New Jersey property taxes cost the average homeowner around $7519.00 a year.  That’s nearly 12 percent of the average household’s annual income. In 2009, the bite was less, at around 10 percent.  That 20 percent hike is troubling, not only for homeowners, but for politicians who count on their votes.                    

Assembly Majority Leader Lou Greenwald’s proposal to provide a 25 percent credit of property taxes for seniors and the disabled — and 20 percent for anyone earning less than $250,000.00 – while reasonable,  is staunchly opposed by Governor Christie, since Greenwald proposes it be funded by a millionaire’s tax.

Instead, Christie would like to see a 10 percent cut across the board in income tax — as would many of New Jersey’s wealthiest residents no doubt.

 And that would exactly help the state, how?     

Governor Chris Christie wants to cut income taxes by 10% for every New Jerseyans. Assembly Democrats have a plan they say can provide a 20% property tax cut for…

More at Chris Christie and Lou Greenwald Spar Over NJ Tax Cut Plans …

While presenting tax appeal seminars over the past several years, I am repeatedly asked the question of whether someone needs an attorney to file a tax appeal. The answer is no, you do not need an attorney, but, before you decide to go forward without an attorney, you should ask yourself, do I have the expertise to successfully handle an appeal?

A situation that presents a similar question regarding the need for a professional is when a pipe bursts and is flooding your home. Before calling a plumber you ask yourself, do I have the expertise to fix the pipe? Some people do, as they have plumbing experience, but most do not and should not even attempt to proceed without a professional.

If you do not have some background in real estate appraisal or handling lawsuits, I submit that you should do the same thing that I would do if a pipe burst in my home, call a professional. The financial stakes are too high to proceed any other way.

In representing clients before many County Tax Boards throughout the State, I have had the opportunity to watch the manner in which these Boards handle various types of cases, including the homeowner who has chosen to represent themselves in a tax appeal. While the appeal process was much less structured and County Tax Boards more lenient in their mode of operation 10 or more years ago, the number of appeals and the amount of tax money being paid out by municipalities in more recent years has caused a dramatic change in how these cases proceed.

A tax appeal is an adversarial process. Many people do not think of it this way, but filing an appeal is filing a lawsuit against the town that claims as its basis that the assessor did not set the correct value on your property. The towns and the assessors interests are the opposite of yours. The assessor is not there as your representative or to act against the interests of their employer – the town.Tax appeals are governed by the same rules of evidence and procedure as every other lawsuit in Superior Court. While many County Tax Boards relax these rules somewhat, it remains the taxpayers burden to present evidence that proves that their assessment is too high.

In residential appeals, the normal evidence that is presented is comparable sales. In other types of appeals, the income approach or cost approach may be the most appropriate means of determining a value. Selecting those comparable sales is critical and the place where most pro se taxpayers cases fall apart. Demonstrating this is the rapidly growing number of people each year who have filed their own appeal at the County Tax Board and not received any reduction and then hire me to appeal the County Tax Board decision to the State Tax Court.The cases with pro se taxpayers generally fall into several classes. One is where the homeowner is a real estate appraiser or a real estate agent. They have the professional background to select comparable sales and present them to the Board to hopefully obtain a positive outcome.

The next group is people who know a realtor who provides them with comparable sales or who use an on-line service that selects comparable sales. The first question from either the Board or from the town will be who selected the comparable sales? If the taxpayer answers that their friend, a realtor, selected them, you may not notice it, but if you listen carefully to the questioning, the Board has already decided your case and you will not get any reduction. If an appraiser or an on-line service provided the comparables, the town has a right to ask questions of the person who selected the comparables.  If that person is not present at the hearing, whether its the realtor or the on-line service, then the comparables are not allowed in as evidence. Without evidence, there is no proof that the assessment is wrong and the assessment will not change.

