Laura Rowley Money & Happiness

With home values down sharply and projected to decline further this year, this may be the time to challenge your property tax assessment. In fact, a few tax authorities are beating homeowners to the punch.

Crunching the Numbers

Some jurisdictions are performing blanket reviews and proactively cutting property taxes on homes purchased at the market's top. Los Angeles County, for example, says it reduced assessments on 128,000 homes, with average savings of $750. California's Proposition 8, adopted in 1976, allows for reductions in assessment due to declining home values.

"It's not common -- we did this in early '90s, but haven't had this type of real estate recession since that time," says L.A. County Tax Assessor Rick Auerbach. "L.A. County reviewed everything purchased in last three years, as did most counties in the state."

Tax offices are also inviting homeowners in declining markets to do the research and send in a challenge themselves. Craig Withers, a banker, bought a three-bedroom, 2,200-square-foot home in January 2007 in a suburb of San Diego. "I guess you could say I caught a falling knife," he says. "When I bought, prices were already 10 to 15 percent off their high -- then they kept falling."

Withers received a notice from the assessor suggesting he log on to its website and follow the instructions to seek a reduction. "They wanted recent sales comparable to your home and what you thought your property was worth," says Withers, who ultimately won a 10 percent cut in his assessment. (Property taxes are determined by the home's assessed value multiplied by a local tax rate.)

Take the Challenge

The National Taxpayers Union estimates that just 10 percent of homeowners nationwide protest their property assessments, but many more could benefit from a challenge.

"It depends on the jurisdiction, but there are accounts of properties being 30 to 60 percent over-assessed," says spokesperson Pete Sepp. "Some have to do with losses or gains of market prices, others with sloppiness or inaccuracies, others with the changing character of the neighborhood -- in that the classification of properties is no longer accurate."

An estimated 30 to 50 percent of appeals are successful, says Sepp. "People shouldn't be intimidated by the appeals process -- it's like traffic court. Think about it as if you're protesting a parking ticket," he says.

With big hikes in property taxes in recent years, though, this protest can add up to much more than a parking violation. According to the Taxpayers Union, the most successful challenges come from long-time homeowners who have never viewed the factors that went into their tax assessment or the worksheets used by the assessor.

"Maybe you tore down a screened-in porch three years ago -- that's a simple error that can be fixed without a formal appeal," says Sepp. "You may also want to consider an appeal if home sales have taken either an upward or downward turn, or there have been major new developments around your neighborhood on previously vacant land."

Reassessing Values

That was Aimee Bennett's basis for appeal. The Colorado homeowner was one of the first residents to purchase in a new development in 2003, which was surrounded by vacant lots. "The assessor's office even admitted they didn't have a lot to go on -- they had to base the assessment on houses that were kind of nearby, but not really. A few miles away it's a whole different [neighborhood])," she says.

Properties in her area are reassessed every two years. When the Bennetts received their 2005 valuation, they noticed that it surpassed home sale prices in the same period. Bennett consulted a local website to run comparisons; you can also find comparable sales by asking a real estate broker or using a website such as Yahoo! Real Estate's Home Values page. (Homeowners can also hire professional appraisers -- just check if your jurisdiction allows it, Sepp says.)

"I went online and found all of the [recently sold] homes," says Bennett. "It took me time to walk all over the neighborhood, and I wrote down numbers of the homes that matched our model." She asked for a reduction of 20 to 25 percent in the assessed value of her home, and got 15 percent.

An Appealing Prospect

You may also have grounds for an appeal if your home has a unique flaw that differentiates it from your neighbors' houses. Maybe it's the only house on the street with a railroad running behind the backyard, or it's on a busy corner where there's minimal street parking. In that case, bring supporting evidence to the assessor's office, such blueprints, building records, or photographs.

Timing of an appeal is important; the filing deadline is typically 60 to 90 days after receiving either your notice of assessment or your property tax bill -- and some jurisdictions require you to file in as little as two weeks. There may also be a fee for filing an appeal. If you lose, you can appeal to a higher authority, typically a state board.

For a first appeal, don't hire help, experts say. Earlier this year, the L.A. County Assessors Office warned consumers about companies charging anywhere from $99 to $999 to file appeals. "Within California, the person can fill out a simple form saying 'this is the property address and I think it's worth less than the assessed value,'" says Auerbach. "It's a simple thing any taxpayer can do easily."

Homeowners may want to hire a professional if the challenge is declined, and they must appeal to a higher level, Auerbach adds. If you do hire an attorney, try to find one willing to work on contingency (in which the firm would receive a percentage of a successful reduction).

No Boom, No Bust

Meanwhile, if you feel your property has been overvalued, it's not a bad idea to check in with the neighbors. Counties will sometimes reduce assessments in an entire area if they receive enough appeals. That was the case in Wake County, N.C., which includes the cities of Raleigh, Durham, Chapel Hill, and Cary, where some homeowners were pleasantly surprised by an automatic reduction in their assessment.

"If we get a high number of appeals in a certain section we sometimes will go back and adjust the entire section based on the grade or quality of construction -- so the appeal of a few may affect several," says Marcus Kinrade, Wake County appraisal/collection manager. The county does a revaluation every 8 years, and only 8 percent of homeowners appealed following the re-assessment that ended this past January. Residential property values rose 43 percent countywide since 2000.

"We didn't boom here as much as other places -- it was very steady and controlled growth," says Kinrade. "Sales are slowing down, but because we didn't boom like other places, we weren't as affected when things went bad."