What homeowners need to know during property tax assessment time...

When the envelope arrived, Cindy Branigin said, she closed her eyes and hoped for the best. After nearly 15 years in her Southern Maryland home, the arrival of her property tax assessment had become a gut-wrenching ritual. This time, Branigin said, she was pleasantly surprised. The assessment of her home had dropped by $50,000.

"That is not something you would usually wish for, but it was kind of a relief," she said.

It's that time of year again. Thousands of Washington area homeowners are receiving their property tax assessment notices from their local jurisdictions.

Many homeowners, like Branigin, will see their property tax assessments fall as the housing market continues to suffer. In Maryland, where assessments are rotated among neighborhoods every three years, the average homeowner receiving the current batch of notices saw a 20 percent decline in value since 2006, according to the state's Department of Assessments and Taxation. The average residential assessment has fallen 7.1 percent in Arlington since peaking in 2007, including a 3.25 percent drop in this year's assessment. Property tax assessments were down 2 percent for single-family homes in Falls Church, 10 percent for condominiums.

But the decline can differ by neighborhood and sometimes lags behind the recent deterioration of home values in the region. And for some homeowners, just because the local government decides their home is worth less, that doesn't necessarily mean their tax bill will drop.

A property tax assessment is an estimate of property value based on the value of similar homes nearby. It reflects how much the local government thinks the home would sell for if the owner is not under distress or in a hurry to sell.

Assessments are sometimes confused with real estate appraisals, which are conducted for lenders when someone is attempting to secure a mortgage. But, unlike appraisers, government assessors do not appraise individual houses. Instead, they may look at hundreds of homes in an neighborhood that are close to one another and have similar characteristics. Local tax assessors sometimes survey neighborhoods and track permits for renovations to determine neighborhood values.

The assessment notices are typically mailed around the first of the year, though some localities take a few more months. Fairfax County and the city of Alexandria won't mail notices until later this month. And in Prince William County and the District, assessment notices won't be issued until March.

The goal of the process is to assign reasonable values to properties so that homeowners carry a fair share of their jurisdiction's tax burden.

The valuations are used by local governments to determine their taxable property base and to set a tax set rate that will help cover the cost of the jurisdiction's needs, from schools to road repair. The assessment multiplied by the tax rate (usually expressed in so many dollars per $100 or $1,000 of assessed value) equals the tax bill -- or the out-of-pocket cost for a homeowner.

But the process is complicated, and even if a homeowner's property tax assessment declines, the tax bill may not. In some cases, cash-strapped localities may increase the tax rate to make up for budget shortfalls, and that increase may offset a decrease in the assessed value of the home.

"The real estate tax, unfortunately, is the largest discretionary tax that local governments have to balance their budgets in Virginia," said Thomas Rice, Arlington's director of real estate assessments.

In a December press release explaining the modest declines in property tax assessments, acting Arlington County Manager Barbara Donnellan said that the next fiscal year's budget remains a challenge and that to balance it, "we may have to use a combination of service reductions and tax rate and fee increases."

In Maryland, many homeowners are paying taxes on only a fraction of the assessed value because of the state's Homestead Tax Credit program, which caps the amount of increase that can be taxed each year. During the housing boom, that protected homeowners from sudden jumps in their tax bills.

So unless their local government cuts the tax rate, most homeowners won't see a decrease in their tax bill, at least not immediately. "For the majority of homeowners, their taxes are not going to come down," said Hank Sikorski, the state supervisor of assessments.

That could mean a hike for Branigin. "I would be disappointed but not surprised," she said.

Even in an environment of declining home values, some homeowners are likely to feel that their property is still overvalued, prompting them to appeal their assessments. "It also reflects the economy," Rice said. "I think people are trying to save money where they can. So if they can get your taxes reduced, people are availing themselves of that right."

Maryland is not expecting many of the 673,221 homeowners who received their property tax assessments this year to appeal. The assessments cover the period since 2007, when the housing market began to crumble, and reflects the largest decrease ever experienced in Maryland. Assessed values of residential property fell 28percent in Charles County, 19 percent in Montgomery and 27 percent in Prince George's.

But because the state sends assessments to only a third of homeowners each year, those who were not included in the most recent cycle may be more likely to appeal if they think their home value declined significantly since their last assessment, said Sikorski. "Anybody can appeal their assessment any year," he said. "If they want to appeal, they can, and we will review it."

Homeowners considering an appeal should weigh the expected benefit against a potentially lengthy and complicated process, housing experts said. "You don't want to challenge if it's $20,000 to $30,000 one way or the other, but if it's $100,000, that could make a difference. It could make a difference not just this year, but for years to come," said John McIlwain, a senior fellow at the Urban Land Institute. "It is a time-consuming process, so it's likely not worth it for a couple of bucks."

Begin by making sure the local assessor has the correct physical description of the home, including the proper square footage and the number of bathrooms and bedrooms. Mistakes on these basic elements can change the assessed value of a property significantly.

It is also important to present the assessors with facts and not emotional complaints, experts said. Sometimes the assessments may have been set before a recent spate of sales in the neighborhood that reflect a steep decline in home values. Homeowners should compare assessments and sales records for nearby homes, taking advantage of the public information posted online.

"You have to be armed with data. They won't listen to emotional pleas. They want cold, hard facts," said Steve Wydler, an agent with Long & Foster, who has helped some clients file appeals. "They are very bureaucratic about it, so you have to have every document submitted by the timeline they require."

But the high rate of foreclosures in some communities may make it harder for homeowners to judge whether their assessments are fair. Foreclosures often drag down home values in the neighborhood, but not necessarily the assessments. That is because the sale price of a foreclosed property is not considered its fair market value -- the seller is considered to be under duress to unload the property.

To bolster their case, homeowners can also ask assessors to visit. Assessors cannot come inside a home uninvited, but a scheduled visit can be an opportunity to show that the government has incorrect data about the physical characteristics of a home or that it has significant problems, such as a crack in the foundation, that would lower its value.

And even if the appeal fails, there may be other ways to get relief.

For example, in Arlington County, low income seniors and disabled people may be able to have their tax bill deferred or forgiven depending on their income and assets.


Source: Washington Post