As we enter each New Year, it is appropriate for us to remember the roman deity Janus, god of passages and time. He is most often depicted as having two faces: one looking to the future and one looking to the past. The Romans named the month of January in his honor.
And if we own any real estate, this is also a good time for us to look back and forward.
Look back to see if we have been paying more than our fair share of property tax, and look forward to learn what can be done to make sure we don’t pay one cent more than the law demands during the new year.
Here then are my recommendations for your year-end property tax review.
1. FORGET THE PAST. Know that unless your property is currently under an appeal from last year, it is not possible to revisit your property tax assessment for prior years. It’s over and done with. Generally, even the tax commissioner lacks the authority to revisit previous years values, even if there is an obvious mistake. That’s because the county needs to know how much revenue it can count on, and the mechanism for appeal is written into the state statute. It is, however, your responsibility to take control of the process in the future.
2. ASKING FOR A LOWER TAX ASSESSMENT WILL NOT HURT YOUR ACTUAL VALUE. One of the most common misconceptions is that protesting an assessment may in some way lower the actual value of your home. Here’s the truth: there is absolutely no relationship whatsoever between the assessed value for property tax purposes and the real market value of the property. While all of us want our homes to be worth as much as possible, you needn’t worry that a low assessment will hurt your selling price should you decide later to sell. Don’t worry about pursuing a lower value for tax purposes.
3. YOUR PROPERTY TAX RETURN. Beginning January 1, owners may file a TAXPAYERS RETURN of PROPERTY with the Tax Assessor of the county where the property is located. This form simply notifies the assessor of your opinion of the value of the property in question on January 1 of that calendar year. The form is known as “Georgia PT-50R” and can be found on my website at Money99.com. This is not the same as protesting your NOTICE OF VALUATION – that can’t be filed until you get it, probably in April or May. But the PT-50R can be used to begin your dialog with the tax assessor.
4. The PT-50R form requires only your name, parcel ID, property address, and your estimate of value for the land and improvements as they existed on New Years Day. It should take less than ten minutes to fill out, even less if you have last year’s tax bill or can log on the county tax website to gather your account info.
If you are filing a return on a single family residence and your lot is less than 5 acres, you can ignore the part of the form that asks for your estimate of value for LAND versus IMPROVEMENT. Simply enter the street address on the first line that says IMPROVEMENT to the left of your estimate of value, then enter the total value to the right. Sign it, keep a copy for your records, then mail it as early in the new year as possible. The sooner you get the process started, the more likely you can work out an acceptable solution with the assessor. If you have any trouble with the form, call the tax assessor’s office and ask for help – they are usually very nice folks!
5. Remember that an APPRAISAL is simply one man’s estimate of the value of your real estate at a single moment in time. For property tax purposes, we need that moment to be January 1st of the current calendar year. Your estimate of value should be based on sales of comparable homes which occurred during the twelve month period immediately preceding that January 1st.
If possible, find at least three sales which are a) similar in age, style, and size to yours; b) have the same bedroom and bathroom count; and c) are located within a mile of your home.
The farther you get away from the parameters described above, the “less confidence” an appraiser will have in your comparable sales. Remember that sales don’t always cooperate with your need to have comparable sales. Your goal is to select those comps which best validate your conclusion.
6. Make sure your estimate of value for this year is lower than the assessed value assigned for last year. Because this is simply your estimate of value, you don’t have to be able to back it up with data, at least at this stage of the game. Filing the form simply tells the county you want them to re-examine their estimate of value before they propose a valuation for this year later in the year. It’s sort of like “putting the ball in play.”
6. Local real estate agents can help you locate these sales and also provide data such as square footage, so that you can calculate a “dollars per square foot” average for your estimate. Most agents have easy access to this information on their MLS computer program, but it is polite to offer to pay them a nominal fee anyway. Agents are prohibited by law from rendering an “appraisal,” but they can prepare a “competitive market analysis” which contains much of the same data.
Alternatively, you can choose to hire a real estate appraiser to establish a value, but that usually costs several hundred dollars. While I am not disputing the value of a professional appraisal, you may not save enough on your property tax to justify the expenditure, so run a cost-benefit analysis before you dive in. If you DO choose to use an appraiser, make sure you tell the appraiser you need the appraisal for PROPERTY TAX reasons, and you need the value to be as of January 1, not any other day.
7. If you purchased the property during the preceding calendar year, you are required to file a return. Include a copy of the HUD-1 settlement statement to establish value for this year. Georgia law now requires counties to accept the purchase price from the previous year as the value for the following tax year.
8. Your completed Georgia Form PT-50R should be mailed or hand delivered to the local Board of Tax Assessors no later than April 1. Some counties allow you to file your FORM online. However, the safest method of filing is to hand it the assessor and get a receipt. Filing that paperwork tells the county you want them to review last years sales data before they calculate a proposed valuation for this year.
We’ll examine each of these steps in more detail as we move into the new year, but the bottom line is this: you can save significant sums of money by making sure the county is not overcharging you for your property taxes.
1. COLLECT SALES DATA
You need to get a list of all actual sales (not listings) in your neighborhood that have occurred during the previous calendar year, because those sales will be an indicator of your home’s value. Get the list from the Internet (try realtor.com, zillow.com or trulia.com) and verify it with realty agents who are active in the area. The closer physically the sales are to yours the better.
2. COMPARE SOLD HOMES TO YOURS
The most important data are location, age, square footage, and the bedroom + bath count. Also, try to determine the condition of the property. Has it been completely remodeled? While other factors are noted in a formal appraisal, they generally are given lesser consideration in valuation.
Foreclosure auction sales are not considered because they are not “arm’s length transactions,” but bank resales (where the lender sells to someone else) do count, and that can help you very much.
If a bank resale was at a particularly low price, make sure you stress it in your comparisons. While I personally consider these to be “distress sales,” the appraisal community does not, and they write the rules.
For the purpose of property taxation, you want your home to be worth as little as possible, and foreclosure resales can have a devastating effect on value. Find them and use them to your advantage.
3. VISIT THE HOUSES
You don’t need to go inside.
But see each house from the street, take photos from your car, and compare each home to yours. If you can reach the listing or selling agent, call them and ask questions about details and condition of the interior. Then assemble all the comparable sales data on your desk.
4. ESTIMATE THE VALUE OF YOUR HOME
By making adjustments for sales that were less similar to your home, you should be able to come up with a ballpark guess as to what your home was worth on January 1, of the current tax year.
You can ask a real estate agent who is familiar with your neighborhood to help you, but be prepared to pay for their services, or at least offer to do so.
While agents are not trained as appraisers, they are very familiar with sales activity and often have a keen eye as to values. Make sure your estimate of value is justifiable and reasonable.