Why are property tax assessments often so inaccurate?

As a follow-up on last week’s post about how falling home values can still lead to an increasing property tax bill, I thought I would go a little more detail on how the county assessor comes up with that magical home value number on which they base your tax bill.

Here’s how the King County Assessor’s website explains the process:

Residential property is assessed each year at its full market value, which is defined as the amount a buyer, willing but not obligated to buy, would pay to a seller willing but not obligated to sell. For residential parcels, fair market value is determined by analyzing recent sales of comparable properties in the same area.

In addition to statistical analysis to determine value, all properties are physically inspected once in every six year cycle.

In other words, the county is using an “automated valuation model,” the same basic concept that Zillow uses for their notoriously spotty “Zestimates”.

When your “Zestimate” is off by 20%, it’s not really a big deal. When your property tax assessment comes in 20% higher than the actual market value of your home, that’s a different story. According to locally-based property tax appeal specialists at ValueAppeal, the problem of over-assessment affects as many as one in four homes in any given year.

In King County, the assessor’s office mails out property tax notices to 92 different neighborhoods staggered over a period of a couple of months, beginning in June. So far, 24 neighborhoods have received their 2010 tax assessments (comprising roughly 22% of homes in the county). Using data on 2010 assessments in King County provided by ValueAppeal, I have generated a “heat map” of sorts for these neighborhoods.

Each dot on the map is roughly centered over a neighborhood defined by the county assessor. Float your mouse over the dot to see the name of the neighborhoods covered by that dot, and to view the detailed stats. Head over to the King County Assessor’s website for detailed pdfs that include maps of each area.

According to ValueAppeal, of the neighborhoods released by the assessor so far this year, Fauntleroy in West Seattle has by far the most over-assessed homes, with more than one in four home owners likely to be receiving an unfairly high tax bill. “Eastern West Seattle” comes in second with 18% of homes likely to be over-assessed. The ranked list of most over-assessed neighborhoods will change as the assessor releases new assessments for additional neighborhoods throughout the summer.

So what can you do if your assessment is too high? We have covered this topic a couple of times in the past, with posts from our local escrow expert Tim Kane and a guest post from ValueAppeal CEO Charlie Walsh. If you think your assessment is too high, start by reading over those posts, or just punch your address right into the ValueAppeal widget right on the Seattle Bubble sidebar for a no-strings-attached free evaluation of your home’s assessment.

Do you have a tax assessment horror story or success story, or some advice on how to deal with the appeals process? Let’s hear it in the comments!


About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

29 comments:

  1. 1

    I Know Some of You Uncontrolled Over-growth Enthusiasts Think I’m a Wild-eyed Extremist

    But let’s be a pragmatic scientist type and anayze property tax needs.

    Historical population density in the Seattle area is masked, when the Census can capture only a fraction of the undocumented guests….and masked increased population density in Seattle lowers wages, packs more people in per housing unit and lowers per capita tax base spending. There’s no way to stop unemployment increases too, with concurrent population density increases.

    The result is property values plummet with wage decreases and property tax needs for schools, hospitals, etc. goes off the Richter Scale.

    Back when American schools could afford Math and Science BS degreed instructors in public schools, population density was way lower and property tax receipts per student were way higher. Hades, even centrist Seattle, heavy laden with aging home owners; has the curse of property tax butcher axing based on low income/disability of it’s Pink Pony home owners. This makes it worse for centrist Seattle.

    The bottom line, we can’t afford to add costs to our public schools when property tax receipts per student plummet [practically no one will admit it BTW, but SWE will]. You got a magic wand remedy to population density increases?

  2. 2

    There is no way to value a house without going in. That would be rather expensive.

    But there are system issues too. I just saw the note on a property recently where the assessor noted an extensive kitchen remodel that they said didn’t affect value! I’m made that complaint about appraisers in the past (that they don’t value enough for condition and specifically kitchens), but I didn’t expect that to carry over to the Assessor’s office.

  3. 3
    The Tim says:

    FYI, it seems that the map viz is busted this morning. I’m looking into it.

  4. 4
    ChrisM says:

    Opposite problem down here in Clark county — raw land is grossly under-appraised. For fun, I looked at 10+ acres offered for sale, then looked at the assessed value. Properties where they are asking over $1 million are often appraised at 1/10th of that.

    Since the county commissioners are in the pocket of the developers, I expect this to continue, even though the county is desperate for revenue.

  5. 5
    PhinneyDawg says:

    If my property tax assessment is right, I’d be really sorry, because its FAR below what I paid for my house. I should really just keep my mouth shut.

    Funny thing is….the value of my land this year went down $10,000 but the value of my ‘addition’ (house) went up $30,000.

    Does that make sense? I painted the house and added new windows (things that can be seen from the street).

  6. 6

    RE: Kary L. Krismer @ 2

    A Good Example Kary

    But the real overall problem is property taxes are way high in proportion to the property values in general, not the opposite, as the case you mentioned.

    But there are exceptions to every rule.

  7. 7

    RE: softwarengineer @ 6 – Our property taxes are lower than many/most other states.

  8. 8
    Lake Hills Renter says:

    (Deleted by LHR.)

  9. 9

    Does anyone know the approximate success rate of appealing property tax rates?

    Thanks
    Conor

  10. 10
    The Tim says:

    RE: The Tim @ 3 – Update: The viz should now be working. Sorry about that.

  11. 11
    timmcb says:

    RE: PhinneyDawg @ 5

    PhinneyDawg- I saw the opposite problem happen on our house. The addition value dropped 20,000 but the land value went up $55,000. It think that they manipulate the addition value to suit their overall valuation. I checked all of the tax assessments of neighbors on our street and they are exactly the same valuation (same lot size as well).

