How To Lower Your Property Taxes: An Inside Look At How Property Assessors Screw Homeowners
Your property assessors’ #1 goal is to collect as much property tax from you as possible. Your goal as a homeowner is to make your home look like the dumpiest of dumps to pay the least amount of property tax possible. An asteroid could wipe out your entire city, but if the assessors office survives, they will come for you to collect!
Ever since the downturn, I’ve religiously filed a property tax appeal to get my assessed value lowered. In the midst of the financial crisis I was shocked that the assessors office appraised my primary residence for $100,000 more. If they got away with it, I would have paid roughly $1,200 more in property taxes that year. I ultimately won my appeal three months later and kept my assessed value the same as before.
For the next three years I got more aggressive and managed to lower my assessed value $100,000 below my purchase price. When the world is falling apart, it’s an easy sell to say your property’s value is also going down the tubes. In fact, my goal is to get the city to assess my property as close to $0 as possible.
Now that real estate is roaring back, I’m having a much harder time convincing the city I live in a rundown shack. This post will highlight how I almost got screwed over by the San Francisco property assessor again, and how I fought back and came to a compromise. Just like how every homeowner should be taking action to refinance their mortgage, every homeowner should take action by filing property tax appeals!
A CONVERSATION WITH AN ANGRY PROPERTY ASSESSOR EMPLOYEE
I filed a property tax value appeal in the spring of 2012 because the City raised my property’s assessed value by a whopping $270,000. That’s equivalent to roughly 100,000 packs of the highest quality ramen noodles. If I ate a generous three packs a day, that would be 91 years of sustenance.
A $270,000 higher assessed property value leads to roughly $3,000 more in property taxes. The reason the jump was much higher than the 2% max increase as stated by Prop 13 is because I got reset back to my original purchase price plus an extra 1.8% increase for the latest calendar year. If you ever want to know what tyranny looks like, this is it. If I don’t pay the increase, my credit score will get crushed, I’ll have to pay fines, and will ultimately have to go to jail. Ain’t power grand?
Undaunted, I went to Zillow.com to get 10 comparables at lower price/sqft levels than my house between October 2011 and March 2012 to keep my assessed value down. I filled out the application, attached a $60 mandatory appeals check, and waited.
Five months later, I finally get a letter in the mail saying they have acknowledged receipt of my application for appeal. The letter then goes on to state that I will be notified by mail 45 days in advance of my scheduled hearing date. Meanwhile, there are no specifics of when that hearing date might be! I call the SF Assessment Appeals Board at 415-554-6778, and a supremely pissed off lady answers the phone. Before letting me ask my questions, she tells me exactly what I want to know.
“Before you ask anything, hear me out because I’ve been answering this question all week. Times have changed. What used to take two to three months to schedule a hearing or reduce your assessed value now takes up to two years! At some point next year, you will get another letter from us with your scheduled hearing date. IF you win your appeal, the city has another nine months to refund your property tax overage. Meanwhile, you are required by LAW to pay your property tax this year, no matter how wrong the valuation is!”
She goes on to say…..
“You are lucky you filed a 2012-2013 property tax appeal in the first place. There are thousands of people who naively assumed the City would lower or keep their assessed values the same because the economy is still on shaky ground. Some people have seen their home’s valuations increase by $1 million and there is nothing they can do about it but pay the extra $11,500 in property taxes!”
“My boss, Phil Ting’s job is to collect as much property tax from the public as possible, no matter the economic environment. He will never get voted out because only 30% of San Franciscans own property. The measures he puts in place raises property taxes for homeowners and redistributes the funds towards other programs for those who don’t pay.”
I quizzically ask, “So you’re saying I should sell my house and live off the backs of others? Who should I vote for?”
She replies, “You are not listening to me. 65-70% of San Franciscans are renters. They will always vote to raise property taxes since they don’t have to pay for them. This is the way the city gets more funding for public works and for teachers, regardless of whether the homeowner has children or uses public works at all. It’s obviously better to be a homeowner, but my boss’ sweet words will keep him in office forever!”
The lady was pissed because she was bearing the brunt of all these angry homeowner phone calls. Appeals have gone from 1,600 a year to 6,000 a year, while the number of people in her office has stayed the same! She hates her boss and is ultimately on our side.
STEPS TO LOWER YOUR PROPERTY TAXES
* Google “<Your City’s Name> assessor’s office.” It’s important you proactively find out what the city/county is assessing your property first before you get your bill. You need as much time to prepare for battle.