We then address the situation where the taxpayer selects the comparables. The questions that will be asked include have you ever been inside the comparable? The vast majority of the time the answer is no. Which raises the follow up question, If you havent been in the comparable, how do you know it is comparable? Price does not determine comparability. It is physical features of the home, such as square footage, quality of construction, effective age of the improvements, number of bedrooms and baths, size of lot, age of house, age of any remodeling, etc. that determine comparability. And if you use the Multiple Listing Service (MLS) to get the background information, as you are not a licensed professional, you are not entitled to rely upon the MLS information as reliable.

Appraisers start with the MLS, but then confirm the information contained therein to ensure its reliability or to obtain the correct information for their report.Most important in the decision on whether to proceed pro se or not is the timing of when you can expect to receive any reduction in taxes or refund that you believe you are due.

The filing deadline for appeals is April 1 (May 1 if the town did a revaluation). Most County Tax Boards try to complete their hearings by June 30. This has been extended in many counties due to the number of appeals that have been filed which many times makes it physically impossible to complete all of the hearings by June 30. If the hearing is completed by June 30, you can expect to have a decision by July 31. If you received a reduction in your assessment, the reduction will show on your 4^th quarter tax bill.

If you are not successful and decide to appeal the County Tax Board decision, the current timeline for residential cases processing through the State Tax Court is 12 to 18 months. That means that your appeal that you filed in March, 2012, and appealed to the State Tax Court in July, 2012, will likely be scheduled for hearing in Tax Court sometime in the Summer of 2013. If you settle the case with the town, it takes approximately 5 months for your judgment to be issued by the Tax Court Clerks office. Summer of 2013 just became the end of 2013. The town then has 60 days to issue you a refund – extending that time frame to early 2014.

Remember that you have to continue to pay the taxes at the higher level until that decision is rendered. Then you will get a refund for 2012, without any interest on the refund, as that is waived as a condition of any settlement.If you try the case in State Tax Court, you will normally receive your decision much sooner. But as you are now in Tax Court, all of the rules of evidence and procedure apply. If you are not familiar with these rules, it is easy to make a misstep that will eliminate any possibility of obtaining any refund. And the discussion of appropriate evidence set out above, regarding the evidence that you are attempting to present to the Court, is repeated here. The trial in Tax Court is a new proceeding where you are required to prove your case in its entirety, by competent, admissible evidence. Presenting something short of that will result in your not obtaining any reduction in your assessment for your 2 years of fighting through the property tax appeal system.

I’m sure you’ve heard stories from neighbors that have gone through the appeal process and been successful. It is likely that they were so far over-assessed to begin with that the assessor felt obligated to lower the assessment. Your case may not be so clear cut and any attempt on your part to discuss the neighbors change in assessment as a valid basis for your obtaining a reduction in your assessment will generally result in your not achieving any reduction in your assessment. The County Tax Board is not allowed to consider assessments on other homes in your neighborhood – only competent evidence of sales that occurred during the appropriate time frame.

Before you decide to go forward and represent yourself in a tax appeal, call me to discuss your situation.

Stephen N. Severud, Esq., P.C.

Valley Professional Center

59 East Mill Road

Long Valley, NJ 07853

Phone (908) 876-8700 Fax (908) 876-8703

Filling out paperwork and jumping through legal hoops in order to get a tax appeal are routine tortures endured by most anyone who has ever attempted to appeal a tax assessment on their own.

So, when someone offers, for a tiny fee, to do all the legwork for you, you can bet many homeowners will be enticed.

A company called ValueAppeal offers to handle an appeal for you start-to-finish for only $99.00. A paltry sum considering the (potentially) thousands of dollars you could save in property taxes using their service.

Is it worth the money?

While their $99 fee is a fraction of what you could expect to pay a tax attorney or appraiser, there is no real proof ValueAppeal actually provides homeowners with the lowest possible reduction of their assessment. To date, no one has used both a lawyer or an appraiser and ValueAppeal and compared the differences in the final assessment. And you can bet an attorney wouldn’t be willing to settle for something less in a reduction than what he or she felt the homeowner deserved.    

