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July 30th, 2009

The other threat to homeowners: taxes

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While most of the attention is focused on the plight of foreclosures due to homeowners who have problems paying down their mortgages. Obviously if they’re having a problem with one bill, they’re having difficulties with property taxes as well:

At a time when the nation’s housing crisis has put millions of Americans at risk of losing their homes through bank foreclosure, a growing pile of unpaid bills has put tens of thousands more in danger of losing them to tax seizures. That has caused multimillion-dollar shortfalls for some already-struggling local governments that rely on property taxes to pay for everything from schools to police.

Because property taxes are almost always collected locally, there is no single national measure of just how many people have fallen behind. But tax collectors and treasures in communities across the country say they’ve seen a sharp jump in the number of delinquent homeowners and businesses as the nation’s unemployment rate grew. They’re bracing for even more unpaid bills ahead.

“We fully expect a higher level ahead than in the last few years,” says Kenneth Parrish, the treasurer of Kent County, Mich., and president of a national association of tax collectors.

Officials in Lee County, Florida, note glumly that more than 43,000 taxpayers didn’t pay bills due this year, compared with about 31,000 two years ago. Florida is one of the states hardest hit by the real estate slump, but plenty of other areas will continue to suffer through it for years to come.

Cities and towns are no more eager than mortgage lenders to push a homeowner into foreclosure and end up owning real estate:

Property tax laws vary, but usually if taxes aren’t paid within two or three years, authorities can seize the property. Before that happens, officials usually try to set up repayment plans, and in many cases, mortgage lenders will step in first to protect their investment, says Dina Mumford, the treasurer in Outagamie County, Wis.

“But eventually those taxes get paid plus interest or we take the home,” she says.

A growing number of homeowners — particularly those whose homes were last reassessed when real-estate values were much higher — are looking at appealing their property tax bills in hopes of having them lowered:

Tens of thousands of homeowners across the country are trying to wring something positive from an epic real-estate crash. In Cuyahoga County, Ohio, which includes Cleveland, hit hard by rising unemployment and foreclosures, nearly 23,000 property owners applied for property-tax reductions this year, up from an annual average of 1,700. Appeals in California’s Sacramento County soared to 12,000 in 2008 from a typical rate of 1,800 a year earlier.

As it happens, homeowners can do it themselves with minimal cost:

Homeowners who want to appeal their assessment in many cases can handle the process themselves, although it’s important to be prepared before going in front of an appeals board, tax experts say. People who want help can hire a property-tax consultant or attorney, but should expect to pay a fee, often 25% to 50% of the amount saved in the first year. And enlisting the service of a real-estate appraiser can cost up to several hundred dollars.

There are also a number of online services which offer automated property-valuation models so you can get a guesstimate of whether your home is overvalued. Click through to the article to learn more about how that works.

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3 Responses to “The other threat to homeowners: taxes”

  1. Sheila Anderson, Realtor Says: July 30th, 2009 at 6:59 pm

    Only 23,000 appeals? Miami, Florida is up to 100,000, which is similar to New York and Chicago’s experience. Even Abraham Lincoln represented taxpayers in ad valorem challenges, and he won!

    What appears to make Ohio difficult is the limitation that only attorneys may represent taxpayers at the administrative level. It’s a multi-disciplinary process, and attorneys may need to learn valuation – not taught as part of their licenses – so taxpayers may need and may be missing some additional expertise. If more won their appeals, there might not be so few.

  2. Mitch Says: August 7th, 2009 at 1:36 am

    I actually wrote about this somewhere (either on my blog or an article for someone else; I can’t really remember), and I said that people who think that buying a very expensive home for a little bit of money now might find themselves in deep trouble when the housing market rebounds and they suddenly find those houses worth what they used to be as it pertains to taxes. In NY, if you’re a new homeowner your taxes have to be paid as part of your monthly mortgage unless you put down at least 75% of the cost of your home, so we don’t have an option of missing any tax payments.

    But you’ve put through an interesting point, since we can bet those assessments didn’t change with the devaluing of property.

  3. Plano City Council Wavering on Property Tax Hike | DFW Real Estate & Homes Says: August 18th, 2009 at 10:10 pm

    [...] The other threat to homeowners: taxes (hsh.com) [...]

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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