To Save Money On Property Tax Don’t Update Your City Property Records

If you want to save money on property tax, please don't call the assessors office to update your city property records. Instead, let the inefficient, bureaucratic machine take its sweet time!

The property assessor's goal is to try and extract as much money from homeowners as possible. Your goal as a homeowner is to save as much money on property taxes as possible.

One of the main reasons why many homeowners do not remodel with a permit is to avoid detection by the property assessors office. If they know you remodeled a kitchen or increased livable space, they will raise the assessed value of your home. As a consequence, your property taxes will go up forever.

Save Money And Don't Contact The Property Assessors Office

As part of any standard mortgage refinance, the lender requires a home appraisal. The lender wants to ensure the homeowner has enough equity to make a new loan. The amount of equity a homeowner is required to have for a refinance is usually 20% or more.

The cost for the home appraisal is generally between $500 – 800. It covers the appraiser's time inspecting the house, taking pictures, drawing a layout, measuring the square footage, and doing a valuation analysis based on comparables and rebuild costs.

My appraiser spent about 40 minutes getting all the information he needed. He then said me he'd get back to me in about a week with the results. While he gathered the information, I asked him questions about the health of the real estate market. I was also curious to know how busy he was to get a pulse of the market. Finally, I asked him what the city assessors office had as the official square footage of my home.

He said he was really busy and the market seems to be doing well. Then, he told me something I was surprised to hear. He said the city has my home recorded at only 1,720 square feet on the 3R report.

The 3R report stands for Report Of Residential Building Record, which is the home's report card. 1,720 square feet was at least 200 square feet smaller than its actual square footage.

Never Update Your City Property Records

I was annoyed the city had not updated my home's official square footage after my home expansion in 2015. After all, I had paid the city a permit fee to legally knock down an old bathroom. I then legally expanded my home's living area by 200+ square feet.

If they weren't properly updating my 3R report, why did I bother getting a permit?

Someday, I may want to sell my home. And if the official record says my home is smaller than it actually is, the online estimates will be off and I won't be able to list my home's official size on the MLS or in my marketing literature without a disclaimer.

Having to explain to potential buyers that my home really is 200+ square feet larger than official records would be a real pain. Buyers might feel like I am pulling a fast one on them. In reality, it's my city's lack of proper record keeping that's the problem. An accurate home square footage matters.

In my area, homes are regularly now selling for $1,100 – $1,400/sqft for similar quality builds based on my FS20 property buying signal. Therefore, missing 200 square feet equals potentially $220,000 – $280,000 in lost value.

I remember talking to a city record keeper six months after I had finished my expansion in 2015, pushing to get my home's square footage updated. She had promised me it would be done, but four years later still nothing.

How frustrating.

Then the home appraiser made me come to my senses.

Leave Your 3R Report Alone

He said, “Don't update your 3R report! If you do, you'll simply be taxed more. Wait until the time you actually want to sell your home and then call to make them update the records.

Ah, that makes so much sense! I actually never want to sell my current primary residence. My plan is to pay off the mortgage in seven years and keep it in the Financial Samurai estate as a vacation property, pied-á-terre, rental property, or home for my children.

I'm long-term bullish on San Francisco property because I think San Francisco is one of the cheapest international cities in the world. Besides New York, London, Hong Kong, and Singapore, I don't see many other cities that have as many companies paying commensurately high salaries.

Holding San Francisco property is part of my real estate asset allocation. The other part is owning a portfolio of 18 commercial and multi-family properties through real estate crowdfunding.

I wanted to update my homes square footage details on the tax records out of pride! But the pride may have cost me a lot of money in the future.

Save Big On Property Tax Over Time

Paying property taxes hurt, especially when you aren't even guaranteed to send your kid to your local elementary school given SF has a public school lottery system. I tried so hard to fight my property taxes and failed recently.

Your goal as a homeowner is to pay the least amount of property tax possible by making your home seem smaller and junkier than reality. I wanted my records updated basically due to ego. But I wasn't thinking rationally.

A week later, the home appraiser came back with a report that said my home is actually 270 square feet larger than official records. Let's say my home sells for $1,200/sqft. That's $324,000 in value the city does not see or tax.

Property Taxes Add Up The Longer You Own Your Home

The property tax rate in San Francisco is 1.24% of the value of your home per year. Therefore, $324,000 X 1.24% = $4,017 a year less in property taxes I have to pay a year. Score! I could use that money to take my wife and son on a family vacation to Hawaii for a week.

If I hold the home for 25 years until my son proudly tells me he wants to buy a home on his own, then I will have saved at least $100,245 in property taxes and probably more like $200,000+ in savings due to likely appreciation and continued increases in the property tax rate.

If I decide to own the home for 50 years, then I will end up saving at least $200,500 in property taxes, and more like $400,000+ due to likely appreciation and continued increases in the property tax rate.

