If you are a homeowner, your mission should be to try and lower your property taxes whenever there is a downturn. You should also try and fight any egregious property tax increases as well. The city counts on homeowners to rollover and not put up a fight.
Ever 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 Taxes 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.
Related: Property Tax Rates By State
Using Zillow To Lower My Property Tax bill
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 was a year I couldn’t use the hack. 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.
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!
Rising Online Estimates Are Terrible For Lowering Your Property Taxes
Yes, it's nice to see an upward move in home prices as a homeowner. However, 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. It is 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.
Related: Property Taxes By State: Why We Should Embrace Higher Property Taxes
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.
I would go onto the various real estate sites and purposefully LOWER your house’s statistics so you can get a lower online pricing estimate.
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! And thank goodness I did, because property prices have since increased by 60% as of 2016.
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: Don't Update Your City Property Records If You Want To Save On Property Taxes
Invest In Real Estate To Build Wealth And Generate Income
If you don't have the downpayment to buy a property, don't want to deal with the hassle of managing real estate, or don't want to tie up your liquidity in physical real estate, take a look at Fundrise, one of the largest real estate crowdsourcing companies today. You don't have to bother fighting with the assessors office to lower your property taxes either!
Real estate is a key component of a diversified portfolio. Real estate crowdsourcing allows you to be more flexible in your real estate investments by investing beyond just where you live for the best returns possible. For example, cap rates are around 3% in San Francisco and New York City, but over 10% in the Midwest if you're looking for strictly investing income returns.
Sign up and take a look at all the residential and commercial investment opportunities around the country Fundrise has to offer. It's free to look.
Shop Around For A Mortgage
Check the latest mortgage rates online through Credible. Credible has one of the largest networks of lenders that compete for your business. You can get free, no-obligation quotes in minutes. The more lenders compete for your business, the lower your rate.
I took blurry photos snd lowered my home’s value by $10,000 when other homes around went up by $3,000. I may try to adjust the square feet to manipulate it more.
Sam – Do you worry that contesting your assessed value will impact your Zestimate, etc – and thus affect your house value upon sale?
I don’t because when it’s time to sell, I will have at least a 3-month lead time. That is enough time to update the stats and have the algorithm reflect its latest value.
What do you mean you would ‘update the stats’? If you’re assessed at a low value, then I suppose you could forgo contesting the value the following year and hope the gov’t will increase the value of your home to a much higher number, but I’d think that’s somewhat out of your control and would be over at least a ~12 month time period.
Here’s what I mean. https://www.financialsamurai.com/downgrade-property-statistics-online-lower-property-taxes/
I need to update this current article and link to the link I just highlighted.
The reality is the market is the market. Assessed values are very rarely taken as market value due to impression changes on your prices.
Make sure you look for loopholes too! My parents recently remodeled a section of their house and used a built in wall heater that is technically a space heater to heat and cool the space. It’s unobtrusive, quiet and completely adequate temperature control, but because it isn’t a “permanent” heating system the space (probably about a third of their square footage) only counts as a porch. Every year, though, the town changes it to year round usable space adding hundreds to their property taxes and every year my dad has to go down and provide evidence to the contrary – it’s worth it though, for the savings!!
[…] January 2014 I wrote a post entitled, “Exploit Online Data To Lower Your Property Taxes“. In the post I highlighted a chart of my house’s estimate value by Zillow. The chart […]
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
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
Google your local cities property assessor’s office. They will have a form and contact info to fill out.
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.
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).
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!
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.
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.
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.
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!
That’s the way. The fact of the matter is that a LARGE majority of homeowners just take it an like it and never fight the government.
This is great information! I’m curious, have you had to go to a hearing to get this approved for this in San Francisco?
I looked up how to appeal the tax rate and it seems like a whole formal process that included a hearing.
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.
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.
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.
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.
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!
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.
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
You and your dad are GENIUSES! I love that! Way to go!
I’ve used comps in the past to lower my property taxes, but we bought our current house in 1998, just before the housing crisis price run-ups. I doubt/hope prices will never get down to the levels of 1998.
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.
Wow that is one crazy chart! It’s funny to think of the government using sites like Zillow but you know they do!
They certainly do. A couple agents I spoke to said, “Well Zillow says this.” And I proceeded to tell them they were using the wrong comps.
I admit, I have not done this in many years. Prop 13 limits the increase to 2% and my base is very very low! Thanks for the reminder.
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!
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.
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. :(
Stay calm and do not awake the beast! $800 a year is nothing!
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.
Take a picture of yourself standing in the “finished attic” to show how ridiculous it is to assume it is livable space! And of course bring with you comps.
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.
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.
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!
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.
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!
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.
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.