Dear PoP – Appealing DC property tax assessment?

Photo by PoPville flickr user Madame Meow

“Dear PoP,

So we bought our house in the in the Capitol hill area in late 2009, and we just got our 2012 property tax assessment, our second increase since we bought the place. I’m contemplating appealing, but not sure it’s worth the effort, and/or wondering if it’ll do more harm than good.

The current assessment is an increase of about 2.6%, bringing the assessed value up to about 3.6% more than we paid for the place about 1.5 years ago. I’ll admit this seems far from extreme, but when I take a look at Zillow for example, it shows 20002 down ~6% in the last year and “Near Northeast” down ~3.5%. I wander through the occasional open house and look at listings and my feeling about local prices is that they’ve been flat at best, if not slightly down as Zillow suggests.

So do I have grounds for an appeal? Should I bother? Do you have any idea how detailed their analysis really is? Do they actually go street by street, house by house, or do they just apply a percentage for each neighborhood based on some coarse measure?

We’ve made some improvements to our house. One of the neighbors just went through a very serious renovation and their property value has clearly gone way up. In reality mine has certainly gone up too as a result, probably more than the assessment shows, though I think it’s been too recent to actually make its way into this assessment. If I appeal will I end up with more focused scrutiny and end up doing myself more harm than good?”

I thought that it would be a good idea to appeal if your house (in similar condition) was assessed at a much higher value than homes nearby. I once appealed on those grounds a couple of years ago and won the appeal.

We discussed how tax assessment works here and discussed an appeal here and here.

Did anyone else’s assessment increase?

53 Comment

  • To my Redfin-loving eyes, prices in Cap Hill have certainly gone up since 2009, which was just about the housing bottom (late 2008 probably was the absolute bottom, post-Lehman)

    Doesn’t hurt to appeal though

  • My assessment has gone down significantly for the past 2 years and is set to go down again next year. Despite the rising prices of homes around me, my assessment continues to fall.

    I am not complaining.

  • First, you’re assuming wrongly that, from the tax assessor’s standpoint, what you paid 1.5 years ago is what the house was actually worth then. He may very well think that you got a good deal.

    Second, there’s no question that CH has become one of the strongest markets in the city because of the relative availability of less expensive housing. I’d be very surprised to hear that prices there have actually dropped over the last 12 months.

    Third, you’re talking about going through a lot of trouble to save what would amount to be at most a couple of hundred dollars — and even there assuming your house is assessed at a million or so.

    Not worth the trouble in my book.

    • I think that assessors should use the sales price of the subject property as one of the main factors when making an assessment. There is no better guide to the price than what someone paid for it on the market.

    • The tax assessor doesn’t have the ability to determine that “you got a good deal” and then amend your tax rate to their personal whim. The sale price is assumed to be the correct price where a buyer and a seller agreed. It’s called a “market” for a reason.

      Having someone in government “determine that you got a good deal” and charge you more would violate your rights resulting in lawsuits.

      You really can’t trust Zillow for anything other than a band of valuations.

      • You’re flat out wrong. Not only does the tax assessor not HAVE to, he in fact does NOT assume that the price paid for a house is what the house is worth. DC housing is reassessed every year, and if it were the case that the sales price “is assumed to be the right price” then every house in DC that sells in a given year would simply be reassessed that same year for the sales price. Find me a single house in DC that sold this year and that was assessed for the exact price that it sold for and I’ll concede your point.

        In addition, tax assessors are guided by neighorhood trends, block trends, etc., and not by individual housing prices. They are assessors, not appraisors.

        Good luck making any kind of case that a house on CH that’s assessed at 3.6 percent more than it sold for 1.5 years ago is overassessed.

        • “Find me a single house in DC that sold this year and that was assessed for the exact price that it sold for and I’ll concede your point.”

          We actually just bought a house in Capitol Hill for $10k less than the list price, and it was assessed for exactly the amount we paid.

