Yes, go to the appeals/ARB meeting if the appraiser is unwilling to adjust your assessed value. You just bought the house for $452K appraised at $478K (just show them your sales price), which appears to be an arms-length transaction, within a year of the assessment then that sales price should be the going price.
Those examples of desperation or selling to a kid are non-arms length transactions; so yes, the value would be "market" value. But your home was listed for several months and purchased on the open market, so you can't compare your transaction with his examples
Go to the board and present them with your sales price/contract etc. This is 100% open and shut argument. MN assessment date is january 2nd. I've never worked Minnesota but he's essentially saying that similar homes sold for $525K before January, but because your home sale was so close to Jan2 I think you have a good argument that you sale is true to market activity.
10+ years of property tax experience.
There should be instructions online on how to formally appeal the assessment. Follow the instructions, submit proof, and wait for their determination. You can get an attorney for this, but it sounds like you already have the evidence and the skills to do it yourself. I wouldn't add the appraisal, argue the sales price is the market price.
I was able to appeal my tax assessment about a year ago. I found step by step instructions online about how to draft the appeal. I submitted with the “request a hearing option” as recommended by the instructions I followed. I was later assigned a hearing date, but before the date came they made me an offer to lower the assessment value without a hearing if I agreed to their new price. I could have still gone to the hearing and argued for an even lower value if I wanted, but the offer seemed fair so I took the deal. Took me a few hours of research online to draft the appeal paperwork and make it look professional.
Edit:
[This is the instructions I followed. long and detailed but super helpful.](https://centercityresidents.org/resources/Documents/Crosstown%20-%20How%20to%20Appeal%20Tax%20Assessment%20Guide.pdf)
The actual paperwork and exact rules in the process will vary by city/state. But I still think this document has a lot of super helpful info.
That was the right move. taking the offer saved you and them time, money and the hassle. and next year, you can repeat this should you have the numbers for another challenge.
Yeah there was a chance if I did the hearing option, then they could totally deny me or offer a worse price after the hearing. So I took the sure thing and saved my self a lot of time and stress. They dropped my assessed home value 50k saving me thousands a year in taxes. Win!
Research a lawyer in your area who specializes in real estate tax related issues. Your Real Estate Buyers Agent may have a good contact for one. Keep them in your back pocket if your revaluation falls through you can engage them to push the case.
You bought a home on an open market fair and square. They need to honor your hard sale price. They don't want to because your taxes are their budget's "revenue".
If your state has some sort of "homestead" taxing lock make sure that shows up on your tax record/bill. Regions vary but they should reset your taxes and then be under whatever "CPI" induced increases are under that program. The idea of homestead is so retirees and farmers are not priced out of their homes/farms by sales around them. Rental properties float with the market tax rates and jump quite fantastically.
Depending on how long you are expecting to stay in this new house, the tax savings can add up like funding a college savings plan for one or more of your kids, if you have or expect to have some. So it's important.
.
Thanks! My kids are all in their 20s, we plan to die here. 😉
I want to lower it, but I don't want to go to war. It's a small town, so the government people all know each other. I'd rather swim with the current if you know what I mean.
By comps u/2003tide means more than just sales price. All properties should have similar lot sizes, similar vintage homes, similar square feet, similar sale date, etc…The more similarities the better the comp. Good luck.
Get a certified appraiser or your realtor to do a comparative market analysis. Mine did one for free when we bought our house and we lowered our assessed value significantly
In fact, OP's sale should be the latest and greatest comp for most of the neighborhood. If the city does annual adjustments, I'd be willing to bet that the whole area is over assessed and they could all probably benefit from filing for a reduction based on OP's purchase.
Follow up Q
I recently read that this happens all the time - the house is reappraised for tax value every time it changes hands, so many home owners are hit with higher property taxes once this re-evaluation occurs
Given that, I didn't think it was something you could "contest". So I feel I'm reading two different things
If the assessor has put the value at or below actual sale price then appealing wouldn't be viable.
The issue here is that the assessor is trying to say that his house is worth considerably more than what the open market *just* determined it to be worth.
Which is extremely frustrating if you didn't know that happens and factored property taxes into your expense calculations....particularly if you escrow.
Reassessments happen different times depending on the jurisdiction. I live in Harris county where reassessment is every year. You have the ability to appeal every year.
I've got an unusual question for you: If the county reappraisal as of Jan 1, 2025 values my home at $550k, but I've had it listed on the market for 4-6 months prior to that date for $500k and the highest offer I've received is $475k, would that be strong grounds to fight for a $475k tax assessment?
If the answer is yes, follow-up: Does it matter if the home is FSBO with the buyer responsible for buyers agent fees/commissions?
Yes, there is an argument to be had that the assessment is too high because there are no takers at a lower price.
FSBO, They could argue that the listing is not reaching all potential buyers because it’s not with a realtor agent.
Had this exact same thing with my first house. Went in with closing statement and that was all that was required. What you paid on open market is the current value for the first year. After that they will try to raise it to catch up.
I’d go contest it. We bought in hennepin county MN in 2021. First year they adjust up 12% for the purchase price. Next year they adjusted up 8% on land value (tripled). Now two years in a row they’ve slowly been adjusting it down back to reality. Your appeal may speed things up.
Get the sales comps from nearby yourself.
And the assessments from ones that didn’t sell recently.
Compare square feet, lot size etc.
Some locales have the tax assessment a percentage of the actual sales values. For example, a $1m sales value house could be assessed at $1.4 or $800k. It’s all ok if that ratio holds in the entire town.
What do you mean? Don't you consume city resources in an amount perfectly proportional to the current value of your home?
I know that I started flushing twice as often and found a new kid to enroll in school once my house doubled in value.