So while $99.00 might seem worth a gamble to some homeowners, without an on-site appraisal and some legal muscle, how much money they may actually be leaving behind on the table is something they may never know.  

From Moneyland:    

 

New Britain officials challenged the accuracy of the information in the letters ValueAppeal purportedly sent to local property owners. The letters represented that their properties were over-assessed, calculated the amount of

……More at Attorney General seeks info from Value Appeal after company …

Due to a high number of tax appeals after a 2008 assessment, Lincoln Park recently completed its reassessment and noted a $149 million drop in value.  In 2008, Lincoln Park was valued at $738 million; in 2009, it was valued at $1.576 billion. However, after the appeals went through, it was sliced down to $1.528 billion.

The drop from the reassessment forced the Lincoln Park school board to pass the first tax decrease in years for its 2012-2013 budget. However, thanks to the ratio rebalancing from the lost revenue, the effort made was disputable.

Each homeowner will see an average increase of $33 on their tax bill even though the school district had a $134,000 tax decrease. On the municipal side of the coin, a tax increase of $90 is expected although officials said they did what they could to decrease the budget to bare minimums.

West Milford also recently completed their property tax reassessment; the district saw an increase in its value to $2.782 billion…up from $1.492 billion. Residents, including people who have lakefront properties, are questioning the assessment made. This questioning could lead to a significant number of property tax appeals being filed, which would cost the municipality time and money.

Kampfe Lake and other area residents in Bloomingdale took their concerns to its town council meeting March 6. From the feedback the officials received, Bloomingdale officials approved Appraisal Systems Inc.’s $224,700 bid to have the town’s properties reassessed. This reassessment could soon place the town in a similar scenario as Lincoln Park.

Some New Jersey property tax experts have said when all is said and done, people with little to no knowledge on how property taxes work hurt themselves in the long-run to satisfy themselves in the short-term — which may not be what they expected.

Seems residents are learning a hard lesson as to how reassessments only benefit those property owners who had a higher than average assessment in their original revaluation.

Victory in altering their assessments for many appears short-lived — as they do so at the risk of increasing – rather than decreasing — their tax bite.

Lincoln Park's reassessment knocks out $144 million from property valuationNorthJersey.comBY SID JOHNSTON The borough has completed its community-wide property tax reassessment after receiving a revaluation in ……More at Lincoln Park's reassessment knocks out $144 million from property …

New Jersey may tighten property tax cap

Full story: Asbury Park Press Online

Fair to say,  if you are living in New Jersey, you are probably paying more property taxes than you should. The National Taxpayers Union, in fact, estimates that approximately 60% of all properties are currently overassessed.

What makes this particularly shocking is that, since 2003, prices of median homes have declined dramatically. We would therefore expect tax assessments to be adjusted so as to reflect such declines in market values – though this has generally not been the case. Therefore property taxes for many New Jersey homeowners unfairly continue to increase despite a continued decrease in local home values.

Due to a considerable shortfall in budgets, many municipalities are, in essence, heaping extra taxes on homeowners — many of whom are exercising their constitutional right for an appeal. Though appealing New Jersey property tax assessments can be difficult and time consuming — and not always successful — being well-prepared for the fight can significantly increase your chances of success.

Assess your assessment

It is important to understand how your property is assessed.  Ask a local realtor to help you compare your property with similar properties which sold recently to determine its market value. Multiply that value with the assessment ratio that has been established for your town. If the market value of your property is, say, $100,000 and its assessment ratio is 80%, this means the tax levied on that property is $80,000. Some rural areas and high class neighborhoods use another method of assessment by estimating the house replacement cost by adjusting factors such as the land value.

Property Record Card

Check for errors in your assessment next. To do so, you will need to obtain the worksheet of your property from your local assessor’s office. This work sheet is also known as property record card and contains information of your property such as number of rooms, dimensions, number of bathrooms, and so on. Check whether all the information about your property provided in the worksheet is correct or not. If you discover any incorrect or missing information submit this information immediately to the local assessor along with a blue print of your property. In this way you will could receive an immediate reduction and become exempt from a formal appeal.

