Property taxes can be a major expense for both homeowners and commercial property owners. If a property assessment seems too high, the owner may be paying more in taxes than necessary. Fortunately, there’s a process to appeal the assessment and potentially lower the tax bill. This guide breaks down the steps to take and strategies to improve the chances of success.
How Assessors Determine Property Value
A property tax bill is based on the assessed value of the property, which is determined by the local tax assessor. Assessors use one of three primary methods to calculate this value:
Sales Comparison Approach
This method looks at recent sales of similar properties in the area. For residential properties, the sales comparison approach is the most common since it reflects recent market trends. For instance, if a similar home recently sold for $250,000 but the assessor values another comparable home at $275,000, the owner may have a reason to challenge the assessment.
Income Approach
Often used for rental and commercial properties, this method estimates value based on net operating income (NOI). If a commercial building earns $150,000 in NOI per year and local market data suggests a valuation of $900,000, but the assessor values it at $950,000, there may be grounds for an appeal.
Cost Approach
This method calculates the value based on the cost of rebuilding the property from scratch, factoring in depreciation. If rebuilding costs and depreciation suggest a property is worth $300,000, but the assessor values it at $350,000, the owner may have a case to challenge the assessment.
Because assessors typically use mass appraisal techniques instead of individual inspections, mistakes can occur. Property owners should carefully review their assessments.
Common Errors That Lead to Overassessment
Mistakes in property assessments can result in overpaying taxes. Here are some common errors to watch for:
Incorrect property details: Errors in square footage, number of rooms, or property features can inflate assessments.
Overstated condition: Assessors may assume a property is in average or above-average condition, even if it has significant wear and tear.
Misclassified property use: A residential property incorrectly classified as commercial can result in a significantly higher tax bill.
Inaccurate comparable sales: If an assessor uses higher-priced properties without adjusting for differences in property values, the assessment may be too high.
Ignoring market trends: If local property values have declined but the assessment remains high, there may be grounds for an appeal.
When To Consider an Appeal
It may be worth filing an appeal if:
The assessed value is higher than the recent sales prices of comparable properties.
The assessor has incorrect details about the property.
The property has structural issues that reduce its value.
Properties in the area with similar characteristics have lower assessments.
The property was recently purchased for less than its assessed value.
Market conditions have shifted, resulting in lower property values.
Our recent national homeowner survey found that nearly three-quarters of American homeowners worry about significant increases to their property taxes, but only 22% have ever appealed their property taxes. Even worse, of the 78% who haven't appealed before, only 53% knew you could appeal your property taxes.
Steps To Appeal Your Property Taxes
Step 1: Review the Assessment Notice
Each year, property owners receive a notice of assessment from their local tax assessor. This document outlines your property’s assessed value, tax rate, and potential exemptions. Review this document carefully to check for errors and assess whether the valuation is accurate.
Check for discrepancies in property details such as:
Lot size
Square footage
Number of bedrooms/bathrooms
Property condition
Recent renovations or damage
Step 2: Gather Evidence
A strong appeal requires solid evidence. Gathering recent sales data of similar properties, an independent appraisal, photos and reports documenting structural damage, property records showing discrepancies, and contractor estimates for necessary repairs can strengthen the case.
Step 3: Check the Local Appeal Deadlines
Property tax appeal deadlines vary by location. Typically, you have 30 to 60 days from receiving your valuation notice to file an appeal. Check with your local tax office to confirm deadlines and required documents.
Step 4: File an Appeal
Most jurisdictions allow appeals to be filed online, by mail, or in person.
Most jurisdictions allow appeals to be submitted online, by mail, or in person. The appeal should include the required forms, supporting documents, and a clear explanation of why the assessed value.
Step 5: Attend the Informal Hearing
Some tax offices offer an informal review before a formal appeal. During this process, the owner meets with an assessor to present evidence. Be prepared to discuss market trends and other factors affecting property value. If the case is strong, the assessor may adjust the valuation immediately. If the appeal is denied, the next step is a formal hearing.
Step 6: Attend a Formal Appeal Hearing (If Necessary)
If the informal review doesn’t result in a change, the owner may request a formal hearing before an assessment review board. At the hearing, the owner presents evidence and arguments, while the board may ask questions or counter the appeal with their own data.
If successful, the property’s assessed value (and tax bill) will be adjusted. In some cases, retroactive adjustments may result in refunds for past overpayments. If denied, the owner may escalate the appeal to a state-level board or court.
Advanced Strategies To Strengthen an Appeal
Request the assessor’s records: Many jurisdictions let homeowners access the records used to determine their assessed value. Reviewing these records can reveal errors or outdated information.
Compare assessments with neighbors: If similar properties in your area have lower assessments, include this data in your appeal.
Use historical trends: If property values have been declining, but your assessment has increased, present evidence of past market trends.
Check for exemptions: Ensure you’re receiving any applicable exemptions, such as homestead exemptions or senior discounts.
Hire a property tax consultant: Professionals have experience navigating the appeal process and can significantly improve your chances of success.
How a Property Tax Appeal Affects Future Assessments
Winning a property tax appeal can lower the tax bill, but it does not always guarantee long-term savings. In many areas, property values are reassessed annually, meaning a successful appeal one year does not prevent an increase the next year. Property owners should monitor future assessments to make sure the valuation remains accurate.
Some jurisdictions place temporary restrictions on reassessments after a successful appeal, preventing large increases for a certain period. Others may reassess properties each year based on market trends, even if an appeal was recently won. Understanding local property tax laws can help owners anticipate how their appeal may impact future tax bills.
How To Prevent Future Overassessments
Preventing overassessments can help property owners avoid unnecessary tax increases. Here are some proactive steps to take:
Review property records annually: Property details, such as square footage, lot size, and building features, should be checked against official records to catch any errors early.
Track market trends: Keeping an eye on local real estate prices can help property owners recognize when their assessment is out of sync with market conditions.
Request a reassessment if necessary: If a property’s value decreases due to market trends, structural damage, or economic downturns, owners may request a reassessment.
Document changes to the property: Keeping records of renovations, repairs, or structural issues ensures accurate information is available if an assessment needs to be challenged.
Engage with local tax authorities: Attending public meetings and staying informed about tax policies can help property owners anticipate changes and address concerns proactively.
Conclusion
Appealing a property tax assessment can lead to significant savings over time. By understanding the assessment process, gathering strong evidence, and following the correct appeal steps, property owners can challenge inflated valuations.
At Ownwell, we make the process easy by handling property tax appeals from start to finish. Since 2021, we've won over 240,000 appeals.
Don’t pay more than necessary — take action and appeal today!