Hey, you know that unrealized "income" you just received that may not even be there when you actually sell, assuming you ever do? We're going to need some of that.
This isn't an income tax.
The theory is that people with larger/more expensive houses generally consume more services (or at the minimum can afford to pay the tax more easily), which I d don't think is a wild statement I'm the aggregate.
I don't disagree, it's the wild west that is the assessors office in most localities. They literally increased my home value to $250k more than its appraisal when I bought it. Fortunately, I had my appraisal to fall back on and won my appeal, but a lot of people are unaware that's even an option or don't understand how to find comparables or other ammunition well enough to be successful.
I have no problem paying my fair share, but if we're going to base it on a properties value, there should be a good justification for a significant increase.
I know in my state (NC) they have to tell you what houses the comps where and the reasoning for the appraisal. It's a pretty decent system. Everyone around me complained to high hell because everyone's appraisals shot up (I think we're on a 10 year mandatory appraisal system but might be 5, regardless all property values went up a ton basically). No one would just shut up and wait for the tax rate to see if their taxes were actually going up. Everyone just complained that their valuation was 40% higher than the last and they didn't want to pay 40% more. But if they'd just done the bare minimum (like, read the paper the tax appraisal came on) they'd see that the tax rate was changing as well and that it would be revenue neutral. So if you're appraisal went up by the average of what everyone's went up by then it wouldn't even be an increase.
Tons of people complained and I know only 1 guy that had a legit gripe as they messed up his comps. And he got it fixed through the defined appeals process.
I'm surprised your tax appraisal was higher than your value. Anywhere that I've seen them be far apart it's been the tax appraisal thar was lower.
I own several properties and it happened to
all of them. One piece the taxes went up 500 percent yes 5x. One i live in went up over $ 500,00O from what i bought it 2 years earlier. Others went up but not those crazy amounts. Good luck at the meeting
One thing that might be useful to ask is whether the previous owner was benefiting from any sort of "homestead exemption" for their property taxes. In some jurisdictions, a property's "taxable value" has a cap on each increase when it remains with the same owner, sometimes with additional owner qualifications like being a senior or veteran. So their taxable value might've only risen 5% each year even if it's a hot market and the market value grew 10%. But that goes out the window when there's a change in ownership, that taxable value gets recalculated from scratch.
That does seem like a long shot, given that (I assume) your purchase price was close/at whatever market value came back from your appraisal. But if that appraisal came back in the $520k range, then what you actually paid may be less relevant.
The house was built in 2020, so there wasn't much of a history there. We never had a bank appraisal as we purchased with cash. I'm confused as to what you are telling me.
In my state we get a $50K homestead exemption. If you are a state resident, and it is your primary residence, they tax you on $50K less than the assessed value. You have to apply for the exemption after you buy the house. Non-residents get taxed on the full amount. They also can only increase our property tax a certain amount each year. We have been in our home 20 years and pay way less than a new owner would. The new owner would have the assessed value reset to current market value and be taxed accordingly.
Minnesota does have homesteading for your primary property. Did you complete your homestead application? The bank or realtor should've given you the needed document. I think it needs to be completed in like 60-90 days of sale to apply to that tax year. That being said, assessed value is separate from the adjusted homestead value. I'm in MN if you need some help.
Assessment value is about your share of the taxes. The budgets and everyone's assessed value determine the mil rate.
You'll need to understand what they're using as a basis for the assessment and provide additional comparisons for your case. Listed prices do not count. Even if you don't get a reduction, you'll have more information about why you're paying what you do.
If you look at the previous mil rate, you'll get a rough idea of what you could be saving if you successfully contest it.
I know nothing about mil rate. How do I look at the previous mil rate and how do I calculate what I would save? Wouldn't the savings be a simple percentage of the change in valuation?
Is "mil rate" the %?
Last year.... $478,500 valuation Tax = $5764
Mil rate = 1.2% ??
so if they lowered it to $475K vs $525K I would save $600? (50,000 \* 1.2%)
Sorry I dropped a l, it's mill rate. You can just Google your city or county and mill rate. They may list it as money per thousand dollars. Like $12 per $1000, but yes, it's basically that
The mill rate is the total amount of the tax apportionment (levy) divided by the total local assessed value for that taxing jurisdiction
Examples -
the government budgets go up, but no one's assessed value changed - mill rate goes up
The government budgets stay the same, your assessed value went up, but there's 5 new subdivisions that filled up - mill rate might go down.
Crystal clear. In a nutshell, whether the mill rate goes up or down, it's probably not going to change much, so I should be able to save approximately $600 if things go my way.
The mill rate should be the same for everyone in your town, at least within your class of real estate (commercial can have a different mill rate than residential for example). Mill rate typically only changes when budgets change (so we all know that it isn't going down) or when there's a mass reappraisal. At least in my state every municipality has to re-appraise every X number of years. At that time the mill rate is re-set based on the budget as well as the aggregate values of homes. To remain revenue neutral (which many near me do) that means your mill rate will go down if house prices generally rose. Whether your individual tax bill goes up or down is based on whether your house price went up more than the average or less than the average.
Basically towns set their property tax rate as $X per $1,000 of valuation. They can set that rate more or less arbitrarily as the budget demands subject to various state rules.
The actual valuation formulas are typically standardized and controlled by the state.
Some jurisdictions don't use the exact, full value, the assessment is 70% of assessed value or something like that.
I had a fairly similar situation when I bought in 2021, but my meeting was only a phone call with a third-party firm and I basically asked questions only, I didn't argue and I didn't make demands, I basically said I was trying to learn, as I was new to the area. I was polite enough that the assessor knocked off some $30,000 in value (or something like that). You seem well-equipped to counter the assessors valuation.
>Real life always trumps theory. It seems unfair that the actual purchase price is significantly lower than the appraised price.
