Exploit Online Data To Lower Your Property Taxes

Victorian Mansion In San FranciscoEver since 2008 I’ve been fighting to lower my property taxes every year. If I didn’t fight, the SF Property Assessor’s office would undoubtedly keep raising my assessed value all throughout the financial crisis because they need to extract as much money from homeowners as possible. Renters certainly aren’t going to volunteer to pitch in if they can simply vote to raise property taxes. Too bad everything just comes around in the form of higher rents. In other words, together we must stand united against the government.

Your main mission as a homeowner is to convince the assessor’s office your property is worth as close to $0 as possible. Anybody who is proud their assessed home value is higher is being silly because the government will take advantage of you. The same goes for people who make a lot of money telling everybody exactly how much they make. Practice the mantra of Stealth Wealth and believe your primary home is a dump in order to build your net worth further.

LOWER YOUR PROPERTY TAX WITH ONLINE DATA

The main way I’ve been able to utilize Zillow to lower my property taxes is by looking at comparable sales after punching in my address and looking at their database. You’re free to use Redfin or Trulia as well. I then gather the most bombed out listings and use their price/sqft number to come up with a fair assessed value for my house which I send over e-mail and hard copy to the assessor’s office.

The great thing about Zillow is that their data is wrong all the time! Your job is to get that erroneously huge house that sold on a highway for 70% below the median p/sqft in your neighborhood and use that comp as your own. Zillow’s data is only as good as what the owner inputs, or what the tax records show.

Rest assured the property assessor’s office uses Zillow’s erroneous data to charge you higher taxes as well. I spoke to a number of people in the property assessor’s office over the years and they have ALL admitted their main strategy is to automatically tack on an annual increase based on an index and hope homeowner’s don’t have the time or willpower to contest the property tax bill. They all say they do quick online valuation checks as well.

Unfortunately for every property assessor’s office who tries to rip off a Financial Samurai reader, they’re going to have some big backlash! There is no way we will accept getting bulldozed by a greedy and wasteful government because we are empowered with knowledge.

THE GOOD TIMES MAY FINALLY COME TO AN END

Since 2008 I’ve been able to use Zillow’s database to lower my property tax bill by $3,600 a year on average. Unfortunately, 2014 will be a year that I might finally be screwed. A building three doors down with two units recently sold in the summer of 2013. The units were nicely remodeled and priced at what I thought was at the top of the market. They sold within a week and recorded sale. Take a look at the below chart to see what happened to my home estimate.

SF Home Price Appreciation Chart

What the hell?

My Zestimate has literally gone up every single week for the past 37 weeks due to this comparable sale to my dismay. I was pumped in June 2013 when Zillow pegged my home value at just slightly higher than my purchase price 8.5 years ago because I could then use this valuation as another datapoint to keep my property taxes down.

Now the property assessor’s office is going to look up my home price online and tell me I’m smoking dope for asking for a 2005 assessed value for my 2014/2015 property taxes. My one wild card is that when I used condos to try and lower my assessed value in the past, they were disavowed because I own a single family home. I’m going to use their same logic to disavow the Zillow estimate because the neighboring sale was a condo. There’s no tails you win, heads I lose you crooks!

Yes, it’s nice to see an upward move in home prices as a homeowner, but this 42% jump over nine months is absurd. Everything unravels once a neighbor on the same block sells. If property sold on a different block, you can still make an aggressive argument as to why you are in a much inferior location if you live in a big city.

The dashed line is the city’s overall price index and is therefore more indicative of property price appreciation in my neighborhood at roughly 21% since summer 2012. Now you can see why my 15% increase in property prices for my net worth in 2013 is reasonable.

YOU CAN LOWER YOUR PROPERTY TAXES IF YOU TRY

The point of this article is several fold:

1) Defend your wealth and fight back. So many people feel helpless they can’t fight the government, and it’s just not true. Yes, the government has expanded its power immensely since 2008, but if you feel you are being taken advantage of then fight back! If I failed at fighting back, my home’s appreciation chart would look much smoother and I’d have paid probably $20,000 more in property taxes over the past five years.

2) Online data is full of errors. Use Zillow’s errors to your own advantage when assembling comps to send into the assessor’s office. They will surely use errors in their favor to raise your property tax as they tried to do with me for years.

3) Be as poor as possible in the eyes of the government. There’s no use being rich to the government because the government will just tax the hell out of you. If you are celebrating the fact that your assessed value is higher and you have no plans for selling, then you are being irrational.

4) Hold on to assets for as long as possible. If you sold property in 2009, 2010, 2011, 2012 you unfortunately missed out on a huge recovery in 2013. Property is to be held for the longer term to build true wealth. Commissions are ridiculously high along with taxes. Thank goodness I pulled my house off the market in 2012 after 25 days!

5) The markets will eventually become efficient. One of the biggest disappointments I have about Zillow, Trulia, Redfin and other online real estate companies is how they’ve done nothing to lower commission costs since they started. Every single other industry has seen a compression in transaction costs thanks to the internet, but not real estate due to collusion. In the meantime, it is up to consumers to keep fighting to protect our wealth until efficiency happens.

