Appealing property values for tax break
People are asking for a reevaluation of their property values to get break from their taxes, including in Collier County FL.
By JOE MILICIA Associated Press Writer
CLEVELAND (AP) — A growing number of homeowners are trying to make falling property values work for them: They're asking the government for an accompanying tax break.
Some are winning cuts worth hundreds of dollars in taxes that help pay for everything from law enforcement to road crews in a city or county.
Challenges to property values have increased in beleaguered real estate markets such as Cleveland, Chicago and Las Vegas as more homeowners become aware of a relatively obscure process that involves no fees and no need to hire an attorney or an appraiser.
The number of appeals for the 2007 tax year went up anywhere from 10 percent in Collier County, Fla., to 89 percent in Clark County, Nev.
"Because of the market and so forth and people are frustrated, and the economy, people losing their jobs. It's tough right now," said Abe Skinner, Collier County's property appraiser.
Declining home values, the foreclosure crisis, tighter mortgage lending criteria and an economy in shambles have contributed to the stream of homeowners seeking tax cuts.
It's too soon to know how much tax money local governments might lose. Property tax rates are structured to protect against steep declines in value, or to prevent a windfall for government if values jump.
In Cook County, Ill., where the median sales price in Chicago was down nearly 10 percent in October from a year ago, the challenges have more than doubled from about 127,000 in 2005 to about 277,000 last year.
"They're willing to pay their fair share, but they don't want to pay more than their fair share," said Joseph Berrios, one of three commissioners on the Cook County Board of Review.
Berrios said his staff will put in a lot of overtime to keep up with demand.
Any property owner who thinks the government has placed an unfair value on a piece of land has the right to challenge that decision. What's brought wider attention to this right is falling property values and foreclosures that have driven down housing markets.
"More and more people are becoming aware of the process that's always been there, of their right and taking advantage of it," said Robert Chambers, director of Cuyahoga County Board of Revision in Cleveland.
The process varies from county to county. But a typical example is the appeal filed by Scott Laney, who bought a brick bungalow in June 2007 in suburban Cleveland that was approaching foreclosure. He paid $99,000 and later discovered the county valued the North Olmsted property at $141,300.
Citing declining market values — Cleveland and its suburbs have suffered steep median sales price drops according to The Associated Press-Re/Max Monthly Housing Report — Laney filed a complaint in late February with the Cuyahoga County Board of Revision.
The board received 7,780 complaints from homeowners in tax year 2007 — the most this decade — and could surpass that figure this year in a county that was one of the early victims of the foreclosure crisis.
Laney had to wait nearly six months for a decision, but he won his case, and the value of his property was reduced to $99,000.
"I was ecstatic. I was glad to see the little man beat the government," he said.
Laney expects to save as much as $400 a year, although the property is back on the market with a "REDUCED" sign in the front yard. His only expenses were sending the complaint to the board by certified mail and traveling to a hearing to state his case.
Cuyahoga County Treasurer Jim Rokakis, who chairs the board of revision, said that in a stable suburban market an owner usually needs to prove at a hearing why the property is worth less.
But if someone on a street with 10 boarded-up homes challenges the value, the owner might not even need a hearing to get a reduction.
"It's not worth $80,000 anymore, it's pretty easy," he said.
Although there's no data tracking the trend nationally, the lower property valuations ultimately will cost local government in the form of lower tax receipts, said Robert Van Order, an associate professor of finance and real estate at the University of Michigan.
Schools receive about 65 percent of property taxes in Ohio. Rokakis said it's too early to say how much tax money will be lost. The county will have a better indication in 2009 when the auditor's office updates the values — done every three years — of all properties in the county.
In the Las Vegas market, 1,370 appeals were filed with the Clark County Assessor's Office in fiscal year 2008-09 compared with 725 the year before. Reductions are up as well with 786 property owners, or 57 percent, receiving a break earlier this year compared with 356, or 49 percent, in fiscal year 2007-08.
The numbers include a mix of residential and commercial properties with an increase in residential appeals this year.
Las Vegas attorney Monty VanderMay, who has challenged property valuations in Nevada and four other states, said a homeowner typically needs to gather information on the value of other homes in the neighborhood and recent sales in the area.
He said it's not worth hiring an attorney considering the amount of money to be saved. He added that in today's market, winning a lower valuation isn't as difficult as it was when real estate was booming.
"The process is fairly easy, especially in these tough economic times, a great way to save some money," said Laney, a middle school reading teacher.