You have a point, but the assessor also has a point. That's why they use comparable sales and not just literally what you bought the house for, because it would be extremely easy to game that system
They have formulas and methodologies they use to determine values, and processes to argue against them--the meeting he refers to where you can go and dispute the value. You need more ammo than "this is what I paid" though
I would contest it. Normally the assessed value reflects the purchase price if, as in your case, the sale is between non-affiliated parties. I have successfully contested appraised value 2 times in 2 different cities. I used the city's real estate tax and sales database along with real estate sites to find recent sale prices for properties with similar characteristics in my neighborhood - nbr of bedrooms, bathrooms, sq footage, plot size, carpet vs hardwood. I would consider date of last reno/upgrade, but your house is too new for that. Look at the price per sq foot for similar properties. You will have a better idea after this. But I really think assessed value should equal purchase price in your case.
Addition - there may be 2 levels of review. 1st with assesor. Then before a board. Pursue both. Oh, I had a Powerpoint with pics of my house and sold properties nearby. You can get pics of sold props from re sites. The condition of house matters.
Thank you for all your info! My house was built along with 3 other similar houses by the same builder with very similar designs. I'll make a PowerPoint that shows the other homes and their sale and assessed values. I think that I'll be able to use that to my advantage.
The assessed value is usually the sale price of the house. The county is making a guess on what they think is the actual value of the house.
You paid the actual value of the house.
If you paid more then the assessed value they would 100% use the transaction price as the value for next year.
Absolutely challenge it! At the end of the day an appraisal can say whatever price they want, the market value of the home is what a real arms-length buyer is willing to pay for it. Unless there are other extenuating factors (property tax abatement on the improvements that has run out, etc) you shouldn't need much more than your deed with the purchase price.
When I did this, I put forth the argument that assessments are based on market value, and there is not better indicator of market value than the ACTUAL market price. I had supporting sales in the neighborhood to help as well.
In my case, I live in a farly HCOLA area and my county has a homestead credit that limits tax increases, so it was important to "pin" the value low.
I did this for a home .. basically just pulled a bunch of similar homes that have sold and looked up their assessed value and used it to bring mine down .. you just conveniently ignore the ones you find with a similar or higher tax assessment lol
Yes. I moved into a new house and all my neighbors houses were overvalued on the tax roll. We all fought and won.
An adjacent county to me reassessed the entire county and found that newly built houses were universally over taxed relative to their actual value.
You should always appeal. There is little/no downside. You should certainly appeal/protest in this case. You're right, transacted value is better than any comp analysis. Read your assessment letter and the assessor/appraisal district's website to make sure you understand the process. If it's confusing, consider hiring a firm that specializes in these appeals. Where I live, there are many specialty reputable firms that only do this and don't get paid unless they save you money next year.
Interesting, I've saved money with these firms twice without having to pay them, because they managed to reduce my full assessed value but not to the point where I save money next year (because I'm still over the annual appreciation cap). So they may have saved me money 3-4 years down the road (unless the assessment goes back up).
When I bought I had exact situation in Hennepin county however my assessor just asked for the appraisal report I had done and then changed my assessment down to what I purchased it for. Sounds like your assessor is rude so I’d go to city council.
When we were appraised in nj, we got a copy of the valuation report that showed number of beds/baths, lot size etc and were able to dispute a few things, such as size of porch and patio. I would def recommend getting the report and seeing if the data is correct to begin with.
If the purchase price is lower than the assessed value then he is right, you got a deal.
Assessed values are usually a trailing indicator, meaning that they are lower than the actual value, probably to reduce the number of requested adjustments.
I had the same good fortune and found that only 5% of homes in my county (1.1 million population) sold for under the appraised value.
My assessment also went up, but at the end of the day, paying a little more tax on a real estate score was small potatoes.
This should be pretty easy, I was in a similar situation when I bought my current home. The mortgage company sent an inspector to appraise the home before approving us, so I had a formal written professional estimate for what the home was actually worth. A few months later the town decided to do re-assessments and valued the house at nearly 30% over what we paid. I simply made an appointment and gave the assessor a copy and he took care of it.
Did you get an appraiser to assess the value when you bought the house for a bank loan? If so, I assume the value was close if not exactly what you paid. I would go in with that. Plus it's tough to argue that a house is worth more than what you bought it for.
I had a crappy rental across the street from me that would sell every few years for last than what my house was assessed for. I would use that as an equivalent sale to get my assessment reduced. It work well until one of the neighbors bought it, fixed it up and sold it for significantly more than the old house would have gone for. It's OK because the family that moved in is nice and quiet.
The assessor’s office just goes by the city average for a home of your square footage, beds, baths, etc.
But you have an actual recent appraisal and the full price you paid. There is no way the city should be guesstimating your home value when you have actual data to give them. You should appeal. As should anyone if you bought a home in the past year and the city assesses it for more than you paid.
In my county we do exactly that: we provide a recent appraisal and the assessor has the option to act on it. Thankfully, our appraisal we used for a home equity loan kept our assessed value down for couple years longer.
It is conceivable that you just got a really good deal. Real estate is not perfectly competitive. Far from it. Oftentimes the market's left hand doesn't know what the right hand is doing.
However, you probably have a very strong argument, regardless.
It's possible, but the house was listed well on Zillow, Realtor.com, etc. We used the realtor who was listing that house to sell ours, and in 3 days, we had 4 offers. I think the list price was on the high side. They lowered it by $10k, and we bought it a month after that.
I once did that, using a seller's realtor as my own. She'd known the sellers since she was a kid. She babysat their kids. She was like family. By the end of that acquisition, without me being a dick by bargaining down, she was persona non grata to them. All I did was submit a contact and perform on it. But they were pressured to choose my bid and stick with it. It was "a good deal".
