"Property Tax Protester Beware"

The Downside of Appealing

October is not exactly high season for property tax appeals: it's too late to contest 2010 valuations -- set way back in January -- and too soon to challenge as-yet undetermined 2011 taxes (due to a lag, property taxes in MN are set each January 2 for the following year).

Yet, disgruntlement with property taxes has been an undercurrent at practically every Sunday open house I've hosted this year.

Up until last week, my standard advice was, "if you think your tax assessed value is too high, go ahead and try to challenge it -- you've got nothing to lose."

Well, apparently, you do.

At an open house last Sunday, I ran into the first documented instance of a (Minneapolis) homeowner having their property taxes raised as a consequence of protesting their tax assessed value.

I don't believe that this is common, and certainly wouldn't generalize from one instance.

However, no Realtor -- myself included -- wants to see a client bit by this.

So, my new advice is, "make sure you're not in fact under assessed before trying to protest your bill."

P.S.: I had an economics professor whose grading policy on exams was that anyone who felt that their grade was too low was free to challenge it. However, he made clear that he would review the entire exam -- not just the disputed part -- to find offsetting mistakes. In other words . . "don't bother."

Property Tax Appeals

'Shrunk to Fit': Tax Values in a Declining Market

Homeowners across the country are challenging their property tax bills in droves as the value of their homes drop, threatening local governments with another big drain on their budgets

--Jack Healy, "Tax Bill Appeals Take Rising Toll on Governments"; The New York Times (7/4/09).

Which would you rather have, 85% of $100, or 100% of $85?

In fact, they're exactly the same.

Add three (or four) zeroes, and that describes today's property tax environment in much of Minnesota.

Conservative No More

Until recently, most local tax authorities seemed to observe an unspoken rule that, when it came to assessing homes, conservative was better.

So, a house with a fair market value of, say, $250k might only be assessed at $200k. (Of course, another reason for conservative valuations -- at least in a rising market -- is that they're set two years ahead of time).

Today, local governments need every penny they can get. And yet, the housing market is falling, prompting homeowners to challenge their property tax assessments.

What many homeowners are finding out is that their home has "shrunk to fit" the more conservative tax assessed value. In other words, the $250k home that was taxed as though it were $200k now really is $200k. Voila! No tax refund.

Of course, tax assessed value is just one component in determining the tax owed; the other component is the tax percentage, also called the mill rate.

If the mill rate goes up more than your tax assessed value drops -- a distinct possibility these days -- your property taxes rise, not fall.