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Perkins on Real Estate

If assessment goes down, so does property tax bill

By Broderick Perkins

Pay close attention to your property tax bill this spring. Meanwhile, keep an eye on home values in your neighborhood. Your home may be worth less than the tax assessor believes, and that could mean a smaller property tax bill.

If you purchased your home at the height of the market, or even earlier during the boom, and found yourself in the midst of a bidding war, your home could be over-assessed based on current market values.

However, unless the assessor takes it upon himself to perform a wholesale property-tax reduction for all properties--historically unlikely--it's going to be up to you to take on the tedious task of appealing your tax assessment for a reduction.

A word of caution: Be careful what you wish for.

What goes down, typically comes up. When values rise again, you'll be socked with a new property tax bill that could send you reeling.

Your annual property tax bill is based on the assessed value of your home. There are some exceptions, but typically, for those most likely to consider an appeal, that value is attached to the selling price, or fair market value, when a property is recorded as sold or transferred.

In Santa Clara County, property taxes are collected largely to fund public education. The property tax bill amounts to 1 percent of your home's value, with another approximate 0.2 percent levied largely for public education bonds and city and county services, bringing your property tax to about 1.2 percent.

For example, if you recently purchased a home for $500,000, your property tax is about $6,000.

Generally, when home prices rise, so do property taxes. However, the assessor is allowed by law (Proposition 13), under most circumstances, to raise the assessed value by no more than 2 percent.

Unless the property is sold, takes on a major value-enhancing alteration or otherwise attracts the assessors' valuation procedure, individual property values aren't regularly scrutinized for increases or decreases in value. There are simply too many of them.

Buyers who purchased homes well above asking, during the peak of the market, are those most likely to be paying more property tax than necessary.

The housing boom and buying frenzy during the first half the decade caused many buyers to bid up the price of the property and artificially inflate the value. Sellers, particularly those who purchased homes at the height of the boom and must now sell, are finding they have to price their home to move. That means a possible price reduction. That also means the possibility of an assessed value reduction.

The American Homeowners Association, the National Taxpayers Union and others offer property-tax reduction kits for a fee, and while they may be useful tools to help walk you through the process, appealing your property tax is a right you can exercise for free.

Beware of official-looking mailings and email come-ons due any day, now that prices are flat and falling. They offer to do the work for you--for a fee. Some are legit, but others are scams designed to appeal to nothing more than your sense of dread at going it alone. They want only your money, not to appeal your property tax assessment.

When you receive your property tax assessment notificationcard in May and believe the assessed value is too high, you can file for an assessment review request. Should that fail, you can enter the assessment appeal process, which gives you two additional opportunities to get your assessment adjusted.

You'll have until Sept. 15 to complete the entire process and prove your case. Typically, that means finding three or more comparable (by age, square footage, floor plan, location, etc.) homes in your neighborhood with recent lower assessments. An appraisal can't hurt.

Property tax law, public records of assessed values of your home and others, filing forms and instructions for filing a review and an appeal in Santa Clara County, along with a host of related information, are all available on the county assessor's website at www.sccgov.org.

Eric Cunliffe, a senior vice president with RealEstate.com, says the process is free if you go it alone, but you still may need the help of a real estate agent, realty attorney, appraiser or other qualified professional to assist you with the comparable market analysis of homes recently sold and in escrow to hone in on your home's true value. That's particularly true if public records don't provide the evidence you need.

However, if you need professional help, that could put you back a few hundred dollars. Don't make a case if you don't think it's worth the cost of a review or appeal.

When you figure your costs, also keep in mind property taxes are tax-deductible--the smaller the tax, the smaller the deduction.

There's one other cost down the road to consider.

While tax law prevents the assessor from raising your property taxes by more than 2 percent a year, there is one exception directly tied to reduced assessments. Once your property's value returns to pre-reduction levels, your assessment will likely jump back to that level, even if it's more than a 2 percent increase.

In 1998 some 60,000 Silicon Valley homeowners who had their taxes reduced during the recession of the early 1990s saw their property taxes increase from 3 percent to 16 percent, according to the county assessor's office.

Real estate writer Broderick Perkins, executive editor of San Jose-based DeadlineNews.Com, writes regularly for this newspaper.