About a quarter of the nation’s homeowners pay more than their fair share of property taxes every year, by the estimates of Seattle-based ValueAppeal, a company that charges a fee to assist customers in appealing their tax assessment. The fee is refundable if the appeal is unsuccessful.
ValueAppeal analyzes whether a particular home is over-assessed compared to nearby, similar properties. The company’s proprietary algorithm takes into account several factors, including a home’s number of bedrooms and bathrooms, construction quality, age, condition, square footage, grade, and whether it has amenities like a golf course or an exceptional view.
Property-tax assessments are created by running an automated valuation model over homes in the county, said Charlie Walsh, ValueAppeal’s founder and CEO.
"That model will spit out values for all those homes. Anytime you do a model like that … on one end you will have 25 percent over-assessed, and on the other 25 percent under-assessed, and 50 percent are about right. And that’s what we’ve found," he said.
Homeowners who believe their county has over-assessed their home can appeal the decision themselves at no cost. In California, for example, homeowners can submit evidence from comparable sales of similar properties to their county assessor’s office.
If the homeowner and the assessor cannot agree, the homeowner can file an appeal form with their local appeals board and submit similar evidence at a hearing. Some homeowners choose to hire an attorney or other advocate to represent them at the hearing.
For a $99 fee — a fraction of the cost ValueAppeal says it would take to hire an attorney or an appraiser — the company will create a custom report to mail in to the county assessor’s office, including a prefilled appeal form and data for five to eight comparable homes consumers narrow down from 15 homes ValueAppeal preselects for them.
If the appeal is unsuccessful, the company refunds the $99 fee. Thus far, about 80 percent of ValueAppeal-generated appeals have been successful and the remaining 20 percent have gotten their money back, the company said.
"We developed ValueAppeal to level the playing field for homeowners who otherwise would not appeal their assessments because it is too intimidating, too confusing, and too hard to find the data they need to win their appeal," Walsh said in a December press release.
The release announced the company had raised $560,000 in funding from individual investors, in addition to an initial $1 million round raised in early 2010.
Walsh started the company in January 2009 and officially launched the service in July 2009. Since then, the 10-employee company has grown to cover single-family homes, condominiums, and townhomes in 39 states that comprise 80 percent of the U.S. population.
ValueAppeal doesn’t cover every county in a particular state because some counties, especially in rural areas, don’t have enough of a population or housing stock to generate comparable properties, Walsh said.
The company has built a $300 threshold into ValueAppeal’s algorithm.
"If we analyze your house and (the algorithm) says you’re over-assessed but only by $200, we actually tell you you’re not over-assessed because we charge $99 and figure it’s not worth it (to the customer to appeal). Our average customer so far saves $839," Walsh said.
ValueAppeal gleans its data from local county assessor’s offices.
"That’s an important piece of the pie — we are using the same data that (the offices) are in the analysis," Walsh said.
ValueAppeal’s algorithm takes into account how many data points are available in a certain county and the preferences of the local board of equalization or appeals board. For example, some boards do not allow tax appeals to compare one-story homes with two-story homes, while other counties don’t track stories at all, Walsh said.
Foreclosures are generally not considered comparable homes when filing an appeal "because those are not considered arms-length transactions," Walsh said. "That’s one of the things that those who try to do this on their own get tripped up by."
"We haven’t found a pattern with foreclosures and distressed properties. In reality, that actually has nothing to do with it. Whether the housing market went up or down has nothing to do with whether a house is over-assessed. It depends on how your assessor responds and that varies from county to county," Walsh said.
For example, the Maricopa County Assessor’s office in Phoenix has noted steep declines in housing values for the past few years, starting with its 2009 tax year valuation, and has adjusted property-tax assessments accordingly. Consequently, that county has a low share of homes that have been over-assessed, Walsh said.
While homeowners are the end users of ValueAppeal’s platform, real estate professionals can also partner with the company to offer their clients a unique coupon code for 20 percent off the $99 fee. The coupons can help real estate professionals "stay front of mind" for past clients and provide value even after that initial transaction, Walsh said.
