When Does it Help for Your House to be Worth Less?

Living in New Jersey can be an expensive proposition. This is balanced by our great sights, restaurants, corporations and schools, but it leaves many residents feeling the proverbial pinch in the pocketbook.

With mortgage and refinance interest rates rising from historical lows, homeowners may have to look elsewhere for home cost reductions. One area to explore is lowering your annual property taxes through home value reassessment. There are trade offs to such an approach, but this can be a low-cost method to reduce your annual costs this year and for several years into the future.

The Basics:

Property taxes are based on a percentage of the assessed value of real estate, generally with a complicated formula assessed on both land and building. These are set by the local municipality each year, usually at the beginning of the calendar year. However, it is possible for you to file a petition to your municipality for are assessment. You cannot petition to lower the tax RATE, but you can petition to re-assess the VALUE of your real estate to reduce the overall tax. With the decline in real estate values in the near past, it is possible that your home might have a tax assessed value that is greater than the current market value. The housing market is usually inefficient, and house pricing are impacted by quite a few intangible factors. And in many areas, the annual assessment is based on an automatic increase in value rather than an actual revaluation process.

The Petition:

The petition forms can often be found on your municipality’s website and are not difficult to complete. However, there is usually a filing fee. The form will ask for information about your property that is printed on your Notice of Property Assessment card which you should receive in the mail each year. In addition, you will also need to provide the reason for the appeal and comparable property sales for the basis of the reassessment.

Value & Comparable Sales:

The best way to value your home is by comparing it to recently sold properties just like yours. You may be able to get your local real estate agent to assist with these comparables. There are also numerous online tools and software that can help identify comparable property prices which you can use to in your petition to adjust the assessed property value. The software is generally inexpensive. One of the planners at our firm used Easytaxfix.com for a fee of $79 and received a 25% reduction in tax after appealing twice in three years just by submitting the comparables and required forms and then negotiating it with the tax assessor over the telephone. A word of caution: While free websites like Zillow and Trulia can give you a quick estimate of the value of your property, they are not official and will not be acceptable for the appeal as specific comparable sales are needed.

What if Your Appeal is Rejected?

If your reassessment was rejected, a professional assessor may help; however, an assessor costs approximately $300-600. Keep in mind that you are trying to lower the “value” of your home. If you are looking to sell in the next few years, you may want to consider this and allow future owners to sort out what the assessed value should be. Mortgage refinances may also be impacted by a lowered property assessment. Experienced real estate attorneys may also help you navigate this and maximize your potential tax reduction. However, engaging an attorney may only be worth it if there are serious assessment errors to justify the cost of an attorney.

Long-Term Planning:

New Jersey residents consistently rank among the highest tax payers in the United States. If you are considering moving to another state, talk to us. Helping clients relocate to another state is part of our deeper and broader approach to financial planning. We have created a proprietary planning module to help walk youthrough all the essential elements to consider for a major move. Contact your Financial Life Planner or Peter Hoglund via email at PHoglund@aepg.com or at 908-821-9760 for more information.

Have a friend who is considering a move? Have them give us a call.

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