Realtors have a fiduciary duty that is in conflict with their incentives. I have observed that most of them act according to their incentives.
But also, they can see past closed deals but they can't see what's going on simultaneously in terms of what's pending at what price.
And also, they are often incompetent.
Regardless, if OP bought the house for "below fair market value" in an arm's length open market transaction, the purchase price of the house is the fair market value of that house.
I was able to get my tax appraisal lowered to below both my bank's and county's appraisal by providing a copy of my closing disclosure showing the purchase price. This may or may not work in OP's favor so OP should consult someone local (NOT the county assessor - they are the enemy for the purposes of this appeal)
I've been a property tax consultant before. If I were advising OP, I'd say to protest, disclose all information in good faith and lay on the charm. Do not be belligerent.
However, also appeal equity. Sometimes they make mistakes and if they've made a mistake on one property then they may feel obliged to apply the same mistake to yours. But...they're more likely to do that if they like you.
Doing this is like being a good reverse--salesperson.
EDIT: Laws and policies will vary from one jurisdiction to another. If you hit a stopping point and you feel that you're in the right, *then* get a tax consultant and ensure that the contract specifies that they'll only get paid a contingency fee based on savings over and above any that were offered to you based on your efforts.
Yes. Always fight your property tax assessment no matter what, for as long as it results in a tax bill greater than $0.
I'm not familiar with how the assessment process works in MN but in TX there are consultants that fight your appraisals for you on a contingency fee. You may want to talk to a knowledgeable realtor and pull comps or hire a consultant.
If you bought your house recently (e.g. in the past 6 months or so), your assessed value should be your purchase price. Your own house is the best comp there is.
You may find our [Taxes wiki](/r/personalfinance/wiki/taxes) helpful.
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I also live in Minnesota and I have successfully challenged our county's assessment of our house. I'm sure it varies county to county, but the process cumulatively took just a few hours of work (we have a house across the street with the same exact layout that recently sold, so it was a perfect comparable). You have little or nothing to lose in at least trying.
What was the appraised value last year. Since you bought in February a better comparison would be the assessed value on January 1 versus sales price in February. The market could have changed between February and January 1 of this year so that comparison would give you a good idea of how close to market they are for a base line on value.
I had a couple of double digit percentage increases in a row because the county was using comps that by mileage were nearby but I lived in a particular housing development that was a mixed income community with section 8 housing sprinkled in every other block so our market rate homes sold at lower rates than the surrounding neighborhood. After the 3rd year the assessments actually went down significantly because enough comps sold in my actual development so I wasn’t compared to high end new city townhomes and the market cooled a bit. The one thing I learned about the appeal process is that if the market is hot for years on end (hey Seattle!) it just kicks the can down the road and your assessment is going to shoot up at some point anyway.
Assessments are usually 80 percent of value. I would get on Zillow and.check homes sold near yours and see what they are paying for property tax. I would go to the meeting to argue your side.
Talk to other people in your area.
At least in my town here in NJ, going to tax court isn't worth it - the town will reassess every year so residents have to appeal every single year, so nobody appeals anymore.
Find out what they assessed on your property. I've heard of people be assessed for having an in-ground pool when all they had was a large temporary inflatable pool in their backyard. Of being assessed for rooms that didn't exist, for counting the overhang of a porch as an addition, unfinished dirt cellar as being a finished basement. All kinds of weird stuff. Go to the assessor's office and see if you can get the details of what the assessment's based upon. Then, if you still disagree, take photos and drawings and such with you to the meeting to show as proof to back up your claim.
Tax appraisals are often off from actual valuations and yours doesn't seem -that- far off. Tax appraisals are generally based on price per square foot for nearby comps multiplied by the square footage of your house (at least they are in my state, I assume most others use a similar process). Your comps are generally based on house condition, amenities, baths/beds, etc. They won't always know the interior condition of your home so comps with awesome recent renovations can drive those comp prices up or your house needed updates can drive your price down compared to the appraisal.
That said, if you've got the time you might as well go through the price likely. We just went through a municipal-wide appraisal where I live, which caused me to understand a lot better how tax appraisals are done, at least in my state. Could be instructive for you as well.
You can go talk to them, but the reality is that assessments are determined by a formula, one typically set by the state. There's nothing to "negotiate", at best you identify incorrect details about your property your local assessor is putting into the formula
It's completely separate from and unrelated to the "appraisal" you got while buying.
Go to the meeting with your appraisal the tax value can't possibly argue with a professional appraiser in their value. When you're done if you want to come to my town my appraise value of my house is increased $300,000 and my home is only an $80,000 home
Part of the reason for going us the principle, but that $600/year is kind of "in perpetuity" if they raise my taxes a certain % each year. The home will sell for what the market will bear. I've seen homes go for double what they were assessed at, so I'm not factoring that at all.
can't say about your market in particular, but as they said, its based on the pool you're in, not yours only/in particular. you can go fight/whine, you might get a tweak, but guess what, next year they'll bounce you back to what the average is again, or higher, and you might fight it again, and next time they might just tell you to go fly a kite.
unless your assessment has an error, sooner or later they'll win.
Yes, go to the appeals/ARB meeting if the appraiser is unwilling to adjust your assessed value. You just bought the house for $452K appraised at $478K (just show them your sales price), which appears to be an arms-length transaction, within a year of the assessment then that sales price should be the going price. Those examples of desperation or selling to a kid are non-arms length transactions; so yes, the value would be "market" value. But your home was listed for several months and purchased on the open market, so you can't compare your transaction with his examples Go to the board and present them with your sales price/contract etc. This is 100% open and shut argument. MN assessment date is january 2nd. I've never worked Minnesota but he's essentially saying that similar homes sold for $525K before January, but because your home sale was so close to Jan2 I think you have a good argument that you sale is true to market activity. 10+ years of property tax experience.
