Drop in Home’s Value May Cut Property Taxes

With the housing market in a serious slump, many Californians are looking at declining home values for the first time in nearly a decade.

One need look no further than the daily newspaper to get an idea of how bad things have gotten. Developers and auction houses are now advertising homes in so-called luxury developments that are offered at prices $75,000 to $150,000 below original sales prices.

There is nothing you can do about having paid too much for your home. But something can be done about property taxes based on that inflated value, said Michael Schaaf, manager at the accounting firm of Arthur Andersen & Co.

State property taxes generally amount to 1% of the value of the home as determined by the county assessor. However, since 1978’s Proposition 13, assessors can only hike their appraisals 2% a year (with a few exceptions) unless the home was sold or remodeled. Generally speaking, the assessment is raised or lowered to the value of the most recent sales price, plus 2% for every year subsequent to the last sale.

If you have owned your home for a decade or more, chances are your home’s assessed value is well below its true market value. This column is not for you.

But if you purchased your home within the last few years and believe that its value has dropped, it might pay to request a new assessment. And, if that is not successful, you can take it another step and “appeal” your property tax assessment.

An overly rich assessment can cost you a lot of money, especially if your home’s value has dropped by tens of thousands of dollars. You would pay $3,000 annually in taxes on a $300,000 home, for example, but only $2,000 if that home were suddenly worth $200,000. (Notably, this 1% figure only accounts for your basic state property taxes. It does not include additional taxes for special water districts, schools, etc. However, the amount of some of these assessments may also be affected by the value of your home.)

Asking for a new assessment on your home is a simple process that can be completed in one day. Don’t expect an immediate reduction in your bill, though. Your April payment is based on last year’s value, so that will not change. However, if you complete the application soon, your October bill may reflect the new amount.

Where do you start?

Either check your most recent property tax statement or go to a local assessor’s office--there are 13 regional offices in Southern California as well as the main office in downtown Los Angeles--to find your current property assessment.

Chances are your 1991 assessment will be the same as your 1990 bill, plus 2%. But there are some exceptions. Some county assessors have been reviewing properties in their areas and cutting assessments because of the depressed real estate market, but that is unusual. Particularly in densely populated areas such as Los Angeles, assessors rely on consumers to tell them when the assessed property values are too high.

If you determine that the assessed value of your home is higher than today’s market value, you can write a letter or fill out a “decline in value” application, which is available at the assessor’s office.

Assessors also ask for information about three comparable home sales in your area. You can generally get this information from your real estate broker. But if that is a problem, you can go to the assessor’s office and ask for their list of home sales. Their list will include all sales within the last 24 months in that district.

Once you file your application, including documentation on comparable home sales, all you have to do is wait. The assessor’s office will let you know whether or not they have accepted your revised home value within 30 days, Assistant Assessor Sid Delgado said.

The assessor’s office, however, does their own review of the property value, so it is possible they will differ with your opinion of value.

If you don’t like the result, it can be appealed.

The appeal process is very similar to the re-evaluation process. You fill out a short application, submit “proof” of the lower value--which is still comparable home sales. And you wait.

However, there are a few more rules to the appeal process.

First and foremost, the appeal can only be filed between July 2 and Sept. 15. And you must submit the appeal on an appeal application. To get this form, go to or call the assessor’s office near you. (The assessment appeals office can be reached at 213-974-1471.)

This one-page application asks for your name, address and the location and description of the property you are appealing, as well as the reason for questioning the assessed value. It also asks for your opinion of the property’s market value--a number you should have arrived at by looking at recent comparable home sales and by talking to a real estate broker.

You do not need to send in evidence--such as multiple listings or information about comparable home sales--at this point, Schaaf said. However, appeals officers say it does not hurt. You also need to attach a copy of your tax bill or assessment notice to the appeal form before sending it in.

Now you wait. It can take six to nine months to get your first appointment with a hearing officer. However, the good news is, most disputes about a personal residence are settled in that one meeting, Schaaf said.

When you do go before the hearing officer, make sure you bring copies of all the evidence you need to determine a new value for your property--even if you have sent in this information before. These officials are reasonable, but they will not be bullied. If you have no evidence of your property’s decreased value, they will deny the application. And your only recourse is to appeal to a second hearing officer, and then to the whole assessment appeals board.

And regardless how far you go up the chain of command, if the evidence is lacking, your appeal is not going to make it.

It is important to note that you need to continue making your property tax payments even while the assessment is under appeal. If you fail to pay the tax, you may be subject to late-payment penalties. And those are not waived just because you are disputing the bill. If your assessment is lowered, you will receive a refund of the overpayment.

There is one more caveat. These appeals are for “temporary declines” in property value. So there is a chance that your assessment will pop right back up to the pre-appeal level, plus 2%, the next year. If it does, and your property is still not worth what it used to be, you need to appeal again.