By now, many property owners have received their county/state property tax assessment.  Read the notices and don’t be afraid to question the values reported by the assessor.  Because many areas of the US real estate market have had DRASTIC price increases in the past year or two, you may be paying much more than needed.

Keep in mind that as property values have increased, many local/state/federal governments have INCREASED SPENDING (ie HUGE budget deficit/shortage coming! ) The result is a scramble to “find” additional revenue to “feed the beast”.  Property taxes are one method local/state governments have to raise revenue.  As prices increase, governments will look to increase the RATE or amount at which they tax to make up the difference.  Keep in mind that government RARELY decreases (or eliminates) a tax once it is in-place.  To head-off the pending increase, you should consider protesting your tax assessor’s estimate (tax assessment).

There are benefits and drawbacks to protesting the assessment.

One benefit is a lower tax bill. This may also result in a lower insurance bill.  Lower bills means more money in your pocket.  And this lower tax bill will help you for the next two or three years (plus many more years if you’re a long-term real estate investor) or until the next assessment.

One drawback is the resale value of your property may be decreased. Some buyers (and online property valuation tools…zillow, yahoo, etc.) will see the decreased assessed value and assume that your property is worth less than you are asking (you can counter with proper analysis and show the increased cash flow or more affordable home).  Remember value is a function of the net cash returned.

Protesting the assessment is easy.  Contact your local Realtor and ask for help with finding comparable (comps) properties to help protest the assessment.  Once you have the comps, determine which comps are most like your property.  Then determine the value of your property using three different methods (comparable sales to find the price-per-square foot, income basis and replacement costs).

If your research shows that your property value assessment is too high, then simply tell the assessor (on the paperwork provided with the assessment notice) that you disagree with the assessment and what you think the value should be.

The assessor may agree or disagree with your suggested valuation.  If the assessor agrees with your valuation, congratulate yourself!  You just saved some money.

If the assessor disagrees with your suggested valuation, you should prepare to support your valuation.  Keep your information secret until the assessor questions your valuation and method that you used to arrive at your value.  Once you can logically show that the valuation should be lower than the assessor’s value, you should have little difficulty lowering your tax assessment.

Keep in mind that the assessor is busy YEAR-ROUND looking at many, many, many properties and assessments.  The assessor most likely won’t know your property or neighborhood as well as an informed property owner does.  The worst thing that can happen is that your assessment stays the same.  In rare cases, does the assessment increase because of your protest.  Most of the time property owners are successful in reducing their tax assessment.

If you need a list of comparable (Comps) properties, contact me and I’ll email you a list of properties comparable to your property.  JUNE 1st is the deadline to protest in many jurisdictions in Colorado.