Comparable Sales

Compare the assessed value of your property with other similar properties in that area. Look at the property’s worksheet to compare other factors like square footage, age, bedrooms, bathrooms, and so on. In this way you may be in a stronger position to appeal if your property’s assessed value is determined to be higher than at least five other properties. Make a list of comparable properties along with their other details like square footage, construction material grades, same neighborhood, and so on. This list should be produced when demanded by the assessor. The record of your neighborhood’s properties is available at the website of your local assessor.

In case you find only three assessed properties at lower and three at a higher value don’t lose hope because in this case you might be entitled to a reduction representing the difference between comparable properties and your property. Your house may be the only property with lousy grading which prevents you from having a garden or a less than desired view of your city’s water tower.

Fight back

Different localities have different rules and your assessment should be capable of explaining how your appeal works. For this you can provide evidence to the assessor including a list of comparable properties, repair estimates, blueprints, and photographs for review. In this way you can obtain a good settlement in an informal way and the assessor may continue completing his rolls and get a fair reduction for you. On the other hand if some settlement is not agreed upon, continue paying your taxes so as to avoid any future penalties on your property. Don’t worry because if the county is satisfied with your appeal, you will get a reduction or check on all future bills thereafter.

Before submitting your appeal form and other related documents, ensure whether or not they comply with all the requirements stated by the county. Keep one copy of all the documents and information submitted by you for your files In a few months you will probably receive a reply and if you think that the reduction you’ve got is not fair, you can follow the next step. The next step is to submit your case in front of an independent local appealing body. This will be more advantageous because you can personally explain your case. You can use photographs, blueprints, etc to prove that your appeal is correct. Also submit a copy of all the assessed document highlighting important points to every board member.

If your case at local level fails, you can take it to state, and even the judicial, level. Bear in mind, however, that judicial hearing will court fees, lawyer’s fees, and other expenses that could negate any savings you might realize from winning an appeal.

Where to search for the right help

It is better to employ an expert assistance which will not only save time but provide proper guidance also. In this way your appeal will become stronger. One more option is to submit your address and case to an online service company. Such companies — for a moderate fee — will highlight comparable homes in your area along with their assessment information and their sale price. If they consider your case strong enough they will send you a report which you can file with your local appeals board. If the appeals board rejects your appeal your  money is then refunded.

Should you decide instead on hiring a professional appraiser, confirm that the board to which you are appealing your case permits such a professional or not. Certified appraisers can be found through the Appraisal Institute or the National Association of Independent Fee Appraisers. Most charge anywhere between $250 and $500. Hire a person who is not only experienced in the field but also is familiar with local neighborhoods in your area.

As municipalities continue being hammered with tax appeals, billions of dollars in revenue are being lost by the state.  In 2011, muncipalities in New Jersey lost in excess of $3.8 billion dollars in their tax base due to reduced assessments – more than twice the amount in 2008.  And with the housing not poised for a full recovery anytime soon, we can expect further blood loss in the years to come.

This depletion in the tax base has many towns struggling with how to deal with the shortfall. Raising the tax rate seems to be the most common answer, something we’ll no doubt witness happening in the most cash-strapped towns.

The best muncipalities can do right now is what many are opting to: that is, avoiding incurring the expense of taking assessment appeals to court and settling instead.

Some sanity at last.

From NJ.com:

Swamped with a near-record number of tax appeals, New Jersey municipalities are choosing to settle more than ever rather than fight them, costing the state billions of dollars in lost tax base and wreaking havoc on local budgets, a Star-Ledger analysis has found.

More…How N.J. towns’ countless tax appeal settlements are costing the state billions 

This recent case underscores the importance of not relying on the weight of a single comparable sale (in this case, the buyer’s),  and why a sampling of at least three “arms-length” comparable sales is always needed.

