Consumer Alert: Property Tax Reduction Offers

Beware of fee-based offers to reduce your property tax, especially those that arrive with an official-looking letterhead. Get the facts from your local tax office or assessor.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - Larry Stone, Silicon Valley's tax assessor , is warning homeowners to beware of companies seeking cash to help homeowners lower their property tax.

He says a local company, asking for $99 to perform a property tax reduction services, is "disgraceful" because the assessor's office performs the service for free.

The sales pitch also arrives with official-looking letterhead.

"There's simply no reason at all for a property owner to pay a fee to a private company for a service taxpayers receive from the Assessor's Office without charge," Stone said.

This consumer alert comes from Silicon Valley's Santa Clara County, but it's good advice for any homeowner anywhere facing lower property values.

Here's why.

When your home value falls, a small consolation can come in the form of a temporary property tax cut. That's provided your property tax jurisdiction, like Silicon Valley, bases your home's assessed value on market values and or sales prices.

If you live in Silicon Valley, depending on the location, your home value may have fallen by 20 percent or more since the market peaked.

This month 41,231 Silicon Valley homeowners had their assessed values reduced, netting an average $900 per-home reduction in annual property taxes, for the 2008-2009 assessment roll.

That's a healthy chunk of change in hard economic times, especially when the reduction in assessed values and property taxes did not cost them a dime.

That's because Silicon Valley's assessor uses a relatively unique -- even in California -- proactive property tax assessment process that includes annual examinations of property values when the market is in decline.

Computer models using recent sales flag properties that warrant a reduction in assessed values, the assessor automatically makes the reduction and if you don't agree with the reduction or any assessment, you can always appeal it -- at no charge. Silicon Valley offers informal appeals directly with the assessor and another level of appeal with an independent appeals board.

Jurisdictions vary on how they handle property taxes. But, before you spend a penny, check with your assessor or tax office to determine if, when and how to get your property taxes reduced. Most assessors have Web sites that make this information available.

"(There) are questionable operators, bottom dwellers who are feeding upon the increased fears of homeowners stressed out by a declining real estate market and the loss of equity," said Stone.

Stone said the pitch for the $99 service comes just weeks before the assessor's office sends out property tax levy notifications. That could encourage homeowners to apply for and pay for a property tax reduction the assessors office has already granted.

In some jurisdictions you may have to pay for professional services if your appeal process asks you to document your home's value and you don't want the headache of making the effort. Typically you can choose to use an appraisal or comparable market analysis to prove your case.

An appraisal is typically conducted by a licensed appraiser who physically examines your house, factors in market conditions, building costs and other homes like yours, among other factors, and then sets a value based on professional opinion derived from their work.

A comparable market analysis, to determine a value, considers homes like yours that were recently sold. The homes should be as much like yours as possible in terms of square footage, lot size, age, floor plan, rooms, building materials, style and other factors. An appraiser typically includes comparables in his analysis.

You can obtain comparable market analysis information from public records where deeds are recorded, but in a moving market, faster access to recent sales may give you a more accurate value.

The most recent sales are available through the members-only multiple listing service. Real estate agents and other eligible real estate professionals have access, but they could charge you a fee for pulling the comparables. It you choose this alternative, some fee could be worth it to get comparables that have actually closed. In today's market, "sold" doesn't always mean "closed escrow."

Hiring a real estate attorney could be another option if your jurisdiction allows legal representation to prove the value of your home for property tax purposes.

A final note, in Silicon Valley and other California jurisdictions, a property tax reduction lasts only as long as the market warrants it. Once values begin to rise so does the property tax amount -- and fast -- to the cap set by law.

Golden State law generally mandates that property taxes rise no more than two percent a year.

However, once property values have been reduced, and later begin to rise, the assessed property value rises too -- in a hurry.

Once a property's value returns to the pre-reduction level, the assessed value gets put on the fast track and quickly jumps back to its pre-reduction level -- where it would have been if there was no reduction -- plus the allowed 2 percent a year.

That could be a sudden increase in property taxes at a rate much steeper than the otherwise normal 2 percent annual increase.

Again, contact your local jurisdiction's property tax agency and get the straight scoop before you listen to someone offering you property tax reduction services for a fee.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

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