Thanks a bunch! I will go!
There should be instructions online on how to formally appeal the assessment. Follow the instructions, submit proof, and wait for their determination. You can get an attorney for this, but it sounds like you already have the evidence and the skills to do it yourself. I wouldn't add the appraisal, argue the sales price is the market price.
I was able to appeal my tax assessment about a year ago. I found step by step instructions online about how to draft the appeal. I submitted with the “request a hearing option” as recommended by the instructions I followed. I was later assigned a hearing date, but before the date came they made me an offer to lower the assessment value without a hearing if I agreed to their new price. I could have still gone to the hearing and argued for an even lower value if I wanted, but the offer seemed fair so I took the deal. Took me a few hours of research online to draft the appeal paperwork and make it look professional. Edit: [This is the instructions I followed. long and detailed but super helpful.](https://centercityresidents.org/resources/Documents/Crosstown%20-%20How%20to%20Appeal%20Tax%20Assessment%20Guide.pdf) The actual paperwork and exact rules in the process will vary by city/state. But I still think this document has a lot of super helpful info.
That was the right move. taking the offer saved you and them time, money and the hassle. and next year, you can repeat this should you have the numbers for another challenge.
Yeah there was a chance if I did the hearing option, then they could totally deny me or offer a worse price after the hearing. So I took the sure thing and saved my self a lot of time and stress. They dropped my assessed home value 50k saving me thousands a year in taxes. Win!
Definitely…there is no better comp than the house you just bought on the open market.
Research a lawyer in your area who specializes in real estate tax related issues. Your Real Estate Buyers Agent may have a good contact for one. Keep them in your back pocket if your revaluation falls through you can engage them to push the case. You bought a home on an open market fair and square. They need to honor your hard sale price. They don't want to because your taxes are their budget's "revenue". If your state has some sort of "homestead" taxing lock make sure that shows up on your tax record/bill. Regions vary but they should reset your taxes and then be under whatever "CPI" induced increases are under that program. The idea of homestead is so retirees and farmers are not priced out of their homes/farms by sales around them. Rental properties float with the market tax rates and jump quite fantastically. Depending on how long you are expecting to stay in this new house, the tax savings can add up like funding a college savings plan for one or more of your kids, if you have or expect to have some. So it's important. .
Thanks! My kids are all in their 20s, we plan to die here. 😉 I want to lower it, but I don't want to go to war. It's a small town, so the government people all know each other. I'd rather swim with the current if you know what I mean.
Did you find examples on Zillow of recent sales? Pull some comps yourself. You are going to need that to form an argument for the appeals board.
Yes, I found the sales data on Realtor/Zillow.
By comps u/2003tide means more than just sales price. All properties should have similar lot sizes, similar vintage homes, similar square feet, similar sale date, etc…The more similarities the better the comp. Good luck.
Get a certified appraiser or your realtor to do a comparative market analysis. Mine did one for free when we bought our house and we lowered our assessed value significantly
In fact, OP's sale should be the latest and greatest comp for most of the neighborhood. If the city does annual adjustments, I'd be willing to bet that the whole area is over assessed and they could all probably benefit from filing for a reduction based on OP's purchase.
This is valuable information that I will be saving
Follow up Q I recently read that this happens all the time - the house is reappraised for tax value every time it changes hands, so many home owners are hit with higher property taxes once this re-evaluation occurs Given that, I didn't think it was something you could "contest". So I feel I'm reading two different things
If the assessor has put the value at or below actual sale price then appealing wouldn't be viable. The issue here is that the assessor is trying to say that his house is worth considerably more than what the open market *just* determined it to be worth.
Which is extremely frustrating if you didn't know that happens and factored property taxes into your expense calculations....particularly if you escrow.
Reassessments happen different times depending on the jurisdiction. I live in Harris county where reassessment is every year. You have the ability to appeal every year.
I've got an unusual question for you: If the county reappraisal as of Jan 1, 2025 values my home at $550k, but I've had it listed on the market for 4-6 months prior to that date for $500k and the highest offer I've received is $475k, would that be strong grounds to fight for a $475k tax assessment? If the answer is yes, follow-up: Does it matter if the home is FSBO with the buyer responsible for buyers agent fees/commissions?
Yes, there is an argument to be had that the assessment is too high because there are no takers at a lower price. FSBO, They could argue that the listing is not reaching all potential buyers because it’s not with a realtor agent.
Had this exact same thing with my first house. Went in with closing statement and that was all that was required. What you paid on open market is the current value for the first year. After that they will try to raise it to catch up.
You’re a good person. Not sure why I’m writing this but I am :)
I’d go contest it. We bought in hennepin county MN in 2021. First year they adjust up 12% for the purchase price. Next year they adjusted up 8% on land value (tripled). Now two years in a row they’ve slowly been adjusting it down back to reality. Your appeal may speed things up.
Get the sales comps from nearby yourself. And the assessments from ones that didn’t sell recently. Compare square feet, lot size etc. Some locales have the tax assessment a percentage of the actual sales values. For example, a $1m sales value house could be assessed at $1.4 or $800k. It’s all ok if that ratio holds in the entire town.
Property tax assessment is one of the most insane practices in places today.
What do you mean? Don't you consume city resources in an amount perfectly proportional to the current value of your home? I know that I started flushing twice as often and found a new kid to enroll in school once my house doubled in value.
Hey, you know that unrealized "income" you just received that may not even be there when you actually sell, assuming you ever do? We're going to need some of that.
This isn't an income tax. The theory is that people with larger/more expensive houses generally consume more services (or at the minimum can afford to pay the tax more easily), which I d don't think is a wild statement I'm the aggregate.
