The Property Tax – The Greatest Con
Would you pay the electric company, or cable company or the bank holding your mortgage if these creditors gave you an estimate of what they think you owe? Of course not. But that is exactly what your property tax bill is - a bill based on the estimated value of your property. If the estimate is too high, then your tax bill is probably too high. If the estimate is too low, then your tax bill is probably too low, unless the town or city assessor valued everyone else’s property even lower, in which case your tax bill is too high. The shell game played by taxing authorities is convincing taxpayers that they actually know the value of their taxpayers’ property.
The property tax is based on the fair market value of your property as if it were sold on the valuation date to a willing buyer, from a willing seller with both parties well-informed about the property. The taxing authority, by law, must engage in this fiction that your house or other real property is available for sale on the valuation date and determine what it would sell for in order to determine the amount of your tax bill. The truth of the matter it is extremely difficult to determine the value of any property, but it is even more difficult to determine the value of real property because each piece of real property is unique. Its location is unique because it is the only piece of real property that occupies its space on the planet. Its features are more or less unique. If you asked two appraisers, they would likely not agree on the value of your property.
However, the town or city assessor does not hire an appraiser to value your property each year. Instead they use mass appraisal computer systems to value property for purposes of determining the amount of your tax bill. However, what most people do not know is that these mass appraisal systems have a very low degree of accuracy. That means a very high percentage of properties in each town or city are in fact not paying the property tax that they should. To understand how inaccurate mass appraisal systems are in determining the fair market value of real property, consider the statistics that are used to determine the performance of the systems. Many states use the median ratio to measure the performance of its assessing systems. If a community is assessed at a 90% median ratio, then half the properties valued are assessed at lower than 90% and half the properties are assessed at higher than 90%. This means that 50% of the properties are paying too little tax, and 50% are paying too much tax.
Considering that it may be the second biggest cost associated with your property over the course of your ownership of it, wouldn’t it be worth it to investigate if the estimate that the mass appraisal system came up with is too high?
By: John F. Hayes, Esq., General Counsel/Senior Tax
Representative to Allobar Strategies and former general counsel to the New Hampshire Department of Revenue Administration
For more information on property tax abatement appeals in New Hampshire, please visit Allobar Strategies.