Housing prices crashed in many areas of the US when the housing bubble burst last year. While this hurt the bottom line for many people, there may be a hidden benefit for some: Lower home values mean lower property taxes. In locations that experienced slight decreases in home values, you may save a few hundred dollars per year. But in some places in Southern California and other areas that were hit hard by the housing bubble, home owners may save thousands of dollars on their property taxes.
Of course, I’m not saying lower housing prices are good for everyone – I know it has made life more difficult for many people. But lower housing prices benefit many people as well, including people who have paid off their mortgages, landlords, and people who plan to stay in their home for a few years.
Unfortunately, most locations review property values every few years, so the savings is not automatic – and most counties are in no hurry to decrease their income from property taxes. To have your property taxes lowered you will need to challenge your property tax assessment.
Challenge your property taxes
About a year and a half ago my wife and I had some work done to our house. We filed a permit with the county and they automatically added the cost of the addition to our home value. It turns out they also recorded our house as having an extra bedroom and additional square footage. I thought the tax assessment was a little high, so I called them and challenged our property taxes. We presented our case and won – which meant a savings of $60 per month, or over $700 per year. Not bad!
Here is more information about how to challenge your property tax assessment – and win.
- Know your home’s property value and compare it to tax assessment value
- Verify the information on record (number of rooms, square footage, etc.)
- Research neighborhood property values
- You may need to submit an appraisal from a professional (at your expense)
- Submit your case to the county auditor’s office or tax assessor (be organized, professional, and polite!).
Last week, Pete from Bible Money Matters wrote about how and his wife were considering refinancing their home. They were able to lock in a new mortgage rate that would save them $200 per month. Unfortunately, their house decreased in value to the point that they would no longer have 20% equity in their house. That means they would have to get Private Mortgage Insurance (PMI) which would erase over half of their monthly savings. In the end, they decided they wouldn’t refinance right now.
There is a silver lining to the story even though Pete’s house is worth less than when he bought it. He and his wife plan on staying in the area for a few years, so he has time for his house to catch up to its previous value. In the mean time, he can challenge his property taxes, and hopefully save a few hundred dollars per year.