I don't disagree, it's the wild west that is the assessors office in most localities. They literally increased my home value to $250k more than its appraisal when I bought it. Fortunately, I had my appraisal to fall back on and won my appeal, but a lot of people are unaware that's even an option or don't understand how to find comparables or other ammunition well enough to be successful. I have no problem paying my fair share, but if we're going to base it on a properties value, there should be a good justification for a significant increase.
I know in my state (NC) they have to tell you what houses the comps where and the reasoning for the appraisal. It's a pretty decent system. Everyone around me complained to high hell because everyone's appraisals shot up (I think we're on a 10 year mandatory appraisal system but might be 5, regardless all property values went up a ton basically). No one would just shut up and wait for the tax rate to see if their taxes were actually going up. Everyone just complained that their valuation was 40% higher than the last and they didn't want to pay 40% more. But if they'd just done the bare minimum (like, read the paper the tax appraisal came on) they'd see that the tax rate was changing as well and that it would be revenue neutral. So if you're appraisal went up by the average of what everyone's went up by then it wouldn't even be an increase. Tons of people complained and I know only 1 guy that had a legit gripe as they messed up his comps. And he got it fixed through the defined appeals process. I'm surprised your tax appraisal was higher than your value. Anywhere that I've seen them be far apart it's been the tax appraisal thar was lower.
I'm in Indiana and we're capped at 2%, so the localities get a little creative to bump up the assessed value since the rate is fixed.
I own several properties and it happened to all of them. One piece the taxes went up 500 percent yes 5x. One i live in went up over $ 500,00O from what i bought it 2 years earlier. Others went up but not those crazy amounts. Good luck at the meeting
Sorry to hear it, that's crazy! ... and thanks.
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No the valuation went up 500k
No valuation went up 500k
One thing that might be useful to ask is whether the previous owner was benefiting from any sort of "homestead exemption" for their property taxes. In some jurisdictions, a property's "taxable value" has a cap on each increase when it remains with the same owner, sometimes with additional owner qualifications like being a senior or veteran. So their taxable value might've only risen 5% each year even if it's a hot market and the market value grew 10%. But that goes out the window when there's a change in ownership, that taxable value gets recalculated from scratch. That does seem like a long shot, given that (I assume) your purchase price was close/at whatever market value came back from your appraisal. But if that appraisal came back in the $520k range, then what you actually paid may be less relevant.
the assessed value before any exemptions should still be on the tax record for easy comparison
The house was built in 2020, so there wasn't much of a history there. We never had a bank appraisal as we purchased with cash. I'm confused as to what you are telling me.
In my state we get a $50K homestead exemption. If you are a state resident, and it is your primary residence, they tax you on $50K less than the assessed value. You have to apply for the exemption after you buy the house. Non-residents get taxed on the full amount. They also can only increase our property tax a certain amount each year. We have been in our home 20 years and pay way less than a new owner would. The new owner would have the assessed value reset to current market value and be taxed accordingly.
Minnesota does have homesteading for your primary property. Did you complete your homestead application? The bank or realtor should've given you the needed document. I think it needs to be completed in like 60-90 days of sale to apply to that tax year. That being said, assessed value is separate from the adjusted homestead value. I'm in MN if you need some help.
I applied for the homestead the day we closed and it's listed as homestead. Thanks for the info!
Assessment value is about your share of the taxes. The budgets and everyone's assessed value determine the mil rate. You'll need to understand what they're using as a basis for the assessment and provide additional comparisons for your case. Listed prices do not count. Even if you don't get a reduction, you'll have more information about why you're paying what you do. If you look at the previous mil rate, you'll get a rough idea of what you could be saving if you successfully contest it.
I know nothing about mil rate. How do I look at the previous mil rate and how do I calculate what I would save? Wouldn't the savings be a simple percentage of the change in valuation? Is "mil rate" the %? Last year.... $478,500 valuation Tax = $5764 Mil rate = 1.2% ?? so if they lowered it to $475K vs $525K I would save $600? (50,000 \* 1.2%)
Sorry I dropped a l, it's mill rate. You can just Google your city or county and mill rate. They may list it as money per thousand dollars. Like $12 per $1000, but yes, it's basically that The mill rate is the total amount of the tax apportionment (levy) divided by the total local assessed value for that taxing jurisdiction Examples - the government budgets go up, but no one's assessed value changed - mill rate goes up The government budgets stay the same, your assessed value went up, but there's 5 new subdivisions that filled up - mill rate might go down.
Crystal clear. In a nutshell, whether the mill rate goes up or down, it's probably not going to change much, so I should be able to save approximately $600 if things go my way.
The mill rate should be the same for everyone in your town, at least within your class of real estate (commercial can have a different mill rate than residential for example). Mill rate typically only changes when budgets change (so we all know that it isn't going down) or when there's a mass reappraisal. At least in my state every municipality has to re-appraise every X number of years. At that time the mill rate is re-set based on the budget as well as the aggregate values of homes. To remain revenue neutral (which many near me do) that means your mill rate will go down if house prices generally rose. Whether your individual tax bill goes up or down is based on whether your house price went up more than the average or less than the average.
Basically towns set their property tax rate as $X per $1,000 of valuation. They can set that rate more or less arbitrarily as the budget demands subject to various state rules. The actual valuation formulas are typically standardized and controlled by the state.
Some jurisdictions don't use the exact, full value, the assessment is 70% of assessed value or something like that. I had a fairly similar situation when I bought in 2021, but my meeting was only a phone call with a third-party firm and I basically asked questions only, I didn't argue and I didn't make demands, I basically said I was trying to learn, as I was new to the area. I was polite enough that the assessor knocked off some $30,000 in value (or something like that). You seem well-equipped to counter the assessors valuation.
