October 19, 2007

Commentary:

Over-Taxed and Under-represented

By Christopher Blood

It is property tax season, and thousands of San Diego County property owners stand to get overcharged this year.

Under Proposition 13, property taxes are set at 1% of a property’s value. So everyone that bought property in 2004 or 2005, the peak of the real estate market, received a sky-high tax bill with their grant deed. A $500K house came with a tax bill of $5,000.

Now fair is fair, San Diego is a great place to live, and we all need to pay our share of taxes. But here’s the issue. Because of the recent decline in property values, the $500K house with its $5,000 tax bill is no longer worth a cool half mil. In fact, three of the neighbors just sold similar residences for an average of $435K. If the neighbors are getting $435K, then that peak-of-the-market purchase is probably worth about the same. Alright, so some people bought at the wrong time. You win some, you lose some. However, California voters also passed Proposition 8, which limits property taxes to the original base value plus a 2% yearly increase, or the fair market value of their home, whichever is less. So the $500K home that now has a fair market value of $435K means the County Assessor should have reduced the taxes to $4,350. Instead, the property owner probably got a bill that, rather than going down, is actually 2% higher than last year. And such a tax bill should be challenged.

Naturally, the Assessor’s office is sensitive to this issue. Because, after all, state law is very clear that they should not be sending out tax bills based on more than the fair market value of a home. The Assessor does not mind taking on the individual property owner who challenges their bill because the Assessor typically has much more time and resources than the average home owner. Further, individual home owners are rarely versed in the methods of property valuation, so it is easy for the Assessor to, maybe, throw the challenging property owner a small reduction, or maybe throw them no bone whatsoever. If the home owner wants to appeal his or her assessment, the County helpfully provides a 30-page rules of procedure on their website, and the Assessor’s office will turn out in full force to argue against the home owner when they show up for the Appeals Board hearing. But this too is fair as the Assessor has the same right as the property owner to vigorously fight for what they believe is the true valuation of a property. Now, here is where the unfairness comes in. The Assessor doesn’t mind taking on Ma and Pa property owner, but by all appearances they are willing to go to great lengths to avoid dealing with professionals whom the property owner might retain to represent them.

On Friday October 12, KFMB TV ran a CONSUMER ALERT by the Better Business Bureau on their newscast. Was the focus of the BBB segment to inform the thousands of property owners of the hundreds of dollars that the Assessor might be overcharging them? Absolutely not. Instead, the BBB, in consultation with the Assessor’s office, was discouraging property owners from seeking professional assistance to reduce their taxes. The gist of the segment (available on Channel 8 website) was that if the homeowner is solicited by someone offering to seek a tax reduction for them, there’s a good chance it is a scam and the property owner can just go down and do it themselves if they really want to pursue. Of course no mention was made of the fact that property valuation is a complex process that involves comparing multiple properties and making adjustments for lot sizes, building square footage, numbers of bedrooms and bathrooms, presence or absence of views, amenities like pools and decks, differences between desirability of neighborhoods, and lengths of time between sales. Nor was there any mention made of the fact that in order to get their tax reduction the homeowner could end up having to give sworn testimony at an Assessment Appeals Board hearing faced off against a panel of Assessors Office personnel. It is all so easy, according to the BBB segment, just go down and do it yourself. Presumably, the people that sent the unlawfully-inflated tax bill in the first place are willing to lend assistance if needed. This is an outrage. Many people are receiving tax bills this year that are higher than state law allows. The BBB should not be discouraging property owners from seeking assistance from qualified personnel when challenging their tax bills. Unless of course the Better Business Bureau is actually rooting for the tax coffers rather than the consumer.

The author, Christopher Blood, teaches real estate principles at a local community college and is licensed as an attorney and a real estate broker. He may be reached at 804-2486 or www.straightarrowservices.com

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