Property Tax Appeal… Questions to Ask Your Expert, or Yourself

Every tax appeals season, owners are inundated by mailings and postings from professionals offering their “expertise.” The mailings are loaded with seriously personal data--your name, your address, how much your house is worth in the eyes of the tax authorities, how much it SHOULD be worth, and how much in taxes you could be saving. The companies sending them vary from appraisers, to realtors and real estate lawyers who advertise their knowledge of the market and charge $500 to 30% contingency. In the mix are also software companies, who sell their specialized software for $50-100 a pop. Finally, there are other individuals who have successfully won multiple appeals who charge up to $250. Who, if anyone, should you hire?

The answer is not the same for everyone.

My first advice is to know yourself. Do you know how these form letter mailings are generated? Are you proficient in excel? If you can sort and mine through thousands of lines of data, there is a good chance you can appeal your taxes yourself. If you are familiar with your neighborhood, and know the details of some properties that might be comparable to yours, and you have good negotiation skills, you have a good shot of standing your ground at the hearing, and winning.

On the other hand, if you are a person who is not proficient in excel, or who is not a numbers person, you would benefit from using a professional to appeal your taxes. I don't mean this in a negative way. In fact, I want to encourage you to appeal your taxes. You will likely not only come up with a more robust tax appeal by using an expert, but you will also sleep more soundly for the several months your appeal will be in process. While it would tough for you to do much homework by yourself (beyond knowing what a few houses in the neighborhood sold for), you can still screen your professional by asking them a handful of questions on how they value your and comparable properties.

If you are in between, that is, you have the excel and research skills, but not much time or confidence, you can take this quiz to see if you are up for the task.

• What is the value of your property?
• Should your taxes be lower because your neighbor, whose house is exactly like yours, pays lower taxes?
• Say you live in a high rise building in Apt 5C (5^th floor). Apartment 10C sold for $500K. What is the value of your property based on this comparable?
• Your upstairs condo sold last year. It is the same square footage as yours, but it has a fireplace and a deck, but your doesn’t. It is a comparable?
• A condo across the street from yours with similar square footage and number of rooms as yours sold last year. However, the building has 50 condos, an elevator and a doorman. Your building has 5 units, no doorman or elevator. Are they comparable?
• A condo in your building sold for $500K. However, it comes with a parking space but yours doesn’t. Will the assessor know and how will you adjust for this?
• You live on Willow Ave. Jackson St. is less than a mile away, but you have seen a few condos there sold for significantly less. Are they good comps?
• A comparably sized condo sold in your building for $10. Can you use that sale to bring down your valuation?
• Your upstairs neighbor’s unit is exactly like yours. It sold last month for $750K. Is that a valid comparable for your tax appeal?
• You appealed your taxes last year, and got a partial settlement. You think your value can be reduced by 5-10% more. Should you try again?

If you know the answers to these questions, good for you! You are ready to appeal your own taxes. If you don’t know these answers, ask these questions to the expert you are about to engage. You will get a good sense of whether he or she will be able to provide you with a strong tax appeal.

As always, don’t sign any contracts until you are sure you are satisfied with the expert. It is ok to say you need time to think things over, or even compare with another expert.

This year, I am offering my consulting services for tax appeals. I do not, and cannot, compete with professional appraisal software that costs upwards of $1200. However, I believe many tax appeals don’t need specialized software to generate an acceptable valuation, especially if the property owner is knowledgeable about his or her property. My goal here is not to make a lot of money, or start a business dedicated to doing tax appeals. It is to use my extensive experience of comparable valuation (I am a Certified Financial Analyst—CFA) to educate and empower owners to do their appeals themselves. Please feel free to write to me for more info.

Other property tax related articles:
Hoboken Property Taxes Due (Feb 2011)
Property Taxes Going Up or Down? (Oct '10)
Appeals... the Next Steps (May '10)