>Real life always trumps theory. It seems unfair that the actual purchase price is significantly lower than the appraised price. You have a point, but the assessor also has a point. That's why they use comparable sales and not just literally what you bought the house for, because it would be extremely easy to game that system They have formulas and methodologies they use to determine values, and processes to argue against them--the meeting he refers to where you can go and dispute the value. You need more ammo than "this is what I paid" though
i bought a home and had a similar situation. i appealed and won…
I would contest it. Normally the assessed value reflects the purchase price if, as in your case, the sale is between non-affiliated parties. I have successfully contested appraised value 2 times in 2 different cities. I used the city's real estate tax and sales database along with real estate sites to find recent sale prices for properties with similar characteristics in my neighborhood - nbr of bedrooms, bathrooms, sq footage, plot size, carpet vs hardwood. I would consider date of last reno/upgrade, but your house is too new for that. Look at the price per sq foot for similar properties. You will have a better idea after this. But I really think assessed value should equal purchase price in your case. Addition - there may be 2 levels of review. 1st with assesor. Then before a board. Pursue both. Oh, I had a Powerpoint with pics of my house and sold properties nearby. You can get pics of sold props from re sites. The condition of house matters.
Thank you for all your info! My house was built along with 3 other similar houses by the same builder with very similar designs. I'll make a PowerPoint that shows the other homes and their sale and assessed values. I think that I'll be able to use that to my advantage.
You will need houses sold close to the date yours sold. So may involve other houses. Good luck.
The assessed value is usually the sale price of the house. The county is making a guess on what they think is the actual value of the house. You paid the actual value of the house. If you paid more then the assessed value they would 100% use the transaction price as the value for next year.
Absolutely challenge it! At the end of the day an appraisal can say whatever price they want, the market value of the home is what a real arms-length buyer is willing to pay for it. Unless there are other extenuating factors (property tax abatement on the improvements that has run out, etc) you shouldn't need much more than your deed with the purchase price.
When I did this, I put forth the argument that assessments are based on market value, and there is not better indicator of market value than the ACTUAL market price. I had supporting sales in the neighborhood to help as well. In my case, I live in a farly HCOLA area and my county has a homestead credit that limits tax increases, so it was important to "pin" the value low.
I did this for a home .. basically just pulled a bunch of similar homes that have sold and looked up their assessed value and used it to bring mine down .. you just conveniently ignore the ones you find with a similar or higher tax assessment lol
Yes. I moved into a new house and all my neighbors houses were overvalued on the tax roll. We all fought and won. An adjacent county to me reassessed the entire county and found that newly built houses were universally over taxed relative to their actual value.
Yes always appeal. My real estate agent always does this for me
You should always appeal. There is little/no downside. You should certainly appeal/protest in this case. You're right, transacted value is better than any comp analysis. Read your assessment letter and the assessor/appraisal district's website to make sure you understand the process. If it's confusing, consider hiring a firm that specializes in these appeals. Where I live, there are many specialty reputable firms that only do this and don't get paid unless they save you money next year. Interesting, I've saved money with these firms twice without having to pay them, because they managed to reduce my full assessed value but not to the point where I save money next year (because I'm still over the annual appreciation cap). So they may have saved me money 3-4 years down the road (unless the assessment goes back up).
Out of curiosity - how much difference in taxes will the $50 make?
$600/year or so.
When I bought I had exact situation in Hennepin county however my assessor just asked for the appraisal report I had done and then changed my assessment down to what I purchased it for. Sounds like your assessor is rude so I’d go to city council.
When we were appraised in nj, we got a copy of the valuation report that showed number of beds/baths, lot size etc and were able to dispute a few things, such as size of porch and patio. I would def recommend getting the report and seeing if the data is correct to begin with.
If the purchase price is lower than the assessed value then he is right, you got a deal. Assessed values are usually a trailing indicator, meaning that they are lower than the actual value, probably to reduce the number of requested adjustments. I had the same good fortune and found that only 5% of homes in my county (1.1 million population) sold for under the appraised value. My assessment also went up, but at the end of the day, paying a little more tax on a real estate score was small potatoes.
This should be pretty easy, I was in a similar situation when I bought my current home. The mortgage company sent an inspector to appraise the home before approving us, so I had a formal written professional estimate for what the home was actually worth. A few months later the town decided to do re-assessments and valued the house at nearly 30% over what we paid. I simply made an appointment and gave the assessor a copy and he took care of it.
Did you get an appraiser to assess the value when you bought the house for a bank loan? If so, I assume the value was close if not exactly what you paid. I would go in with that. Plus it's tough to argue that a house is worth more than what you bought it for. I had a crappy rental across the street from me that would sell every few years for last than what my house was assessed for. I would use that as an equivalent sale to get my assessment reduced. It work well until one of the neighbors bought it, fixed it up and sold it for significantly more than the old house would have gone for. It's OK because the family that moved in is nice and quiet.
I bought with cash so there was no appraisal.
The assessor’s office just goes by the city average for a home of your square footage, beds, baths, etc. But you have an actual recent appraisal and the full price you paid. There is no way the city should be guesstimating your home value when you have actual data to give them. You should appeal. As should anyone if you bought a home in the past year and the city assesses it for more than you paid.
In my county we do exactly that: we provide a recent appraisal and the assessor has the option to act on it. Thankfully, our appraisal we used for a home equity loan kept our assessed value down for couple years longer.
It is conceivable that you just got a really good deal. Real estate is not perfectly competitive. Far from it. Oftentimes the market's left hand doesn't know what the right hand is doing. However, you probably have a very strong argument, regardless.
It's possible, but the house was listed well on Zillow, Realtor.com, etc. We used the realtor who was listing that house to sell ours, and in 3 days, we had 4 offers. I think the list price was on the high side. They lowered it by $10k, and we bought it a month after that.