Property Tax Rate By State
Property taxes by state

Related: How To Raise The Value Of Your Home With One Phone Call

To Save On Property Tax, Don't Update Your Home's Tax Records

The main reasons why homeowners don't want to take out a construction permit are because they want to save on permit fees and save on property taxes due to a future higher assessed value once the remodeling is complete.

Don't let your ego for wanting a bigger and fancier house on public record get in the way of saving you money. Stay as stealthy as possible from the city and let the city operate the way it sees fit.

Unfortunately, inefficient cities will ultimately raise taxes and therefore rents in the long run. But in the short-run at least, it's up to all homeowners to save as much money as possible.

I never thought I'd say this. But hooray for government inefficiency. Even though I tried my best to update my 3R report, my notes from 2015 say the city is backed up by five years.

There's always a bright side to everything. Here's to hoping the assessor's office takes another five years to update my records. Sadly, I just checked in 2023, and they have! But the good thing is, due to Proposition 13, the county can't increase my property taxes by more than an certain rate each year.

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Diversify your real estate investments and earn income passively without the hassle of tenants, maintenance, and assessors. Fundrise is free to sign up and explore. Fundrise manages over $5 billion and has over 500,000 investor. It is my favorite platform today where you can invest with just $10 to start.


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Note: Please check your local city and state laws regarding the property owner's responsibility for accurate record keeping.

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45 thoughts on “To Save Money On Property Tax Don’t Update Your City Property Records”

  1. I live in Dallas where we have really high property taxes, somewhere between 2 and 2.5% of the home price. Every year I pull comps in the neighborhood and try to make a case to the appraisal review board that I’m taxed too high. Sometimes it works, sometimes it doesn’t.

    The first year I argued my taxes the representative from the city looked up my house on Zillow and started making comments about how nice the photos looked. Learned my lesson and claimed my house on Zillow and some of the other sites to get those photos taken down.

    I’m not sure how it works elsewhere, but if you argue your taxes in Dallas you have an appraisal review board that is supposed to represent you the home owner, then you have a city representative. Most of the time, the review board does not know its own rules/laws for how taxes are set. Just a tip, go in to your review hearing with print outs of the tax code that supports your case.

    1. It’s good to always try and fight your property taxes if you think they are egregiously high. I did so for four years in a row from 2009-2012 and WON each time. It saved me at least $20,000 during that time.

      The government counts on its citizens to rollover and not fight. Fast on the way up when assessing. Slow on the way down.

      1. Mark Fuckerburg Zucks

        Be careful disputing their rate or they might remeasure your home and calculate a larger square footage or see improvements like a patio or deck to tax. If there’s unfinished space that you improved upon then that’s fair game too. If you refuse to let them inspect an area behind a curious door then you may get a larger bill based on their guess.
        If 3 people calculate your square footage then you will get 3 different answers., especially if there are morr than 2 stories with an angled roof.

    2. I live in Houston and yes the prop tax in Texas is high, but, we have low sales tax and $0 state income tax. We also have a Homestead Exemption, as well as a +65 Exemption which saves me about 19% in taxes. All in all, if you do the math between Texas and other states it all comes out the same. Anyway, back to the square-footage issue: When i bought my new house the builder stated 3801 sft. Tax authority echoed that. I took out a measure and did my own measurement and it came out 3790 sft. I hustled down to tax authority and made my case. They believed me … saved significant monies over the 15 plus years in house. Now, when I go to sell, I will state on Zillow, HAR, etc. “3801 sft by Builder”, which is what is on the floor plans and was what sold me on the house. I figure my numbers could be off and the tax authority hasn’t confirmed with their own measurement, as they should. The difference could be definition of “living space”.

  2. Financial Freedom Countdown

    Uggh….My county actually sent me their own assessment of the value of the remodel and increased my taxes. They also updated the city records. Glad Prop 8 means that the existing structure retains the earlier base or I would be paying a lot more in taxes if it was based on market value.

    1. Robert Ramos

      If you have an obligation to report any errors, couldn’t county asses the proper square footage that wasn’t reported for say 5 years and charge you back taxes plus interest?

  3. Sam – I would say that not only did you score, you hit a 3-point shot. You are benefiting from a reduced real estate tax bill. In addition, I think when you sell, buyers pay for the actual size of the house based on feel and actual measurements (not some tax assessment records showing the sq ft). Therefore, a buyer would see that they are getting a 200 sq ft bigger house but paying 200 sq ft of lower real estate tax. I think they would compensate you more for your home given the lower real estate tax vs actual sq footage.

    1. Hmm, don’t think I’m that lucky on the back end.

      Property tax is based on the price the seller pays. So everything is baked in.

      But maybe! I’ll provide appraisal layouts.