The real estate professional would get a $20 referral fee for offering the coupon, but at least half of the "several hundred" real estate professionals that have signed up end up waiving the fee or passing the savings on to their clients, he added.
Agents and brokers also have the option of putting a ValueAppeal widget on their site. Users would interact with the widget and only click over to ValueAppeal’s site if they found out their home was over-assessed. The agent or broker would get a percentage of revenue from conversions, Walsh said.
Most counties only allow homeowners to appeal their tax assessments during certain parts of the year. ValueAppeal offers to generate an appeal solely when these windows are open, or will be within a month. If a window is not open, the service tells homeowners how much they would have saved the previous year and suggests homeowners sign up for a free monitoring service.
That service would alert them to when their appeal window is open and invite them to return to the site. The appeals process varies from county to county.
"Generally, when you file an appeal, there’s a review process when the assessor takes a look at your evidence and might approve the appeal right then and there. If not, he might call you up and haggle. If you can’t agree, then you would go to a hearing," Walsh said.
"Right now, we don’t have an option where we would represent you at the hearing, though we plan to have that option in the future. In our experience, less than half (of appeals) have to go to a hearing, but that varies from county to county. For some, 100 percent have to go to a hearing."
In some states, an appeal must be decided within 60 or 90 days, but in other areas of the country — in Washington’s King County, for example — an appeal can take as long as a year and a half, Walsh said.
"In that case, you have to keep paying your property taxes in the meantime," he said.
States also vary in their re-assessment cycles. In some states, such as California, homeowners who apply for a lower tax assessment based on a decline in home value can choose to re-apply every year. In North Carolina, however, homes are only re-assessed every eight years.
"In that case it’s even more important to do an appeal," Walsh said, because a home’s value is likely to have changed dramatically since 2003 or 2004.
Only in California does a home’s purchase price become its property tax basis; all other states use purchase price as a factor, but rely more on comparable sales, Walsh said.
"It’s not like you’re evaluating two shares of Microsoft that are exactly the same. You’re evaluating two homes," he said.
Lowering a home’s assessed value won’t affect how much that home might sell for in the future, Walsh said.
"I have yet to meet a real estate agent who has recommended (a seller) use the county’s assessed value as a data point. They know it’s out of date or just out of touch with reality," he said.
However, "if I’m trying to buy a house and I see that the property taxes are very high, then that’s a negative for me. A lot of people pay their property taxes into escrow every month and the lower they are, the bigger mortgage they can afford," he said.
The following lists counties with the largest share of over-assessed properties in the U.S., as of March 2 (the chart only includes counties with appeal windows that are open or will be open within a month):
|
County
|
State
|
Total properties analyzed
|
Over-assessed properties
|
% Over-assessed
|
|
Lucas
|
Ohio
|
135,279
|
81,975
|
60.6%
|
|
Franklin
|
Ohio
|
276,742
|
153,605
|
55.5%
|
|
Mesa
|
Colo.
|
39,733
|
20,120
|
50.6%
|
|
Cuyahoga
|
Ohio
|
332,385
|
123,313
|
37%
|
|
Montgomery
|
Ohio
|
163,969
|
77,666
|
47.4%
|
|
Summit
|
Ohio
|
167,340
|
74,987
|
44.8%
|
|
Denver
|
Colo.
|
123,953
|
54,051
|
43.6%
|
|
Boulder
|
Colo.
|
73,088
|
31,514
|
43.1%
|
|
Adams
|
Colo.
|
92,479
|
38,620
|
41.8%
|
|
Bergen
|
N.J.
|
241,862
|
97,608
|
40.4%
|
|
Lake
|
Ohio
|
70,426
|
28,153
|
40%
|
|
Butler
|
Ohio
|
99,274
|
38,634
|
38.9%
|
|
Pueblo
|
Colo.
