PROPERTY TAXES, ABATEMENTS AND HOW TO DEAL WITH THEM

By Paul Brown, NHCG-113, 11/24/10

We all dread the day when our property tax bill arrives in the mail. It eliminates a planned vacation or perhaps that used car we really need.

The first thing we do is simply disagree with the assessment."My house isn’t worth that much." But then there’s that nagging thought:"Maybe it is. Can I sell it for that price? Should I?"

          Should I call an appraiser?

The short answer to this question is "yes", but under certain conditions.

First, go to the town office and get a copy of the property record card (PRC). Read the card and be sure that the information about your property is correct.

There will be a perimeter diagram of the house showing the square footage. Are the dimensions correct?

When the assessor lists your house, he measures it and details number of rooms, baths, type of heat, siding, roofing, etc. But what is most important is that he makes two judgments about the home: Quality and condition.

The quality level is the basis for the dollar rate times the square footage, which derives replacement cost new and the condition decides the depreciation, or deduction from the replacement cost new. This amount is then added to the estimated land value to derive the total assessment.

          When you come to me

I don’t want to take your money if I can’t help you. And, I only take about ten percent of the abatement requests that I receive.

Here’s why: Most assessments are probably within ten percent of market, or true value, because typically there are variations in buyer-seller preferences for any property. No appraiser can tell you exactly what a property will sell for, except by luck.

I will ask you to send me a copy of your property record card, then ask if the information on the card is correct. If it isn't, I'll suggest that you so inform the town's assessor for corrections. Usually, however, the errors are small, and the reduction in tax is minor.

Then, I'll do a quick search of sold properties similar to yours. If it appears that your property is over-assessed by as much as fifteen percent, I'll suggest that we investigate this further. Also, at this point I'll ask about the town's equalization ratio, explained later.

Up to this point, the consultation is free. But if we go on to a full appraisal of the property for abatement purposes, the cost can be up to $800, depending on the complexity of the property.

The reason for this is that when I write the appraisal report, I am assuming that eventually I will be testifying before the NH Board of Tax and Land Appeals (BTLA).

This is the quasi-judicial body that hears appeals of abatement requests if the municipality's assessor denies the taxpayer's request.

          Here's the process:

I should say here that a full, and costly appraisal does not guarantee that the appraiser will find an over-assessment.

The municipality's assessor will presumably read the report and make a decision as to whether it has merit.
The assessor may set up an appointment with the property owner to discuss the request and the appraisal.

It must be said that some assessors are under pressure to resist any reduction of assessments, but I have found those who are reasonable and if given a persuasive appraisal report, will reduce the assessment, or at least be willing to negotiate with the property owner. The assessor may point out areas of disagreement with the appraisal, which may or may not be appropriate, and this is why the owner's appraiser should be present for this meeting.

It is the appraiser's job to defend his appraisal; not as the taxpayer's advocate, but as an advocate for his opinion.

Finally, if the assessor offers a negotiated settlement, it is the taxpayer's decision to accept or reject, not the appraiser's.

I have always assumed, when taking on an appraisal assignment for abatement purposes, that the assessor will be disinclined to reduce the assessment, not because he can find any problem with the appraisal, but he has a vested interest in the assessment system that he is using. I expect, that on being denied, that the taxpayer will appeal to the Board of Tax and Land Appeals. This is where that appraisal report is very important.

The Board of Tax and Land Appeals is made up of a panel of experts appointed by the Supreme Court. They have heard virtually every sad assessment story ever conceived. They don't want to hear about the tax bill taking the kids' college tuition. They want facts about value.

The taxpayer can appear pro se, hand the appraisal to the chairman and say "This appraisal report contains the reasons for my appeal of the assessment of my property." Or better, have the appraiser present to testify on his report. The Board simply wants to know if the appraisal is well-founded, reasonable, and meets appraisal standards. The appraisal, to meet standards, must be more than the cost-less-depreciation-plus-land of the assessment.

However, if the assessor is doing his job, he might have gone to a greater effort and written a full report, complete with comparable sales. In which case, it might be wise to review that information before going to the Board.

To summarize, my "threshold" for accepting an appraisal assignment for abatement purposes is when a preliminary analysis indicates that an assessment is fifteen percent high. I do not charge for the preliminary.

When taking on the assignment, I assume at the beginning that my work will ultimately come before the BTLA, and I don't want to lose, because my reputation is at stake.

        The Equalization Ratio

Having said all of that. It might be that your "high" assessment is "proportional", and you don't have a case.

In a period of declining prices, it may well be that all of the properties in town are assessed above their market values. The differences are measured by the State by comparing sold properties to their assessments. For example, when assessments average 10% above selling prices, it is said that the equalization ratio is 110%.

So, when a property owner considers applying for an abatement, it is best to inquire about the equalization ratio, then divide the assessment by the ratio. At that point, it might be found that the assessment is reasonable and not worth fighting about.

Here’s a little anecdote about a recent tax appraisal I made in a seacoast town. My analysis indicated that the assessment was about double the market value. My appraisal was (in my opinion, of course) well researched and supported.

The town said "no" to the request. The property owner appealed to the Board of Tax and Land Appeals. The BTLA requires that the town attempt to negotiate. The town hired an outside appraiser who specializes in defending assessments against abatement requests. I appeared at the meeting with the property owner to explain and defend my appraisal if need be. The "hired gun" had no questions about my appraisal, even though he had only been given two or three pages of the report. He provided a one-page grid showing some comparable sales that supported the town's assessment, and refused to consider any lower value.

The property owners so notified the BTLA and eventually were scheduled for a hearing. The town, having a number of requests, hired other outside appraisers to complete full appraisals on those properties, our subject being one of them.

I can only speculate on the town's motivation. The "hired gun" was not given the full report, but apparently had his mind made up anyway.

When the property owners refused to go away, the town decided that it would be prudent to contract for full appraisals.

The results of the appraisals are in. The property owners are happy!

 

Contact Information

Paul E. Brown

Long Hill Road, Raymond, New Hampshire 03077

Phone:(603)895-3113

Email: paulebrown@comcast.net


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