  4. I’m in the same situation as you. But I’m concerned that if I have the county correct the square footage when I sell, they will come after me for any taxes, penalties, and interest owed for prior years when the square footage was incorrect. Thoughts?

    1. Doubtful. How can the city penalize you for the city not doing their jobs?

      But I guess the government can do anything they want! Which is one of the reasons why I find it strange when people are so pro and dependent on big government.

      1. The county can recoup up to 4 years of back taxes if the error is the fault of the county. It’s 8 years if it’s the fault of the owner. In your case it would be 4 years if the permit was filed but the county is late in processing it.

        I work for the assessors in a different county so I won’t rat ya out but SF county is looking to update their systems so they might be taking a closer look at property data to make sure it’s up-to-date before pushing the button

          1. Can’t speak for SF but where I work there’s a huge breakdown in communication between the cities and the county which causes the lag in permits being recorded and, in many cases, go missing.

  5. A five-year wait to get your home records updated is absurd. The bigger the government, the more waste. It’s good you found a positive angle to this. Big government continuously is so slow and wasteful when getting any public work projects done.

    Outsource everything as much as possible to private companies.

    1. It’s more likely a problem of “small government”. They haven’t hired enough workers to process everything and haven’t upgraded technology yet to track records more easily. Not big enough government has problems too.

  6. Texas is crazy high (blue) on property taxes, however, Texas does not have a state income tax.

    Also, protest your assessed valuation of real and personal property taxes every time you can. Texas has no laws restraining increases in values, so unless I protest, the values keep going up, up and away. Has saved me thousands of dollars over 19 years.

    1. My father spent the last few of his working years as a employee of the NYC subway system. He would be responsible to fix the closed circuit phone system they have in the tunnels. Dad volunteered to work nights. For some reason he and his partner, they never work alone for obvious safety reasons, would be given enough for for 2-3 hours effort most nights. My dad having been a phone company employee for 32 years before that, knew his business. Most nights he and his partner would go to my dad’s apartment and sleep after they finished the work. Union riles set how much time the task should take, so there was nothing to do. Dad was in his late 50s to 60s when he did this work, and so I am glad for that inefficiency.

      As a taxpayer, its horrifying, and that is not even the half of it, but hey it was good for dad.

    2. Seems like the best move may be to rent in Texas and make big bucks? No need to pay high property tax or state income tax.

      The thing is, I like real estate in Austin…. seems like a no brainer to becoming the next Silicon Valley with prices 1/5th – 1/8th the Bay Area.

  7. There is software marketed to counties and municipalities that can scan aerial photographs, create 3-dimensional models, and identify any changes in a building’s shape or volume, as well as additional buildings and sheds.

    Yes, the intent is for assessors to use this information exactly as you would expect.

    No, I don’t believe they will come after anyone for additional taxes after a period where the value wasn’t high enough. Although I am pretty sure there are negative consequences when they find additions that were not issued permits.

    1. I’m sure there is. And there’s simply Google maps, which I’ve seen the Planning Department use when I went to get a permit.

      But they can’t see inside your house. Hence why so many folks just do work without permits.

      I’m older now and don’t want the hassle of getting narqed or paying penalties for no permits. So I get permits like a good solider and pay my fees.

      I ration that if I ever sell, the permits on my 3R report will mean something.

      They mean something to me when I buy. Gives me peace of mind knowing that the work done was inspected multiple times for plumbing, electrical, and building.

  8. Macarthur wheeler

    Can the city retroactively pursue back taxes owed based on the renovation? I’d double check to make sure the city cannot do that. If they can, might want to update to avoid an unforeseen tax bill.

    1. I’m sure each city can do whatever the heck they want to actually. That’s the power of government. Comply or else be punished. We can only hope the government in this department remains as inefficient as possible.

  9. I recently received a questionnaire from the city asking about my house’s details. I’ve also heard of the city sending out auditors to take measurements and verify beds/baths/living space. I didn’t respond to the letter but wondering what legal obligation I have to let them in or take measurements?

  10. Are you taxed on the full value of your property? Here in Ohio*, we’re taxed on 35% percent of the tax-assessed value of our property.

    So, in your example of your property value of $324,000 and taxed at 1.24%, in Ohio the taxes would amount to:

    $324,000 x 35% x 1.24% = $1,406.16.

    Still a big chunk of change.

    *At least in the county I live in.

      1. SherryinChicago

        Your property tax bill should have the calculation, I just got mine in the mail (Chicago/Cook County) and we have a 10% assessment level, then a “state equalizer” of 2.9109 applied to arrive at a “equalized assessed value” to which the tax rate is applied. Yea, it is cumbersome but the calculation is just math once you get the property value.

        I think you are overthinking the square footage issue on resale, measure the size of the rooms and your can arrive at the square footage, again it is just math. If you or your realtor would do this, are you really going to have a buyer going to the public records to compare the square footage? If so they have too much time on their hands.

