We’ve been home owners since 2003 (well, my wife has been, I’ve been a homeowner since marrying into her house in 2005.) We lived in the house she bought until 2016, then moved to our current home. In the first house, we never appealed our property valuations. Since moving to our current house, we’ve appealed five times, including this year.
We live in Hennepin County, Minnesota. I don’t know how other cities and counties handle things, but my intent for this post is to describe what we’ve learned so that we can help others appeal their tax valuation.
Our appeals started in 2018. The reason it wasn’t sooner was because this was the first year that our valuation reflected the price we purchased our home for. We bought the house late enough in 2016 that it didn’t show up yet when we got our 2017 notices. The 2018 valuation was quite aggressive, and took us aback. We couldn’t believe that the value had increased as much as the assessor claimed.
Our first house was in a city that contracts with the county to handle assessments. The majority of cities within Hennepin County do this. However, we now live in a city that handles their own assessments. The process here begins in late March, when new property valuations are mailed out. From what I’ve seen online, it appears this is pretty standard across Minnesota. The first step is to just see what the assessor has valued your home property value to be. Given the size of our city, and the number of people I’ve seen at appeals meetings, the vast majority of people simply accept the valuation they receive.
Because we have been appealing nearly every year, we’ve learned that the next step comes around April 1st. This is when the county publishes all of their current and proposed values. We live on a small lake (if it were just a few acres smaller, it would be called a pond.) This adds a factor used in calculating our value. I have found that it’s enlightening to compare our proposed value to the values of the other homes around our lake. There’s some diversity in the raw values, but not a ton; and seeing the percentage changes is the most valuable part of the exercise. I keep a spreadsheet in which I list out all of the properties on the lake, their current value, and their proposed value. I then have the spreadsheet calculate the percent change from one year to the next.
Let me detour a little to talk about other important factors in an appeal. First, realize that the appeals board are not experts in property valuations. Here in my city, the appeals board is the city council. I assume this is the case in most cities. City councilmen are not only not experts in property valuations, they’re not even full-time city employees. They meet periodically, usually in the evening, to hold meetings and engage in city business. Because they’re not experts, they defer heavily to the experts they employ. This means they defer to the Assessor. If you go in without a good argument, and without doing your homework, you’re very likely to lose your appeal.
This was something we learned our first time. However, we also picked up on what was going on pretty quickly, and managed to pivot very quickly. We went in simply wondering why the valuation was so aggressive. In the 13 years we had the previous house, we saw very little movement in the assessed value of our house. When it was clear that simply pushing back on aggressive valuation was not going to be be a successful strategy, my wife quickly shifted to another tactic. Not only is our house on a small lake, but we learned that the lake itself was a potato farm a century ago. Several of the properties around ours were where the farmer dumped their garbage for decades. Our backyard is full of trash. It’s especially apparent this time of year, as the snow is melting, and stuff is being pushed up to the surface from the freeze-thaw cycle. Our children cannot run around barefoot in the backyard for fear they’ll cut their feet on broken glass that has worked up to the surface. My wife threw out several arguments about our house being worth less than the assessor claimed, but in the end the one successful argument was over this garbage issue. It was not disclosed by the sellers when we bought, but we argued that we would be obligated to disclose it when we sell.
We lost that appeal at the city level. However, we escalated it to the county level. We got a great assessor that year, who heard us out. He first re-ran the calculations, and dropped the valuation by $15,000 just with a re-evaluation. He also went to the added effort of contacting a contractor to get an estimate of how much it would cost to fix the garbage problem. The contractor said he would remove 2 feet of soil, backfill it with clean soil, and re-sod everything. In addition, his equipment would destroy the driveway, so his estimate included replacing the driveway. The term used is “cost-to-cure.” He found that the cost-to-cure was $50,000. Between that and the $15,000 that he already reduced our value by, we ended up with a huge win; reducing the value by $65,000. This was huge, as it cut our actual property tax by around $1,000/year.