  12. 12
    Brainiak says:

    What about if you buy your house in August for example? That would seem to be past the appeal window. Do you have to wait till the next tax year to appeal? Can you do a pre-preemptive appeal?

    I have seen houses sell for over $100K less (they look like arm’s length transactions) than the assessed value. Essentially can you use your own house as a comp for the appeal?

  13. 13

    RE: Brainiak @ 11 – Again, I bought my house in mid-October and their valuation date is supposed to be January 1. Their value was about 10% higher for that next year. I didn’t appeal because I didn’t think it was worth it. If you only bought in August it would only be for 5 months of taxes, so it would be even less worth it.

    Oh, and I think you could use your purchase price as evidence, but technically it’s not a comp, and you would still need comps. It’s possible that you got a bargain, but they would still tax you on the value, not the bargain value.

  14. 14

    RE: Conor MacEvilly @ 9

    A Friend’s Mom Did It Herself and She Was in Her 70s

    Just hired her own property assessor and complied a five year file, demanding a reduction from Snohomish County. Not only did she do it without going to court or using an attorney, she got a massive five year check of over paid property taxes retroactive for five previous years.

    Very few do it, so with legal assessment records for comparisons, how could they argue anyway?

    To high-ball assessments the county’s assessor may throw out low priced deals near your residence.

  15. 15

    RE: softwarengineer @ 13
    Kudos to your friend’s mum for stickin’ it to da man!

    You’re probably right that very few ever pursue contesting their rates.

  16. 16

    RE: Conor MacEvilly @ 9 – The average success rate for homeowners filing appeals on their own varies from county to county. Past interviews with the King County Assessor suggests that the average homeowner is successful about 40-50% of the time.

    The ValueAppeal service is now available in many counties around the country and our success rate so far has been substantially higher than 50%. Any time one of our customers loses their appeal we refund their money in full.

    Homeowners can certainly file an appeal without our help but it takes many hours of research to make sure you don’t get tripped up by the substantial amount of fine print that governs the appeal process. We do this research so our customers don’t have to. It usually only takes five to ten minutes to create a custom report on our site.

  17. 17
    David Losh says:

    RE: softwarengineer @ 13

    I have appealed in the past, and it is a lot of work. The property we currently own has a wetland that we have stewardship of. It’s an expense that can be appealed, but the time, money, effort, and energy aren’t worth it.

    It seems to me that the Value Appeal deal is a cheap service that seems to be very accurate. I played with it when it first came out, and it really seems to be what the County would be looking at.

    Just saying.

  18. 18

    When you appeal your assessment, the county will respond in one of three ways. They will reject the number you propose, they will accept the number you propose, or they will propose a compromise number, which you can accept or reject.
    In my last house, the assessment came in just as a sewer pipe broke, causing a stinky brown liquid to ooze through the basement walls. I took all kinds of pictures and included those with the appeal. The county came back with a proposal raising our assessment 2% instead of 15%, which we accepted.
    If you know what the county is looking for, and can do most of the legwork yourself, you can be successful without outside help, just like when buying or selling a home if you have the smarts and the time you can be successful without a full service agent. Not everyone is capable or has the time or energy to do it.

  19. 19

    RE: Ira Sacharoff @ 17 – You could buy Ray dinner at Claimjumper, then take some pictures, then sign up with Valueappeal.

  20. 20
    David Losh says:

    RE: Ira Sacharoff @ 17

    Thank you, that’s more to the point.

    I hire an attorney because I don’t know how to talk to some people. I hire a Real Estate agent, Marlow Harris, great gal, worth every penney of a full commission, because I get emotional during my personal Real Estate transactions.

    The County is looking for specific stuff. You show them what they need, and that’s what they accept, reject, or counter.

  21. 21
    Pegasus says:

    C’mon guys and gals. Your property taxes are just part of the big con to separate you from your money to fund idiots and their huge pay, benefits and pension plans. Nothing more. When you start voting these clowns out you have a slim chance in correcting the con. Slim chance because the next guy will probably do the same thing to you. Welcome to the new Amerika.

  22. 22

    Tim, did you see my recent post at RCG? The KC Tax Assessor is actually looking at RE listing flyers and adding comments to the tax records. On my post, I write about a house I’ve been watching where the KCTA states “Fabulous renovation per sales flyer. Listed for $999K” (the seller & their listing agent were dreaming IMO).

  23. 23
    Pegasus says:

    Further proof that evaluations have nothing to do with reality Rhonda other than fleecing the public.

  24. 24

    it’s a bad joke with bad timing. Although, a majority of my King County clients have benefited from a reduced tax bill… however I’m in the camp where our assessment went up with no comps and no improvements to support it.

  25. 25
    Pegasus says:

    Rhonda..It is not a joke. It is stealing from the public. I gave up years ago trying to fight this fraud machine.

  26. 26

    By Pegasus @ 23:

    Further proof that evaluations have nothing to do with reality Rhonda other than fleecing the public.

    For the most part the assessments do not affect the total amount collected.

  27. 27
    Pegasus says:

    RE: Kary L. Krismer @ 26 – Right Kary and that is why we spend millions assessing properties? I agree it has little to do with the TOTAL amount collected however it is all part of the big con to separate most of us from our money.

  28. 28

    RE: Pegasus @ 25 – believe me, I don’t think it’s a joke and I don’t find it funny. :(

  29. 29

    Just clicked on the “area report” tab on the tax assessor’s site which is suppose to show comps–looks like King County is going back to 2008 for comps and cherry picking the ones they want to use–they list several solds for reasons that would cause a lower value… how convenient! An appraiser for a RE transaction is not going to exclude those properties when valuing a home.

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