Tuesday, June 15, 2010

The Saga of Property Tax Appeal: A Mini-Series

Some people want the government to run almost nothing because of its inability to do so without a mountain of red tape, layers of bureaucratic nightmares and regulations that are nearly unintelligible.  Here's one woman's journey through a property tax appeal, and why, at certain times, she found herself sympathetic to anarchists' point of view toward government.
Part I - A beautiful new home
While renting a sweet little cottage long enough to make certain that we were planting our roots in a neighborhood we would love, a serendipitous real estate meltdown occurred that brought the price for the home of our dreams within reach.  We found a buyer for our rental, and everybody was happy.  One of the best selling points for our dreamy new home was the seemingly low property taxes.  Emphasis on "seemingly."
Imagine our surprise when we received our property tax statement nine months later with a 40% tax increase.
Part II - Follow the yellow brick road
After numerous calls to the Assessor's Office, we found that the first step toward  rectifying this situation was an appearance in front of BOPTA (that's Board of Property Tax Appeals, for those of you who speak non-acronym-ish).  Okay, fine.
We assemble a plethora of data that includes the fact that the Assessor's Office January 1 RMV (Real Market Value) for this home was 8% higher than our independent appraiser determined 55 days later on the following February 24.  The basis for thier valuation was the Assessor's Office in-person appraisal on the previous November 24.  Among possible reasons for the miscalculation was the fact that the assessor determined that there was a 1120 sq. ft. fully finished basement, when the actual finished area was 336 feet.  But the burden of proof was ours.
Prior to scheduling the appearance before BOPTA, we spoke to the Assessor's Office (many times) and were pressured (many times) to allow another in-person appraisal.  We were reticent to do so, thinking that the inflated appraisal may get even worse, but did agree to let them see the basement, which was apparently the basis for the problem.  "No can do," said the Assessor's Office.  They are an "all or nothing" kind of group, and wanted to see everything or nothing at all.
With their repeated requests, were admissions that "we didn't have to" let them in.  Okay.  We would take our chances with BOPTA.
The Board of Property Tax Appeals is a group of three persons who listen to your case for about 15 minutes, and make a determination of whether your property taxes are too high.  We assembled our data (appraisal, arm's length sale, pictures of the basement, etc.) and made our case to three elderly, slightly confused people who clearly never bothered to review the information.  They shared the one copy we had mailed to the Board three months ago, had difficulty locating the Addenda ("Addendum III?  Let's see here," flip, flip, flip.  "Oh, okay, I found it," said the BOPTA triumvirate leader, with obvious pride). 
Some pertinent quotes included, "This appraisal of yours isn't very long," "How do we know when these pictures of the basement were taken?", and "Property values dropped precipitously after the first of the year."  No evidentiary weight was placed on the fact that the appraisal was complete, the date on which the pictures were taken was noted by the camera at the bottom of the picture and RMLS data showed that property values increased 14.8% from January 1 to February 28.  "Your fifteen minutes are up," they said after ignoring our responses.  "If you disagree with our findings, here's a booklet that shows you the next steps you can take."
Two weeks later, BOPTA informed us by letter that they lowered our Real Market Value by 3.7% and kept our taxes just the same.
Would we care to critique the experience?
Part IV - The Magistrate
Tearing the critique form into tiny pieces, we moved along to the next step.  This required a $75 filing fee, completion of new forms enumerating (again) the reason(s) that we disagreed with the Assessor's Office, and mailing a copy to the Assessor and the Magistrate.  Our booklet noted that the basis of taxation in our state is "complicated," and gave several cites proving that description to be one of the great understatements of history.
We dutifully mailed off our paperwork, and received, almost immediately, a response from the Assessor's Office.  They agreed that we owned the house at the given address, and that it was indeed residential property.  They disagreed that the taxes were incorrect, and the burden of proof was ours.
Part V - Measure 50
Our state, possibly in a drunken stupor, enacted a property tax measure in 1997 called Measure 50.  Briefly, it goes something like this.  All property will be assessed at 90% of its current value on the tax rolls as of 1997.  From that point forward, property taxes can increase 3% per year UNLESS there is an exception, such as, your house burns down or you fix it up.  The value of the exception is the value that the market places on improvements (or loss), and will be assessed in addition to the 3% annual increase.
You pay taxes on the MAV (Maximum Assessed Value), but that value is based on the RMV (Real Market Value) of the property.
Okay.  Well, we bought a house from people who bought it in 2007, fixed it up and sold it to us in early 2009.  The value of the improvements, then will be the difference between what they bought it for and what we paid, less the change in general property values in the area.  Easy enough.
Part VI - The Case Management Hearing
Before you go to court, the Magistrate mandates a Case Management Hearing.  That means everybody gets on the phone and says what they think.  I wrote out our case ver batim in order that it was concise, to the point, and relevant.  Evidence was mailed (again) to both the Magistrate and the Assessor's Office.  Six months after our BOPTA appearance, the phone rang for said management hearing.
I told His Honor that we entered into an arm's length sales transaction to buy our house, for which an independent appraisal was effected on February 24.  The value of the home was clear, therefore, the value of the repairs was clear.  We pointed out the errors in the Assessor's Office appraisal.  We concluded by thanking all participants for their valuable time.
The Assessor's Office responded by saying that they needed to see the property.  We responded that they had seen the property, that our primary point of contention was the size of the finished basement and that we had been repeatedly told we were not obligated to let them in.
The Assessor's Office said, "Our appraiser never saw the interior.  He just walked around the house."
WHAT?  The burden of proof to refute some guy walking around the house and guessing how much it was worth - was MINE?
The Magistrate may have interpreted my shocked silence correctly, and said, "You need to let them in."
Jesus Tapdancing Christ.
Part VII - The Appraisal
The Assessor's Office appraisers came by at 9AM the day following our return from my step-son's wedding.  Groggy, but not unpleasantly, we let them in.  Yup, the basement isn't completely finished, they noted, as they measured the 336 sq. ft. we'd photographed, measured and presented last November.  They walked quickly through the house, measured nothing else, took a few notes, and left.
"We'll be in touch," they said.
Part VIII - The End
We had a detailed accounting of the expenditures made on the house from the previous owners, and applied the percentages of market value for each upgrade suggested by Century 21 on its website.  The market value of the repairs, according to these calculations, was $45,170.
When the appraiser called with his findings, he said, "Your exception value is $50,000."  "Really?" I responded.  "How did you determine that value?"
"We have a complex matrix . . ."  blah blah blah.  "The majority of the adjustment was the basement."
I refrained from saying, "The basement you didn't want to see last November?"
I paused, and instead said "I have a less complex matrix,  I applied the actual value of the repairs to the amount a national realty company suggests they are worth.  My value is $45,000."  Silence.
"We can't go any lower than $45,000," the appraiser snapped.
My thoughts then were inappropriate for writing here.  You could, however, describe them as "Expletives deleted."
We haggled about the square footage, and the real market value of the home, which they continued to think was 2.4% higher than the purchase price, but since it had nothing to do with the amount of taxes, I relented.  Close enough for government work, I guess.
"We'll send you a statement to sign, and will refund your overpayment,  Thank you for your cooperation," he ended.
"You're welcome," I responded, deleting more expletives.

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