There will always be a seller willing — for a million reasons — to sell his or her home at a deep discount, but an assessor’s question will be: is this type of sale representative of a particular market — or an anomaly?

A sale of the subject property was recently disqualified as an “arms’ length” sale, according to the Tax Court, because the seller was ill and accepted the first offer made by the buyer.  The buyer filed a tax appeal to challenge the property’s assessment and offered only the sale of property to establish that the assessment was incorrect.  The City of East Orange challenged the evidence as insufficient because it lacked market exposure, and the ailing seller was eager to unload the property as quickly as possible.  The Tax Court agreed and affirmed the assessment.

An arms’ length transaction is one between a knowledgeable buyer and seller, neither being under any compelling obligation to act.  The Tax Court found the seller was not a typical willing seller, and was instead compelled to sell the property as quickly as possible.  The house had been sitting vacant and the MLS listing noted that the house needed fixing up.  The seller, in a nursing home and selling the house through his daughter by power-of-attorney, accepted the buyer’s offer without negotiations.  Thus, the buyer failed to prove by a fair preponderance of the evidence that the property’s assessment was incorrect.

This case stands for long accepted policy that a single sale cannot “make” a market – whether the sale is high or low – and a successful litigant in a real estate valuation dispute must provide evidence of the market as a whole instead of relying upon a single transaction.

A copy of the Tax Court’s unpublished opinion in Gibbons v. City of East Orange, Docket No. 019151-2010 (Tax Ct. January 17, 2012) can be found here.

For more discussion on New Jersey property tax appeal procedure, please see the following blog posts:

Tax Court to Municipality: Enough is Enough!

Montclair Tax Assessment: Might be Wrong, But Not In Error

Wayne Township Owner Misses the Boat on Property Tax Error

Related articles

• Apples and Oranges? Another Tax Appeal Dismissed (realestatetaxappealsnj.com)
• Property market shrinks as winter approaches (confused.com)
• Mistakes Sellers Make When Listing Homes (choiceofhomes.com)

…More at Ailing Seller’s Eagerness to Sell Fatal to Buyer’s Tax Appeal

When Christie became governor, New Jersey had the highest property taxes in the nation. Even if he were to serve two terms, we could still count on our state keeping that crown.

The reason: spending. New Jersey splurges more than any other state on K-12 education, has more police per capita than any other state, and  uses home rule as an excuse for  jamming five hundred and sixty-six municipalities, five hundred ninety-one school districts and various independent authorities into an area only 166 miles long and 65 miles wide.

Christie has succeeded in helping tighten the belt on spending with a property tax cap, pension and benefit reforms and new arbitration law. After decreasing municipal aid, towns are being forced now to consider some much-needed, cost-cutting regionalization measures, such as Somerset County, which could soon shrink nineteen of its local police departments into three regional police forces.

All of which is helpful..

But even if property taxes were sizably reduced, in order to fill the gap other taxes would need to be increased, such as income tax and sales tax. New Jersey depends so heavily on property taxes to pay its bills that spending cuts alone won’t do the job. To reduce the property tax, Trenton would have to raise state taxes and shoulder a larger portion of local costs.

Fact is, New Jersey is second only to New Hampshire in having a property tax that is higher than state income, corporate taxes and sales taxes combined. In 2011, New Jerseyan’s paid a total of $21 billion in corporate and sales tax — and a whopping $25.8 billion in property taxes to support their schools districts and municipal and county governments.  

A tax system is generally considered good when income, sales and property taxes are in rough balance such that each provides somewhere between 30 percent and 40 percent of the entire revenue — which is the case in most states.

In New Jersey, however, property taxes alone makes up to 58 percent of the income/property/sales tax pie, with income tax just 24 percent and sales taxes the remaining 18 percent of the revenue.