|
48,803
|
18,755
|
38.4%
|
|
Ocean
|
N.J.
|
223,173
|
84,873
|
38%
|
|
El Paso
|
Colo.
|
148,529
|
55,546
|
37.4%
|
|
Larimer
|
Colo.
|
78,738
|
29,133
|
37%
|
|
Jefferson
|
Colo.
|
141,447
|
51,748
|
36.6%
|
|
Douglas
|
Colo.
|
73,760
|
26,876
|
36.4%
|
|
Beaufort
|
S.C.
|
50,172
|
18,176
|
36.2%
|
|
Delaware
|
Ohio
|
48,341
|
17,158
|
35.5%
|
|
Davidson
|
Tenn.
|
146,529
|
50,928
|
34.8%
|
|
Broomfield
|
Colo.
|
13,115
|
4,396
|
33.5%
|
|
Shelby
|
Tenn.
|
262,156
|
85,434
|
32.6%
|
|
Durham
|
N.C.
|
61,368
|
19,550
|
31.9%
|
|
Cumberland
|
N.C.
|
82,271
|
26,111
|
31.7%
|
|
Berkeley
|
S.C.
|
40,646
|
12,329
|
30.3%
|
|
Hamilton
|
Tenn.
|
99,618
|
28,569
|
28.7%
|
|
Morris
|
N.J.
|
146,643
|
42,023
|
28.7%
|
|
Arapahoe
|
Colo.
|
119,125
|
33,946
|
28.5%
|
|
Monmouth
|
N.J.
|
192,555
|
54,531
|
28.3%
|
|
Richland
|
S.C.
|
100,661
|
28,362
|
28.2%
|
Source: ValueAppeal
Counties with the smallest share of over-assessed properties in the country (as of March 3). This list only includes counties whose appeal windows are open or will be within a month:
|
County Name
|
State
|
Total Properties Analyzed
|
Over-assessed Properties
|
% Over-Assessed
|
|
Fayette
|
Tenn.
|
18,836
|
109
|
0.6%
|
|
Cumberland
|
Tenn.
|
52,600
|
430
|
0.8%
|
|
Walton
|
Ga.
|
34,260
|
281
|
0.8%
|
|
Sumter
|
S.C.
|
41,838
|
584
|
1.4%
|
|
Cheatham
|
Tenn.
|
16,268
|
253
|
1.6%
|
|
Hunterdon
|
N.J.
|
42,375
|
774
|
1.8%
|
|
Hall
|
Ga.
|
49,881
|
953
|
1.9%
|
|
Gaston
|
N.C.
|
62,445
|
1,278
|
2.1%
|
|
Coweta
|
Ga.
|
39,558
|
875
|
2.2%
|
|
Union
|
N.C.
|
65,331
|
1,529
|
2.3%
|
|
Barrow
|
Ga.
|
22,336
|
690
|
3.1%
|
|
Cape May
|
N.J.
|
68,538
|
2,146
|
3.1%
|
|
Warren
|
N.J.
|
32,673
|
1,088
|
3.3%
|
|
Sullivan
|
Tenn.
|
74,918
|
2,747
|
3.7%
|
|
Randolph
|
N.C.
|
34,902
|
1,324
|
3.8%
|
|
Rockdale
|
Ga.
|
27,155
|
1,224
|
4.5%
|
|
Gloucester
|
N.J.
|
87,795
|
4,173
|
4.8%
|
|
Dickson
|
Tenn.
|
18,698
|
904
|
4.8%
|
|
Somerset
|
N.J.
|
99,641
|
5,470
|
5.5%
|
|
Tipton
|
Tenn.
|
25,738
|
1,433
|
5.6%
|
|
Harnett
|
N.C.
|
26,439
|
1,473
|
5.6%
|
|
Clayton
|
Ga.
|
82,271
|
4,770
|
5.8%
|
|
Florence
|
S.C.
|
38,389
|
2,526
|
6.6%
|
Source: ValueAppeal.
