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YOUR TAXES

A silver lining as property values fall

Some homeowners stand to save hundreds of dollars as their taxes are reassessed.

June 22, 2008|Scott J. Wilson | Times Staff Writer

So you bought a home near the top of the market, and ever since you've watched in pain as it has declined in value.

Congratulations.

Homeowners may view falling home values as only a negative, but there is a silver lining: the prospect of lower property taxes, which could save you hundreds of dollars a year.

Assessors in the five-county Los Angeles area are now in the process of cutting property taxes on more than half a million homes because of plunging home values. Notifications will go out this month and next to lucky homeowners.

Although savings will vary widely, the average annual property tax reduction in Los Angeles County is expected to be about $750. In Riverside County, it'll be around $1,200.

But don't start counting your money yet. Those tax breaks will go only to selected homeowners who bought their homes around the market's peak in 2005 and 2006. The Los Angeles County Assessor's office, for example, reviewed only properties purchased since July 1, 2004, and will be lowering taxes on 128,000 out of the 318,000 examined.

Assessors in Orange, Riverside, San Bernardino and Ventura counties reviewed sales since Jan. 1, 2004, and say they expect to reduce taxes on about two-thirds of those homes.

Homes bought before 2004 are not being automatically reviewed because of the way property values are set.

When a home is sold, the taxable value is set at the sale price. After that, it can rise no more than 2% a year.

Because the market value of most homes sold before 2004 increased far more than 2% annually in the first part of the decade, those properties are probably still worth more than their taxable value, even when the recent slump is considered.

But if you believe your home's taxable value is too high -- no matter when you bought it -- you can request a review from the county appraiser. And if that fails, you can file an appeal with county's assessment appeals board.

"We can make a mistake," said Orange County Appraiser Webster J. Guillory. "But if we do make a mistake, just share your information with us and we'll work it out together."

Property tax reductions due to falling home values were established by Proposition 8, which was approved by voters in November 1978 as an amendment to the tax-limiting Proposition 13, which passed in June of that year.

You can obtain an assessment review application -- usually called a "Proposition 8" or "Decline-in-Value" form -- from your county assessor's website, or call to request one. (In Orange County, the review filing period closed April 30, but Guillory said homeowners could still call to discuss their assessments.)

Although some businesses have contacted homeowners offering to fill out the application for a fee, assessors emphasize that people can do it themselves free.

To give your review the best chance, some counties suggest (but don't require) submitting comparable sales of similar homes in your neighborhood to justify your estimate of your home's value. You can usually get these from a real estate agent, as well as from websites such as Yahoo Real Estate, at realestate.yahoo.com/homevalues.

Note that the official assessed value is based on your home's value on Jan. 1, 2008, so it's best to find sales near that date. Sales after March 31 cannot, by law, be used for establishing home value.

You can also argue for a lower taxable value if your home has suffered more than $10,000 worth of damage from a fire or other disaster.

If you're not satisfied with your review, you can take your case to the assessment appeals board, a panel independent of the assessor's office. Assessment appeals can be filed beginning July 2, with a deadline of Sept. 15 in Orange County and Nov. 30 elsewhere.

In Los Angeles County, about 15% to 25% of appeals succeed, according to the assessor's office.

If you're fortunate enough to get a reduction, keep an eye on your property's assessment in years ahead, since the 2% cap on annual increases will not apply until home values rise enough to "catch up."

For example, a $500,000 home that drops in value by $80,000 may be reassessed at $420,000 and stay there as long as market values stay down. But if prices surge upward in, say, the fifth year, the home's taxable value could jump as high as $552,000, which is where it would have been with regular 2% annual increases.

In the situation above, the homeowner's annual property taxes would start at about $5,400, drop to $4,500, then leap up to about $6,000.

This year's batch of reassessments is the largest that county assessors have faced since the early 1990s, and has had some offices working nights and weekends.

"It's been a huge workload," Los Angeles County Assessor Rick Auerbach said.

In the early 1990s, Auerbach said, the county gave reductions to even more homes but did so largely by applying blanket reductions to certain areas. This time, the assessor's office was able to review each property individually with the help of computer programs that automatically identify comparable home sales.

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