The only workaround to lower the property taxes in New Jersey to a reasonable and competitive level with other states is to transfer K-12 education or municipal or county services, worth billions of dollars, to another major tax or taxes with the income and sales taxes being the most prominent choices along with devising an effective cap that prevents any new increase in school district and local government expenditure. This was Jim Florio’s vision in 1990 when he dedicated half of the $2.8 billion tax package to property tax rebate, though the majority of the money was rapidly consumed by school districts and municipalities for new expenses — and by the second year the property taxes were skyrocketing again.

Voter renunciation of Florio led to the election of a Republican legislature and GOP government Christie Whitman, and frightened politicians in both the parties away from any substantive effort for overall tax reform. Ever since then there have been a periodic calls for a constitutional convention to inspect and repair the New Jersey's tax system, but it was made clear in Christie campaign that any effort to raise any new tax will be opposed.

Steve Lonegan's proposal to substitute the states graduated income tax with flat 2.9 percent tax was acutely criticized by Christie because it would raise the tax on some citizens. He also rejected independent Chris Daggett's proposal to raise sales taxes by $4 billion to reduce the property, income and corporate taxes by $5.4 billion a net reduce of $1.4 billion as “$4 billion tax hike”.

Christie also sternly ruled out an increase in gas tax which is the third-lowest in the country and rather reinstated the Transportation Trust Fund with funds from the ARC rail tunnel project which he shut down.  

In reality reducing property taxes would require a solid multibillion-dollar tax alteration, and the Democrats didn’t have the guts to do it when they controlled the Statehouse. And it’s not likely that Christie will be the governor to undertake the needed renovation though he’ll go as far as he can on tax cuts.

But his unchanging opposition to state tax hikes will mean that New Jersey will continually have the highest property taxes in the nation. Christie might slow the growth of the property tax, but he cannot kill it.  And it’s uncertain at this point anyone truly can.   

To ensure an equitable and fair redistribution of a tax levy – so that all property owners share the tax burden of the town equally – a town-wide revaluation is often undertaken.

Every real property must be assessed by the same standards of value in New Jersey and must be assessed for taxation according to general laws. Market value is the basis for establishing every property’s fair share.

Many properties, however, do not correspond to their assessed value because their market value was assigned during the last property revaluation — which in many cases occurred decades ago.

Changes on the real estate market make it impossible for a property to maintain the exact same value. New housing is continuously being built and commercial properties that influence the values are also being constructed. Tearing down dilapidated structures and replacing or rehabilitating old homes cause prices to fluctuate. Some houses may seem to have not changed over the years from the outside, but on the inside they may be deteriorated or renovated.

When we compare the market value assessed in past years with the current market value, we can see that many properties in New Jersey’s towns are substantially out of line with the average market value for a majority of homes.

As a result, many properties are underassessed, which means that they do not reflect the accurate value of the property in the current market. Such property owners are therefore not paying their proper share of taxes. To compensate, this means other property owners must pay extra tax. Someone who has bought an old house and renovated it when the real estate market was at its peak may now be paying more than their fair share since the estate market has collapsed.

What scares people is thinking that a property revaluation automatically means an increase in taxes for all properties. State law though mandates that property revaluations assess all properties of a municipality to 100 % of their market value to ensure everyone is paying their fair share of the tax burden.

The general rule is that one third of revaluated properties will see no change in their tax burden, one third will see this burden go down and the last third will experience a raise.

The goals of revaluation are fairness and equity. For the underassessed, though, correcting the imbalance might not be welcome.   

“I hate to say I told you so, but I told you so,” summed up Mayor Sandy Moscaritolo's reaction to the news about the River Edge reassessment results. Out of the 83-page report the majority of homes will see a reduction in their assessed value but at the same time those residents seeing an increase ranging from 16% to 109%.

“The reassessment was a bad idea,” Moscaritolo said. “It's a shell game to move numbers around and its opened a can of worms. Residents who had newer construction homes, did work or made improvements will bear the brunt of the reassessment. I have two words for you 'tax appeal.'”

From RiverDellPatch:

Reassessments Hit Residents Hard