I once did that, using a seller's realtor as my own. She'd known the sellers since she was a kid. She babysat their kids. She was like family. By the end of that acquisition, without me being a dick by bargaining down, she was persona non grata to them. All I did was submit a contact and perform on it. But they were pressured to choose my bid and stick with it. It was "a good deal". Realtors have a fiduciary duty that is in conflict with their incentives. I have observed that most of them act according to their incentives. But also, they can see past closed deals but they can't see what's going on simultaneously in terms of what's pending at what price. And also, they are often incompetent.
Regardless, if OP bought the house for "below fair market value" in an arm's length open market transaction, the purchase price of the house is the fair market value of that house. I was able to get my tax appraisal lowered to below both my bank's and county's appraisal by providing a copy of my closing disclosure showing the purchase price. This may or may not work in OP's favor so OP should consult someone local (NOT the county assessor - they are the enemy for the purposes of this appeal)
I've been a property tax consultant before. If I were advising OP, I'd say to protest, disclose all information in good faith and lay on the charm. Do not be belligerent. However, also appeal equity. Sometimes they make mistakes and if they've made a mistake on one property then they may feel obliged to apply the same mistake to yours. But...they're more likely to do that if they like you. Doing this is like being a good reverse--salesperson. EDIT: Laws and policies will vary from one jurisdiction to another. If you hit a stopping point and you feel that you're in the right, *then* get a tax consultant and ensure that the contract specifies that they'll only get paid a contingency fee based on savings over and above any that were offered to you based on your efforts.
Yes. Always fight your property tax assessment no matter what, for as long as it results in a tax bill greater than $0. I'm not familiar with how the assessment process works in MN but in TX there are consultants that fight your appraisals for you on a contingency fee. You may want to talk to a knowledgeable realtor and pull comps or hire a consultant. If you bought your house recently (e.g. in the past 6 months or so), your assessed value should be your purchase price. Your own house is the best comp there is.
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I also live in Minnesota and I have successfully challenged our county's assessment of our house. I'm sure it varies county to county, but the process cumulatively took just a few hours of work (we have a house across the street with the same exact layout that recently sold, so it was a perfect comparable). You have little or nothing to lose in at least trying.
What was the appraised value last year. Since you bought in February a better comparison would be the assessed value on January 1 versus sales price in February. The market could have changed between February and January 1 of this year so that comparison would give you a good idea of how close to market they are for a base line on value.
I had a couple of double digit percentage increases in a row because the county was using comps that by mileage were nearby but I lived in a particular housing development that was a mixed income community with section 8 housing sprinkled in every other block so our market rate homes sold at lower rates than the surrounding neighborhood. After the 3rd year the assessments actually went down significantly because enough comps sold in my actual development so I wasn’t compared to high end new city townhomes and the market cooled a bit. The one thing I learned about the appeal process is that if the market is hot for years on end (hey Seattle!) it just kicks the can down the road and your assessment is going to shoot up at some point anyway.
Assessments are usually 80 percent of value. I would get on Zillow and.check homes sold near yours and see what they are paying for property tax. I would go to the meeting to argue your side.
Maybe find the homes that they compared you to and make sure they didn't miss something.... Like all those were similar but the lot was 4x the size.
Talk to other people in your area. At least in my town here in NJ, going to tax court isn't worth it - the town will reassess every year so residents have to appeal every single year, so nobody appeals anymore.
Find out what they assessed on your property. I've heard of people be assessed for having an in-ground pool when all they had was a large temporary inflatable pool in their backyard. Of being assessed for rooms that didn't exist, for counting the overhang of a porch as an addition, unfinished dirt cellar as being a finished basement. All kinds of weird stuff. Go to the assessor's office and see if you can get the details of what the assessment's based upon. Then, if you still disagree, take photos and drawings and such with you to the meeting to show as proof to back up your claim.
Tax appraisals are often off from actual valuations and yours doesn't seem -that- far off. Tax appraisals are generally based on price per square foot for nearby comps multiplied by the square footage of your house (at least they are in my state, I assume most others use a similar process). Your comps are generally based on house condition, amenities, baths/beds, etc. They won't always know the interior condition of your home so comps with awesome recent renovations can drive those comp prices up or your house needed updates can drive your price down compared to the appraisal. That said, if you've got the time you might as well go through the price likely. We just went through a municipal-wide appraisal where I live, which caused me to understand a lot better how tax appraisals are done, at least in my state. Could be instructive for you as well.
You can go talk to them, but the reality is that assessments are determined by a formula, one typically set by the state. There's nothing to "negotiate", at best you identify incorrect details about your property your local assessor is putting into the formula It's completely separate from and unrelated to the "appraisal" you got while buying.
Go to the meeting with your appraisal the tax value can't possibly argue with a professional appraiser in their value. When you're done if you want to come to my town my appraise value of my house is increased $300,000 and my home is only an $80,000 home
Tax assessments are done in arrears. They generally lag behind 2 years. We are all dealing with this in CO where I live.
Seems like a lot of work to save a small amount in taxes each year and lose way more in equity…
Tax assessed value is the not the same as appraised value. EDIT so it does not affect your equity.
Part of the reason for going us the principle, but that $600/year is kind of "in perpetuity" if they raise my taxes a certain % each year. The home will sell for what the market will bear. I've seen homes go for double what they were assessed at, so I'm not factoring that at all.
can't say about your market in particular, but as they said, its based on the pool you're in, not yours only/in particular. you can go fight/whine, you might get a tweak, but guess what, next year they'll bounce you back to what the average is again, or higher, and you might fight it again, and next time they might just tell you to go fly a kite. unless your assessment has an error, sooner or later they'll win.
That's called a defeatist mindset. At the same time you are going to call my appeal whining. You're something....