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Will Your Property Taxes Go Down Now That Your House Is Worth Less?

Dec 10, 2007
It is often noted that over the last ten years the price of an average home in the United States in "real term" has more than doubled.

What this means is that you were able to sell your home, in essence to cash in your chips as it you were at a gambling casino, and buy a representative basket of other non real estate goods - be it tomatoes, movie admission passes, corned beef, cars, garden plants you would be able to buy double the amount that you would of just 10 years ago.

I am sure you noticed that along with your new found wealth as a result of your real estate investment that your housing and realty taxes increased as well. Not only are you rich in terms of net valuations but you also having higher taxes on your property.

Property taxes are assessed by cities and municipalities on the "assessed valuation" of the home or property. In the end it your annual property tax bill, that comes in that nice official envelope from realty tax central all comes down to the valuation of the property on hand. It is often said that you can count on two things in life - death and taxes. Property tax is an "ad valorem" tax that an owner of real estate or other property pays on the value of the property being taxed. Sure you are rich - in terms of the valuation of your house but simply put - the more your house is worth, the more realty tax you will pay and be paying every year.

Unfortunately what has happened is that most Americans are not diversified in terms and their assets and investments. With the stock market crashes and low interest rates paid it seemed that the only place that "they could make money' was in their house. Low interest rates allowed many to purchase houses, condos and even vacation cottages and condos that they could never afford otherwise. Low interest rates meant low mortgages.

Many could now afford substantial properties that they never could have afforded in any way before. The circle went round and round- low interest rates meant others could afford those properties as well. Housing prices went as a result of the increased demand. The home buyers now congratulated themselves on the wise choice of their investment in their home. Real estate it turned out was a million times better an investment than anything else. A million times better than the risky stock market, Interest rates on certificate of deposit would have paid you virtually nothing. On top of that a feeding frenzy arose in the real estate market as people who were not buyers of real estate or who had planned to be in the future rushed into the market in a panic lest they be "locked out forever" of their dream of buying a house , condo etc.

The fallacy in this logic is that these people are house rich and cash poor. They had not diversified their investments. At the time it seemed like a wise idea - in terms of rates of return and other options. After all they "only made so much land" and "real estate always goes up".

Back to the topic of taxes and realty taxes. The housing bubble has "burst". Housing prices seem to be in a correction - on the way down.

You may well wonder. If the value of my house has come down so should my realty and house taxes. Don't count on it. Actually it is highly if ever doubtful. Your city or municipality needs that revenue stream as much as you do or perhaps even more. You at least can "cut back". You can eat hamburger instead of steak, you can choose not to purchase that new car you wanted. However your tax money has been incorporated in budgets and planning for a long time coming. It's spoken for. On top of that you can hardly expect that civil servants will take a pay cut or that the whole civil service will become amazingly productive - at least in the near future.

What can you do? It all comes down to valuations and homework. Have your house value assessed. You can do an initial assessment by comparing your home to other homes in your area that were recently professionally evaluated. You can check on the internet and with local real estate agents what similar housing and real estate in your area has sold for. Not so much the asking price but rather the actual sales price.

Now that you have a good general idea from a couple of sources it may be wise to spring and hire a professional property evaluation or property inspection service. You can find these services in your local yellow pages or with a search on the internet. If you are stuck and cannot find one- ask a local real estate agent or company.

Next compare your taxes to other similar priced properties. First in your area and later outside your direct area, but in your municipality.

Many cities now actually list home valuations and taxes on the internet freely to the general public. If not real estate listings may give you the data.

In the end it all comes down to valuation of your property. You can file an appeal of your realty taxes. Your case can rest on two points of discussion. First that your home taxes are out of line and too high, compared to other similar properties. Second you can argue that the valuation of your house upon which these property taxes are based is wrong. According to the cities own calculations you should be paying much less tax.

In the end as they say "It's Your Money" "And Your House". Ensure you do your homework of property valuations and tax rates in a thorough, detailed and systematic manner.
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