Related post: An Inside Look At How The Assessor’s Office Screws Homeowners

Readers, have you used Zillow or any other online real estate site to help you lower your property taxes? Have you successfully fought to lower your property taxes?

Regards,

Sam

 

 

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. says

    We just bought a house and the town records don’t include some of our square feet that we happily use, but “doesn’t count” because of angled walls and other technicalities. That’s about 600 sq ft we use but aren’t counted in the public records. At $250 per sq. ft. average sales price, that’s a lot of $$ that we’re going to use to contest our assessed value, which is on par with houses that have greater sq. ft. We’ll see how it goes. But I totally agree with you.

    • says

      Excellent! Beware of having an inspector hop over if you are doing any work. Their goal is to not only make sure the job is done up to code, but snoop around to see what isn’t accounted for so they can report back to the assessor’s office to raise your taxes.

  2. says

    I really should be better about this. Here in Washington we don’t have an income tax so the governments are forced to put everything on us via property taxes. It’s my single biggest expense. From what I understand, the assessors are more focused on appreciation rate, vs. actual current value so by keeping it as low each year, you’re likely to lag all your neighbors for quite a while.
    My neighbor challenged his valuation a few years ago. He was denied officially by the assessor and then when he received his next notification they gave him exactly what he said. Weird!

    • says

      I was denied a few years ago and then they lowered my assess value. It’s strange, but maybe that’s how they operate. That way the homeowners won’t brag about lowering their property tax to all their neighbors. I guess the complainers get the cake.

    • says

      Hola Nick, love the pic!

      I think your friend’s example clearly shows that doing something about the situation is effective. The more comps you have to prove your case, the better.

      I envy your no state income taxes!

  3. says

    Out in Long Island where I work, property taxes are pretty steep. There is a tax grievance process where homeowners can grieve their taxes in small claims court…a very informal hearing where a representative from the town is also present. I’m not sure Zillow stats are that big of a deal during the hearing. The town generally looks for sales of comparable houses in close proximity to the homeowner’s house during the relevant year. I don’t see how a condo and a single family house are comparable. Zillow is not very accurate sometimes. As for commission…it has been driving me nuts how much it costs. I wonder if I can get the realtor’s license and get the commission myself. Not sure how that would fly. That and if I ever sell, I’d consider FSBO…not sure how good of an idea that is either. At least Redfin refunds a portion of the commission.

    • says

      Zillow stats are often incorrect, which is the point of this post. What is correct are the actual sales prices of “comparable” properties you can find on Zillow. Take the worst comps possible as the assessor’s office will take the best comps possible. Fight fire with water.

  4. says

    The previous owner of our house “finished” the attic and it is being counted as livable space in our assessment even though it’s far from being such. We plan on fighting that this year, but haven’t really formulated a game plan to do so yet.

  5. says

    Great stuff, Sam. I’ve been keeping quiet on this front because, despite home prices rising like crazy in the Phoenix valley since 2010, my property taxes have gone down every year over that time. And they’re preposterously low: under $800 a year. If I pipe up trying to lower them by a hundred bucks or so, I wonder if I might get the opposite result. :(

  6. Andria says

    We tried to fight last year and we were told that no one can fight and the amount for 2013 is what it is. Ours went up $600.00 a year. Now we are at $6,100.00 a year for a 1500 Square foot ranch home with no upgrades. IL is so awful. I might be renting in the next few years. It is getting out of control now. They tax assessor office said they only way it can be lowered is if everyone fights it. Would do I do start a petition and get people to sign?? I am sick of this and I bet they go up again this year. IL SUCKS!

    • says

      Ah yes, Illinois, a state in deep financial trouble like California. You have to fight harder by seeking a court date. Once they know you are serious, and have comparables that show lower prices, they WILL negotiate.

    • says

      Yeah, 1998…. I think you are good to go! Unless your state has a very liberal policy on assessing property to current markets. In CA, there dis Prop 13, so it’s indexed to a max 2-3% increase a year, which can get expensive due to housing costs here.

  7. says

    Sam,
    This reminds me of high school when my parents house had a big assessment increase. My Dad was pissed off for sure. We ended up walking around the neighborhood with my camera and taking photos of the lowest assessed houses around and I made them look big with the camera. Then we made our house look tiny a crappy by standing further away and adjusting the light to make a bad photo.

    He walked into the tax assessment office with the pictures and made his case. Ended up saving a good chunk of money.
    Online data makes it easier these days.
    -RBD

  8. says

    You are the first person that I have ever heard who celebrates the fact that his home value is seemingly going DOWN :) I assume that most people are more excited about the fact that higher comps means that the value of their home, if they chose to sell it, has also increased.

    However.. You do make a great point, and I may look to do this myself.

    • says

      Guess there is a first for everything! Even if I wanted to sell my house tomorrow, I want the assessed value to be low b/c the market is the market. All these assessments are artificial, and we also know that the entire industry colludes.

  9. says

    The house across the street from us sold for almost full price this summer and I thought it was nuts. But, when we put our house on the market a few months later, I quickly became thankful. The house was almost the same square footage as ours, although on a smaller lot. It gave us plenty of reason to ask for top dollar for our home, and we got it when we sold our home in 13 days.