          • then as i said below you’re a real outlier. go do a search on dc’s website and show us a house that isn’t yours that sold this year and was assessed at the exact same price.

            i just did a search in near NE CH and after looking at the first 10 or 15 recent sales didn’t find a single one where the assessment matched the sales prices. many were real close, one or two were assessed higher, and several were much lower.

            not scientific, to be sure, but more data than your anonymous word alone that recent sale = assessment.

          • Don’t get me wrong, I agree with your general point. But you did ask specifically for a single house in DC that sold this year and that was assessed for the exact price that it sold for so I thought I’d jump in.

          • you’re absolutely right. my bad.

        • No, you’re completely mistaken. There’s a formula based on sales and comps. You should read up on it.

          The reason why your house isn’t assessed the same amount in the Year Of Purchase, is because there is a 1 year delay on assessments. You pay tax in 2010 on what your house was worth in 2009. The year AFTER you purchase, your assessment is reset to your purchase price.

          The only thing your assessor can adjust is if there is incorrect information in the MLS. Like you have 3 bedrooms instead of 4 or you can show substantial damage to your house (actual documentation). In that case, it’s a code that goes into a formula, not a number that your assessor dreams up in his spare time.

          Reading is fundamental.

          • Yep. Sales is the #1 factor. I remember it being stated something like, “price your house would sell for in a free market transaction (unrelated parties) on this specific date”.

            The distribution of assessed prices skewing to the left makes perfect sense: no one challenges assessments below sales prices.

    • I don’t think in this case it is worth the appeal — 2.6% over 1.5 yrs is completely reasonable in my eyes, especially when improvements have been made, and using Zillow as an authority borders on preposterous.

      I do, however, think that the only relevant basis for tax appraisal in the year of a sale is the sales price. DC law requires appraisal at fair market value. That’s what is required. While you can argue about ways to get to determine “fair market value” until you’re blue in the face, particularly when the last sale of a property was years ago, the best definition for that term is what the property would get in an arms-length open-market sales transaction. I’d wager that 95% of economists would agree that, when the property sold in the same year, the sales price, almost by definition, is the best approximation of fair market value of the property and should be the number at which the home is appraised. That the city follows any practice other than this (and it does) is ridiculous, and from my arm-chair view, would be a wonderful basis for a class-action lawsuit against the District.

      Full disclosure: my gripe comes from having my property appraised at almost 200% of the sales price back when I bought it, now almost 7 years ago. I was too dumb/lazy at the time to appeal it, and I have paid a lot for the mistake over time. So 2.6% seems like a pittance to me, but the fundamental idea that DC appraises higher than sales price in the year of sale rankles me to no end.

      • A quick addendum: there is some protection against this practice in the District, in that how much you pay in taxes is capped at 10% year-over-year. But that misses the point: these inflated assessments in the year of sale just set a baseline that allows the District to increase you tax bill every year until you are paying tax on the full assessed value. It’s worth the fight in egregious cases. But not this one. Too much time, improvements made, and too little increase.

      • The one thing you’re forgetting is that there is a 1 year delay on valuation for tax purposes. You have to wait a year for the valuation to reset to the sales price.

  • Someone has to pay for those SUVs, so stop your whining.

    • I’m paying for them — my assessment just went up 14%. All around me, they went down. I appealed last year (assessment was about 30% too high for market value and an appraisal I had done to refi). First appeal, I “won” and they lowered it 5% (exactly). Second appeal, I “won” again and they lowered it another 5% (exactly).

      Retaliation by increasing it 14% the next year? You tell me… My assessed value is way out of whack.

  • Unless you have a recent appraisal that would verify your contesting the assessment you’re unlikely to win on appeal. The appeals process is pretty harmless (i’ve appealed twice in several years and one), but it isn’t very transparent. You file your appeal with a reason as to why you’re appealing. You may or may not get a phone call from the assessor, however what will happen is that the assessor will drive by your property for a visual inspection. Usually assessments are done on a formula applied to the entire block based on last years assessment and assessors only get to each block every two years or so. This may have changed, however, i don’t think so.

    It won’t hurt to appeal, however if you’ve made improvements that are either visible from the street (or alley) and or pulled permits for improvements, it’s possible an appeal may result in higher assessment.

