How many homes are overassessed?
The state usually gets property-assessment appeals on fewer than 5 percent of homes a year. But a company that specializes in appeals thinks many more homeowners than that are overassessed.
ValueAppeal, which added Maryland to its online service in May, analyzed properties that were last reassessed a year or two ago as part of the state's three-year cycle and says comparable-home sales suggest that a quarter are significantly overassessed. Baltimore City has the highest share, the company says.
(The deadline to appeal your assessment for July 1 tax purposes is Monday -- that's when they must be postmarked -- if you aren't in the group that was just reassessed.)
Here is ValueAppeal's analysis for Baltimore-area jurisdictions:
| County | Overassessed | % of total | Average estimated savings | Average overassessed amount |
|---|---|---|---|---|
| Anne Arundel | 12,549 | 11% | $1,362 | $73,116 |
| Baltimore | 63,431 | 41% | $1,179 | $57,083 |
| Baltimore City | 49,672 | 52% | $3,574 | $52,117 |
| Carroll | 911 | 3% | $892 | $56,309 |
| Harford | 3,082 | 6% | $946 | $49,799 |
| Howard | 3,305 | 6% | $1,031 | $79,177 |
ValueAppeal dubs a property "overassessed" if comps suggest that the overage amounts to at least $300 in extra taxes. (It set that threshold because it charges $99 for its services, after the initial free look-up to determine if you could benefit from appealing.)
The average savings calculated above accounts for the fact that some homeowners would have two years of lower taxes and some would have one, depending on where they were in the assessment cycle.
But the savings figure assumes that everyone is paying on their full assessment. Thanks to Maryland's complex Homestead tax credit system, that's frequently not the case.
The Homestead credit acts as a ceiling on tax increases for owner-occupiers, capping the annual amount of additional assessable value you can be taxed on once you've lived in your home for at least one tax year. The cap ranges from zero to 10 percent in the state, with both Baltimore City and Baltimore County at 4 percent.
Let's say Joe Schmoe bought his Baltimore home before the housing boom, and now he's paying taxes on just $125,000 of his $200,000 total assessed value. Even if the real value of his home is now $175,000, getting $25,000 shaved off his assessment won't lower his taxes. (His taxes will actually rise 4 percent a year until his taxable value catches up with his assessed value.)
This has kept some homeowners from contesting their assessments. One reader who contacted me this week to see if he'd save money by appealing decided against it when we calculated that his taxable value was substantially less than his best guess at the market value.
ValueAppeal CEO Charlie Walsh says his company doesn't account for tax credits right now, but it plans to do so in the future.
As for the one-third of Maryland homes that were just assessed, ValueAppeal can't compare them against comps until it has the new data in hand. Chances are the overassessment percentage in that group will be lower, because those valuations are new while the others are one to two years old in an environment of falling home prices. (Assessed values dropped 22 percent on average in the newest round.)
But ValueAppeal, like all companies that help people appeal their property assessments, is counting on mistakes. When I interviewed Walsh for a story last year, he said studies suggest that government agencies' mass-assessment process will always miss the mark on a significant number of properties.
"I don't blame them," he said at the time. "It's just not feasible to do it any other way. But one of the things that's beautiful about real estate is that each individual property is unique."
This post has links to resources on the appeal process, including the off-cycle appeal known as the "petition for review."
And you can take the appeal poll here. So far, about 60 percent of the Marylanders who've participated say they plan to appeal and 20 percent more say they already have. A clear case of an unscientific sample, I'm guessing -- unless the state is really going to be deluged this time around.