* Go to their contact page and call and e-mail them every single day until you get a response. I’m not kidding. They are slow. Make sure all your v-mails and e-mails are polite, but stern saying you disagree with your assessment with proof.
* After they respond, you must specifically ask how they came up with their assessment value. Ask them to provide comparables. Also, ask them what you need to do to make your case. There will undoubtedly be appeal forms to fill out. Fill them out and make copies for yourself (important as they like to tell people they never got it 2 months later, hoping you’ll give up and be too late!)
* Like any good negotiator, you must highlight the lowest comps and negotiate accordingly. Let’s say your house is worth $1 million bucks. Go in with horrific comparables that look like bomb shelters in terrible locations, such as a house next to a firehouse that may be worth $500,000. Your comparables need to be similar in dimensions and as close to your home as possible. Set your anchor low. The more comps you can provide, the better. The assessor doesn’t usually have time to verify the comps physically, and just uses online comparisons.
* Make sure you courteously follow up every month until you get confirmation of receipt over e-mail and phone. One year after reaching out in February, I failed to follow up with more comps until July (big mistake). By then, the assessor had moved to valuing a different district, and another person was recommended to me. Good thing the new person had the forms, and decided to e-mail and call me back. Otherwise, I would have wasted a lot of time. Don’t forget to back up all your data!
* Continue to file a property value appeal every year. The lady at the assessors office is always hoping homeowners continue to stay naive and don’t file appeals. Once you get your fall property tax bill, it is TOO LATE to file an appeal for the current year. San Francisco property tax appeals are allowed between July 2 and Sept 15 every year. Do not miss the window. Eventually, you will have your hearing and justice will be had.
* Take to social media. After hitting a roadblock, I was able to send a tweet to @PhilTing (SF Property Assessor Head) who responded to my inquiry within 12 hours. He sent me the name and person to contact to expedite my case and it worked. Using Twitter to help your cause can’t hurt, especially if you have a relatively large presence.
THE ASSESSORS OFFICE IS WILLING TO NEGOTIATE
For three years in a row, I’ve managed to prevent my property taxes from going up. I took action and it paid off to the magnitude of roughly $3,000 a year in property tax savings. I finally hit a wall for the 2012-2013 tax year due to a rising market and the incredible logistical roadblocks they’ve placed to appeal.
Just as hope was growing dim, an angel gave me a ring. It was one of Phil Ting’s henchmen who decided after reading my appeal online, seeing my Tweet, and going through my case over e-mail that he was willing to negotiate. After making my case over the phone twice, I managed to get the assessor’s office to split the difference and raise my assessed value higher by “only” $150,000 from $270,000 originally. Paying $1,800 more in property taxes is better than paying $3,000 more.
If you are a homeowner who has been wronged by your city’s assessors office, do not give up! Realize the government is expecting you to roll over and die. Real estate is still my favorite asset class. However, in order to build long term wealth, you must do your homework and fight the powers who are trying to prevent you from achieving financial freedom.
RECOMMENDATIONS FOR HOMEOWNERS
* Make sure you refinance your mortgage. If you haven’t refinanced your mortgage in the past 6-12 months, I strongly suggest you at least check the latest rates online with Quicken Loans, the largest online mortgage retailer. Rates have been ticking up in 2013 and could surge higher with the end of Quantitative Easing. They were founded by Dan Gilbert, also owner of the Cleveland Cavaliers. Because they have the largest online network, they can provide the lowest rates. They also seem more streamlined in the refinancing process than traditional bricks and mortar banks as well. Interest rates are at all time lows and won’t stay this low forever. My latest refinance was for a 5/1 jumbo ARM at 2.625% from 3.125%. Might as well check because it’s free and there’s no obligation.
* Check Your Credit Score: Take a moment to check your free credit score through GoFreeCredit.com, a company I trust. 30% of credit reports have errors, which could put a serious hamper on your refinancing or new loan borrowing abilities. I had a $8 late payment I didn’t even know I owed crush my score by 100 points come up during my last refinance! If you don’t want the credit monitoring service, simply cancel before the grace period is up.
* Get the best home insurance possible. In order for your property to grow in value you must protect your property from damage. Fires, floods, leaks, theft, and other accidents happen all the time. If you have cut-rate insurance, you could very well pay way more than you should. I highly recommend checking with USInsurance.com online to find the best home insurance rates. They have a huge network of providers that will compete against each other to provide the most tailored home insurance coverage possible that is affordable. Mobile home insurance, renters insurance, condo insurance, and homeowners insurance are just a few of the options based on the type of home in which you reside. Leverage the internet to save money and protect your largest asset.