You might be overpaying in property taxes without it. Property taxes are based on the worth calculated by the local Tax Assessor and in the aftershock of the most major real estate collapse in modern history, it is completely conceivable that the present calculated value on your real estate is greater than today’s market worth. If the value assessed on your property is more than the correct market value, you are overpaying in property taxes! How did this occur and what can you do about it? That’s what you’re about to learn…how local governments have been swindling homeowners and what you can do to stop it!
Secrets of Local Government Finances and Expenses
Local governments handle their assets much differently than for-profit businesses and people. They build financial plans for individual departments and enterprises and then, those groups are anticipated to spend their whole budget each year. If they don’t, the next year, their budget will be reduced to the sum they spent the year before. Therefore, each department is incentivized to spend the whole shebang they get, rather than use any excesses to go towards the next year’s requirements.
My mother worked in local government for a few years and was taken aback when her superior obligated her to purchase a new computer when she was insistent that her current one was more than satisfactory. She was taught that if she didn’t spend all the money that her department had received that year, she would get less the next year. Consequently, to ensure she at least got the same amount as the current year, for next year, she needed to spend, spend, spend.
Examining your property tax bill can be a dull experience, with different tax rates for different services, such as schools, roads, (in my area, beach patrol, lifeguards, mosquito control) and typically much, much more. Local politicians know the property tax equation all too well. They know that it takes two to tango, both the tax assessment value and the tax rates. Local politicians recognize that raising any of the tax rates will get a remarkable amount of press and the public uproar could affect the polls with them no longer being in office the subsequent term. However, they have also uncovered a unusual anomaly in human psychology. Rather than get troubled when the tax assessment letter is sent out showing an upsurge in tax assessment value, oftentimes, property owners get enthusiastic. They reflect to themselves, “Oh great, my home’s value went up from last year, great!” (When, in fact, they should be worried about the increase and should instantaneously verify with recent similar sales what the true market value is.) Consequently, local politicians know that the secret to raising taxes is not to fiddle with tax rates, but to push the bounds on tax assessment values. It’s a win-win for them. They produce pleased residents and get more cash.
Local governments are financed, in part, by property taxes. Every portion of real property has a tax assessment value that its property taxes are based off of and as real estate values increase, so too does the tax assessments thus, the total income made for the local government. Since local governments spend all they get, instead of using leftovers during prosperous times to, possibly, spend less the next year, instead, local governments spend more and more year after year, unrelatedly to economic circumstances, population fluctuations or market alterations.
But what if the economy shrinks radically? What if real estate prices fall and that subsequently decreases the amount of money coming into local governments? Much like a business that has to constrict its belt when times get thin, shouldn’t the local government do the same? Ahhh, good question.
Why You Might Be Overpaying in Property Taxes
As the real estate market hit the roof in the mid 2000s, local governments become fairly comfortable with the bigger income streams coming in from the increased property values. But, when real estate values began to fall, instead of reducing tax assessment worth (and therefore making due with less currency coming in), in many areas, they left values the same or only a little less. As property values continued to drop by as much as 50% or more, local governments, in many places, didn’t bring down the tax assessment values to counterpart this huge drop in market values.
Today, there are property owners all over the United States overpaying in property taxes because their tax assessment value is extremely higher than the actual market value. I spoke with a seller yesterday who was unbending about selling his house for the tax assessment value but the difficulty there was that his tax value was $45,000 more than the market value of his home! I showed him comparable sales to prove it. When it eventually occurred to him that he had been overpaying in property taxes for the past few years, he was furious! Are you in the same boat as him? Is the tax assessment value on your property EXCEEDING than the market value?
Lowering Your Property Taxes
If you are experiencing the unlucky circumstances of having a higher tax assessment value than the current, market value of your property, there is a way to dodge being the pushover of overpaying in property taxes. You will have to make an appeal to your local Tax Assessor for a re-assessment of your house’s value. Offer comparable sales to prove your argument. Each county handles re-assessments in their own way. In many scenarios, you have a very short window each year in which to appeal. But even if you can’t take advantage of this approach today, set a mental note for yourself for when you can.
You may want to share this data with families and friends. Maybe even assist a neighbor out? Yeah, so maybe you think your neighbor isn’t the greatest person ever, but helping him/her save a couple bucks in yearly property taxes may bring you closer. ☺
Finally, let’s have some fun. Let’s see who is the largest pushover in the online community, shall we? Who is overpaying the most in property taxes? For both primary residence and any other venture property you have, comment below on what your tax assessment value is versus your as-is market value. Let’s see which parts of the country have the largest robberies (and with any luck support those areas that have the most authentic and truthful local governments). Who is going to get the prize for overpaying the most in property taxes?