Categories: Homestead Property Tax Credit, Property taxes
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Comments
jamie, this is a hilarious article... for quite a number of reasons... maryland has had a flat state tax roughly 4%-5% for all income brackets up to about $500K for quite some time now (and then it goes up a few pct points for those making $1M or more..... and nobody ever had the balls to suggest maryland raise taxes when the economy was strong and maryland was increasing it's population and services. in fact, the school systems have been relying on federal dollars to build new schools and maintain the schools in the poorest neighborhoods instead of maryland taxpayers taking care of themselves...we are the richest state on a per capita income basis with howard county being one of the richest counties in the country... baltimore county another fairly wealthy county has the balls to cry poor to get federal money from the other 49 states to pay for last years snow removal instead of raising revenues to cover its bills! governor erlich was pretty slick, he wiped out the rainy day fund pretty quickly and doubled all the toll rates at all the bridges and tunnels and even implemented a "flush tax" for those who didn't have government provided sewerage in their homes (to subsidize what?)... i would suggest we keep the tax rates where they are considering no lawmaker was in favor of using the natural forces of capitalism and the invisible hand of the market to correct for any bubble or any misdeeds by wall street, mortgage brokers, real estate industry, or even those who assessed the houses for the counties... let's take this slow and steady... if someone bought an over-valued house... well F-them for being stupid... no more subsidies for being stupid.
Posted by: brutallyfrank | December 31, 2010 9:09 AM
brutallyfrank, you know I'm not suggesting anything about tax rates here, right? (I suppose if enough people's assessments drop, elected officials might be tempted to raise the rates, of course.)
Posted by: Jamie Smith Hopkins | December 31, 2010 9:27 AM
Brutally, I think this is a good article and contains information people need to know about. It has nothing to do with the income tax.
Incidentally, Maryland is NOT the richest state on a per capital basis. It is said to be the richest state on a median basis, and, for your and others' information, there can be a HUGE difference. Look it up.
Posted by: Bar | December 31, 2010 9:57 AM
If Value Appeal doesnt take the Homestead Credit into account then they are trying to rip people off. Why should someone pay them 99 dollars and find that although their home is overassessed at 250k, they are only paying on 198k anyway and their home is worth 225k? All of this info can be obtained from the local assessment office. In addition, as each of the three areas of each county get re-assessed, there is going to be less and less differences between the property values and their assessed values as they get lowered. Unless property values start to rise, there will be less and less reasons for appeals. Most people who appeal each year are money obsessed, and end up selling their homes for more than the assessment.
Posted by: Clay | December 31, 2010 10:49 AM
I just filed my appeal online. I looked up the assessed values of three comps on my block and found that all three were assessed at a lower value than mine. One that had over 400 more square feet of enclosed space than mine was assessed for $40,000 less! I really wonder how the assessors arrive at these values.
Posted by: MCG | December 31, 2010 1:23 PM
I filed an appeal three years ago, when housing prices had started to drop and I had been assessed at almost $100K more than similar homes were selling for in my neighborhood. My appeal was denied. Three years later, I'm curious to see what the new assessment will be. Do you think I'll get a refund for overpaying for the last three years?
Posted by: jen | December 31, 2010 7:37 PM
Jen: You will find that you will not receive any refunds, and you will be horrified to se how your property value has dropped. I mean jaw-dropping drop. Hold onto your seat!
Posted by: Bob | January 1, 2011 3:49 AM
I feel like there are tons of overassessed homes. Additionally, the gov't is getting more rigid in their stance in declining appeals. They need money so good luck in winning. Grrrhhh
Posted by: Johnny Turner | January 4, 2011 7:03 PM
for starters... property taxes and taxes in general should be looked at in a combined fashion... because what isn't covered by property taxes ends up being covered by federal and state income taxes... money/revenue is fungible. take the snow removal example i talked about... even with the overvaluation you wrote about, baltimore county is crying to the federal government for some welfare from the other 49 states. furthermore, since there has been government intervention in the market essentially to un-F the housing bubble, then lawmakers should wait a few years to see the results of the "market forces" in action... one could argue that over-valuation is on average the same across the state (since maryland was not as affected by the economic crisis), i.e. not "pockets of overvaluation"... since those who value real estate also played a contributory role in the housing bubble ... let's not have them overcompensate and undervalue any property either ;) ... they system is both broken and corrupt... let's fix the system before we start picking winners and losers...
Posted by: frank | January 4, 2011 10:04 PM