  • It’s not a lot of trouble to put together an appeal, particularly if there are comparable homes nearby that sold for less; these can be used as evidence of an over-assessment. But I think they need to be sales prices rather than values on zillow or another similar website. If you think your assessment is too high & want to appeal, go for it.

  • We live on the north side of Capitol Hill and have run into this too. We finally were able to successfully appeal because we refinanced our house last year.

    It brought the estimated worth down to a realistic price. He had us worth $20-30,000 more than our house would ever sell for before that and we unsuccessfully appealed the year before, pointing out a house three houses away with more square footage was sold at considerably less than his appraisal of our worth.

    This year, though he conceded to our bank’s property appraiser, he tacked on an extra $7,000 to the value. I thought it rather clever. it wasn’t worth the appeal the extra $100 of taxes it would generate.

    And when a house is sold, my understanding is that’s its value for the first year of taxation.

    • Hi, your understanding is wrong. Take it from somebody who just bought a house and just got her new assessment.

      • that’s how it worked for us our first year in the house. then our assessment got upped by a ridiculous amount a year later.

        • wow, then you are a real outlier. this is real easy to confirm. just go on dc’s website, do a search for all sales in a given year, and compare the sales price to the new tax assessment. you won’t see very many exact matches.

  • The first level of appeal is simply filling out a form and sending evidence for why you are appealing – then the assessor will call you to discuss it.

    I did this last year when, after buying our condo in Colubia Heights in 2007, and after comps in the neighborhood were down significantly, I could find ample evidence to make my case – which I really think I did. I gave sales charts, cost per square foot analysis and comp.’s for similar units on my street and everywhere in a six square-block radius.

    It didn’t matter, they rejected my appeal. I had the option of taking it to the next level of appeal but honestly it didn’t seem worth the effort. They didn’t even bother to give me a reason for rejecting my appeal either.

    Now, a year later, my assessment has jumped $100,000 to a price that makes absolutely not sense at all. They have essentially valued our condo, which is one of two in a converted rowhouse, for what I could probably buy the whole house for. I’ll fill out the form and go through it again. But I think short of a lawsuit from a group of homeowners facing the same arbitrary assessments, many of us will be facing higher assessments with no basis in reality and a city, facing a budget shortfall, eager to rip us off.

    • You should follow all the way through… I believe half of their strategy is putting up barriers to make people stop appealing.

  • “We’ve made some improvements to our house. One of the neighbors just went through a very serious renovation and their property value has clearly gone way up. In reality mine has certainly gone up too as a result, probably more than the assessment shows”

    Just so I am clear, you fully admit that the assesed value of your home HAS gone up as you’ve done work on it and you fully admit it should be assesed more than it is, yet you come here and ask how to get out of it?

    I didn’t know elementary school had let out for the day and that whiny 3rd graders posted here.

    Homeownership is for adults. If you can’t be bothered to pay the debt to the city that you fully admit that you owe, then you should simply sell and go.

  • And the award for most observant reader goes to joker 🙂

    How about a related question. Like an earlier poster, my assessed value keeps decreasing though homes in the area are selling and appraising for more.
    Is there any downside to an assessment that is too low?

    • There’s a potential downside when you go to sell your place in that there are lots of idiots who confuse assessments with appraisals and raise their eyebrows over asking prices that are much higher than assessments. Other than that there’s no downside — unless lower taxes are a downside to you.

    • I would think it would only affect you when you sold, and only in a “down” market.

      During re “boom” times the asking and sales price usually exceeds the appraised value. People expect it, realize tax assesments aren’t necessarily the arbiter of “market” value and that they typically lag as an indicator.

      However, during down markets, I’ve seen people use the assesed value as a price negotiating ploy…saying that I’ll pay your assesed value (which is easily searchable) and not a dollar more.

      Basically, there is no good reason to try to artificially inflate your assesed value, and only occasional and temporary reason to have it inflated.

      • taxes blow and we all know it. all of us just wants to pay as little as possible.
        no need to be rude joker.