The city assessor’s office panicked when they saw our win at the county. They sent their whole team out to investigate the garbage issue and talk with the neighbors. But they fought back, and have been clawing back the reduction ever since. We’ve had to appeal every year. The one year we let it go, thinking maybe the assessor would back off, we were wrong. (Though we did work that into our next appeal, and clawed back some of their increase.)
The next thing we learned is that upon notice of appeal, the Assessor will send out a packet that is basically their argument for their valuation. Key to this is the comparable properties that sold the previous year. In our case, we always get three “comps.” However, we’ve found that they’re always a scattershot of values. It seems the M.O. is to send one that is a little lower, one that’s about the same, and one that is much higher. The much higher “comp” is intended to send the message ‘look, we could have easily justified setting your value higher.’ I’ve never given much weight to the “comps.” However, one has come in very useful for our subsequent appeals; our next-door-neighbor’s house.
The reason our neighbor’s house has been useful is that the houses are so similar. The floor-plans are mirror images of each other. Their basement is finished differently than ours, but the main and upper level are nearly identical. The Assessor put it into our 2018 packet. It was improper for him to do so though, because it was not an open-market sale. Instead, the previous owners sold the house to their daughter and her family. It’s a violation of state standards and industry norms to use it as a “comp.” However, it’s been useful over the past couple years because I’ve argued that the Assessor thought it was so good in 2018 that he used it when it was improper to do so, yet does not carry through on subsequent valuations. As an example, our latest appeal (sent over just last week) was based entirely on this mis-match of values. Because the market is in decline, our proposed value was a reduction from last year of 0.6%. However, the neighbor’s reduction was 1.8%. That’s THREE TIMES the reduction they gave us. For two houses with the same floor plan, the same builder, on the same lake, with the same garbage issues. And I didn’t mention that where our houses differ, their house looks better on paper in every way. They have a pool (we don’t.) They have two fireplaces, we have one. They have a wet bar in the basement, we don’t. They have a slightly larger garage. Their deck area is larger (yes, the assessor looks at deck area.) So I’ve asked, ‘why is our value reduced less than theirs?’ Last year, I asked why their value increased less than ours.
This has been the winning argument for our appeals since getting past the garbage issue. In fact, when I sent the appeal over last week, I emailed the Assessor’s office asking to be added to the agenda, and attached my appeal as a letter. Ninety minutes later, I got a reply stating that they agree with the value I was asking for, and stated that if I replied with the magic words “We concur,” he’d right it up and make that our final value. Because it was the value I was asking for, there was no reason not to concur.
That brings me to another important part of an appeal; bring a proposed value of your own. This takes a little homework, but it doesn’t have to be hard. I mentioned my spreadsheet above; it’s one way to arrive at a number. Using the Assessor’s own data is always good, too. You don’t want to be stuck flat-footed at an appeals meeting with a board member asking, “What do you think your home should be valued at?” Or the follow-up question, “How did you arrive at that number?”
It’s a powerful argument to say, “My house should be valued at $435,200.” And as to why, “because my neighbor’s house is the same model, with the same lot size and square footage, and their home had a change of 0.45% this year. If mine had the same change, this is what the final value would be.”
Finally, it’s helpful to have an independent appeal at the county, if the option is available. I fear this option is no longer available to us, as last year our county made changes. Rather than assigning a county assessor to an appeal, the county board uses the same assessor that the city uses for the appeal. On one hand, this means appeals at the county level are much harder for us. On the other hand, there’s much less to lose by appealing to the county level. We had been told every year that the county could run the numbers and adjust upward, so there’s risk.
In Summary
- The Appeals board/City Council will defer to their expert, which is the Assessor. Be prepared.
- Cite defects in the property. The proper valuation should be the as-good value, minus the cost-to-cure.
- Watch value changes in similar properties. If the Assessor considers another property comparable one year, use that same property in your argument in subsequent years if it works in your favor.
- Bring your own number. Don’t just say “less than this.” Substantiate your number somehow.