    You’re right, Zillow is so wrong most of the time. But I would still try to use it to my advantage if I could!

    • says

      Zillow and other sites being wrong all the time is EXACTLY why we should try to use their data to our advantage b/c assessors around the country use erroneous data to extract more taxes from us. I’ve spoken to five assessor appraisers who tried to use some ridiculously awesome comp as justification to raise my prop taxes.

      Nuh, uh silly appraiser. I’ve done my research, and everybody else should too.

  10. Matt says

    renters pay property taxes through their rent!

    I understand wanting to decrease your tax burden but someone such as yourself is in no position to complain about paying your fair share into a society thats allowed you to be very comfortable.

    • says

      What is the definition of “fair share”?

      Renters need to stand united with homeowners because if renters vote to raise property taxes, which they do b/c homeowners certainly won’t vote to raise their own, then homeowners will simply raise the rent. In other words, the government and its expenditure is a big problem.

  11. S says

    This is great information! I’m curious, have you had to go to a hearing to get this approved for this in San Francisco?

    • says

      Never. It’s like settling out of court. Nobody wants to go to court due to a waste of time and money.

      I last settled last year when I exchanged a couple e-mails and two phone calls arguing my case for the comps I provided. We split the value in between. I will have to make another argument I’m sure this year based on the recent price movements.

  12. says

    I used Zillow at my previous house to lower my property taxes about 6 months after we bought it. I thought the county would fight it, but, to my surprise, they agreed with the comps and lowered our assessment – and it only took about 10 minutes of my time to fill out the form and mail it in!

  13. Barb says

    I am part of a condo building in Chicago, Illinois of 10 units. I tried to debate my taxes to the assessors office since I only have one bathroom while other 4 units have two. I did not get a tax break though this was 2009. However, the taxes are divided by the building. However, when the condo association debated our taxes with a lawyer, our taxes were decreased. Chicago is corrupt. A lawyer had to make money for us to save any. I have heard if you donate to the assessor’s campaign that it could help with your tax dollars.
    I just got my tax bill yesterday. My condo went down (finally to what it is supposed to be) and my parking spot went up.
    Chicago is also the city where we did not get the tax bill until after mayor Rahm Emanuel was elected. They purposely kept the bill until after election day.
    BTW, my grandmother died years ago, my mom and her sister sold the house, but my mother kept getting the tax bill every 6 months. She would call and send a letter every 6 months with the sale of the house to another individual, but still kept getting the bill that should would not pay.

    Whoever has to pay $800 should not mess with anything.

    You people in San Fran are crazy. You don’t want your neighbors to build up, but you complain about rent prices. My friend lives near the McArthur station and there are plenty of lots/building for people to make into more units.

    • says

      Barb – Donating to the assessor’s office will definitely put your appeal at the top of the pile. Don’t understand the power of money to politics.

      The people complaining about rent prices in SF are folks who have to pay rent. Those who don’t stay quiet.

  14. Cindy says

    I am well aware of your thoughts on real estate agents. I am one, and I work very hard, thank you very much. I routinely run comps for people to use to try to lower their assessments and taxes. In St. Louis County, MO, assessors don’t use Zillow; they use actual tax records for sales. We have to file a certificate of value when a sale closes, and they use actual data. Are their suppositions good and accurate? No, not usually. But everyone knows a Realtor–ask for MLS data. It is probably more convincing than Zillow’s.

    Chicago isn’t the only place to pull the delaying of tax bills…that has happened here, too!

    • says

      Like any field, there are good folks and not so good folks. I’m sure you’re a good agent!

      Online real estate companies use recorded sales on their database, and you bring up a good point to rely on a real estate agent to help pull comparable MLS data for you if someone has such a relationship.

  15. El Guapo says

    You inspired me to look at my homes tax assessment value. It is currently assessing for about 40k less than what I think it is worth (and any nearby comps), so I think I will leave it alone for now. Our taxes are fairly low in ABQ NM, but I see the value in getting the tax bill lowered.

    Lowering your tax bill has similar benefits to negotiating a higher salary. If you can start a job with 5k more salary, then all your future % increases will be based on that higher amount, which will be worth much more than just (5k*number_of_years_worked). Similarly, it seems like many counties apply a standard % increase each year for home assessment values, so if you get your tax bill lowered by 2k, your % increases each year will be based on a smaller number, which will save your more money than just (2k*number_of_years).

  16. says

    Unfortunately most of the sites like Zillow have my house appraised for more than the recent county assessment came up with. So alas I am at the mercy of the tax assessor’s office still.

  17. Gary says

    I am unclear how to fill in the Petition of Appeal

    I go to Zillow.com

    I lookup my house address

    I go to similar sales

    It shows me address on the left side at bottom of zillow page.

    What do I do from there?

    thank You

  18. Gary says

    Thanks Sam. I got the form. It is asking for comparable sales. should I use zillow to get the comparable sales and how do I use the calculation that you mentioned price/sqft to my advantage to lower the taxes?

    thanks

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