  • fwiw, last year, my assessment increased by a lot – to over 30,000 more than what i paid for it one year prior (a price that was ultimately set by an FHA appraisal). i was incensed and appealed and received a cursory denial of the appeal. i ran out of steam at that point and did not take it further. this year the assessment went down to something like a reasonable assessment of my property. it’s possible that the decline is just a bad sign of what property values are doing in pleasant plains. but i prefer to think that my apparently fruitless appeal may have had something to do with it.

    • I live in Pleasant Plains, too, and my assessment was basically flat this year (up 3K). It’s still quite a bit less than I paid for the house 1.5 years ago, and the house actually appraised higher than the purchase price.

      The whole process is fairly mysterious, but it’s been working in my favor so far. I’m sure not going to appeal my too-low assessment.

  • me

    Mine went from ~535k to 547k this past year. No significant improvements have been made to my place or any of the neighbors’ places.

  • I just want everyone to remember, $100,000 of assessment translates to an owner paying $875.

    What are we complaining about? $20,000? That’s $175.

    I thought about appealing once, but then I figured, why fight DC (of all the places in the world) over $300.

    Usually, it doesn’t make sense.

    • not to mention that the tax is an itemized deduction on your federal and dc incomes taxes, meaning that the 175 becomes more like 100.

      • Only if you itemize deductions. I own a house and I dont itemize.

      • I think it all depends on how much your time is worth to you. For some (yes even homeowners) $175 is worth the time it takes to write a letter and do a little research.

        That’s all it took me to appeal. Probably 1.5 hours.

        I’ll take the $115/hour.

        • Prop taxes are not a one time charge! The reduction is worth $175 for this year, which is about $2000 over 10 years (after factoring in opportunity cost of not being able to put that money into T-notes).

          Spend 2 hours, save $2000? I think so. Take a day off work if you have to.

    • Remember too that it’s not necessarily just a change on next years taxes, but also all of the years after that. Subsequent increases also compound off of this years…

      • Ah, great minds, etc. The first year is the most critical since it is subject to the most compounding. You should always appeal early on.

  • Go to Urban Turf and read the recent article on appealing the DC property tax assessment.

  • And don’t forget inflation. Assuming an annual rate of 2%, and with everything else being equal, one would expect a $500K home to increase in assessment by $10K.

  • I just ran into this… House was assessed in 2009 for $470k (listed at $499), assessed in 2010 for $480k, and suddenly 2011 is $560k… only improvement is a ~$10k deck. Advised to appeal by my realtor.

  • bfinpetworth

    After moving here from Vermont, I am thrilled with the lower property taxes here. I paid twice the amount there for a house worth 40% less. So when my assessment increased this year by several thousand, I just shrugged.

  • We live on the SE side of the Hill, a few blocks from Eastern Market and Barracks Row. Our assessment went up 50K for 2012. For 2011, it rose 30K over 2010. Seems like our neighbors are experiencing the same thing. That said, prices seems to be creeping up around us and things have been selling for full asking price or higher.

  • How does the assessor estimate “improvements”? Our proposed new value for improvements has increased over 100K. The only major improvement we have made to the house was to install a new A/C unit. Our overall proposed tax is an increase of more than 100K from last year, but still less than what we paid for the house. Is this worth the appeal?

  • I am appealing for the third year in a row, because for the third year in a row they have tried to raise my assessed value the maximum 10% while everyone around me (Bloomingdale) has has dropped about 1-2%. The only thing to do is find comparable houses that sold around the same time as yours in your neighborhood and compare. See what the trend is in your neighborhood. We contacted the guy we refinanced with and was nice enough to find us comps. If you have a case, I recommend fighting it all the way to the hearing. Our assessor (same guy) has changed his assessment criteria to justify his case each year, I’m looking forward to this year’s fight. I highly recommend that everyone who believes he or she has a case should appeal.

    • Oh, and we’re 2 for 2 on appeals so far and should be able to win again since there is no basis for the spike. When we went to the hearing last year, they cut off the discussion early because they already knew he was wrong and we were notified of our victory in 2 days.

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