  11. We live in a suburb of Minneapolis. We had a city tax assessor knocking on our door five weeks into a 12-month basement remodel. Even though we only had the framing finished, they increased our taxes based on the percentage completed thus far. They must be overstaffed and follow-up on building permits after 30 days!

    1. Wow! That is very impressive. Despite San Francisco having a multi billion dollar budget, there is a lot of inefficiency. When you get to spend a lot of peoples’ money, you just aren’t as motivated to do your job as if you were spending your own money.

  12. Quite some lucky savings! You find a lot of property record inaccuracies in Miami. It may involve government inefficiencies but I think it’s just remodels done without permits.

  13. Did the SF Assessor not update your property assessment following the renovation? Or did you get lucky and increase the value when the market was otherwise deflated so that you locked in an updated value that wasn’t much higher than it had been previously?

    1. I’m not quite sure if I understand your second question. Can you elaborate on the question and maybe use yourself as an example?

      SF assessor said in 2015 they have a 3-5 year backlog in updating 3R reports. 4 years later, nothing. Hooray for government waste!

      1. Sure – years ago we added a 2nd floor to our home in El Cerrito – permitted of course! The permit triggered a change in value which mercifully was only about 25% of the cost and actual increase.
        During and following the Great Recession, many petitioned their assessors to reset the assessed value to reflect that actual market conditions (think of the extreme declines out in Brentwood/Antioch area locally). So if your existing assessed value was say $1.5MM, but you could have appealed and had it reduced to $1.2MM (-20%), but your addition was worth less than the $300k difference, perhaps they determined that it was in their best interest to just let it sit at $1.5MM, continue to let it grow, and have you keep paying tax at the 1.24% rate?

        It could also just be that the City is woefully poorly managed, which may be the more likely explanation given what I observe day to day…

        1. Gotcha. Makes sense.

          Assessors seldom if ever assess the full market value of a remodel or expansion, which is why it’s Also more advantageous to buy a fixer-upper and Remodel and explain yourself. If you buy a brand new remodel and fixer you pay full price.

  14. Portland seems to be very diligent about taxing homeowners. We got a new metal roof 5 years ago. I think they did a surprise inspection the following year and increased our property tax because of that. I’m pretty sure they’ll follow up on any permit. That’s one of the reasons why I don’t want to finish the basement yet. It’ll push our property tax up significantly.
    You’re very lucky that they didn’t update the value at your home.

  15. Sam congrats to your new found savings! ;)

    Don’t mean to derail the conversation here… Sam mentioned, SF, NYC, London, HK in the post. With the effect of global warming, raising seawater level in the coming years, SF should be spared but NYC, HK, probably London will certainly be impacted, I just cannot say to what extent economically. And I just realized all these 3 cities are global financial hubs!

    I live in NYC so have been mauling about whether and when(situation probably won’t get so dire in 5 yrs but I can see possibly in 10 yrs) to make a relocate to higher & cooler grounds, Canada an option.

    I am not losing sleep over this yet but it’s been on my mind a lot recently. Just wondering if others have any general thoughts on this topic.

      1. Haha. No heatwave yet. We have a late summer this year. Though we had been getting these really really bad downpours(like water pouring out of a bucket) last 3-5 yrs, which we never used get while growing up.

        And you you may have read Europe is getting hit with a heatwave right now(France is hitting 46 degrees celsius/114 farenheit). India got hit 1-2 months ago as well I think.

        Yes. The inland cities would definitely benefit should the situation get so bad where major banks/businesses start relocating for that reason. They have been moving non-business functions to mid-west for a good 5-7 yrs now.

  16. Ah good to know! I’m all for doing big reno projects with permits as there’s just so many things that can get overlooked and it’s in the homeowner’s benefit to have an experienced inspector giving everything a review. But hey if the city forgets to update their records on work done on a 3R report and such and I can save on taxes that’s just fine with me! Gotta make sure to keep good records of those permits and inspector signatures to be safe though cuz they’ll come in handy later.

  17. That is great that you can take advantage of govt inefficiencies.

    I also heard that in California that property taxes are locked in to when you bought the home but can reset when you sell or remodel. I’m not sure if it is required to report if you remodel a bathroom or kitchen but that would be something I would not be volunteering if I don’t have to. It also may explain why some kitchens etc haven’t been remodeled in ages.

  18. Smart idea, Sam! No need to pay extra taxes if Uncle Sam isn’t knocking. ;)

    I don’t have any examples of government inefficiencies that have benefited me recently, however, I did catch a windfall from CALSTRS who found my sister and I.

    Apparently, my Mom still had an accrued balance in a teachers retirement account. They notified us 15 years after her passing, and I was able to finally get access to the funds this month and pocketed $16k pre-tax. I wouldn’t have known about this unless they found me. :)

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