A Home’s Worth? Appealing a DC Property Tax Assessment

by Amanda Abrams

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This article was originally published in March 2011, but we are re-publishing it for those DC homeowners who wish to appeal the property tax assessments that will arrive in their mailboxes this week.

Last March, Molly Scott and her husband Kevin Caldwell opened a piece of mail from the DC Office of Tax and Revenue to an unwelcome surprise. The city had assessed their Bloomingdale row house condo at $65,000 more than it had been worth the year before — a mistake that could potentially cost them thousands of dollars in property taxes.

Sound familiar? Earlier this month, an annual tradition replayed itself in households all over the District: homeowners greeted their proposed 2012 home assessments with various cries of happiness, satisfaction, or, frequently, indignation. The assessments, which are the city’s attempt to assign value to real property in order to levy the appropriate taxes, are often downright inscrutable: it’s not uncommon for one home’s assessment to go down while a comparable dwelling several blocks away winds up increasing in value.

Efforts by the Office of Tax and Revenue (OTR) to determine a home’s value are, apparently, almost as complex as Google’s storied algorithms. The agency plugs information garnered from sales data, construction permits, field visits, and existing land values into a “multiple regression analysis” to figure out the house’s value, factoring in everything from the building’s size, quality, location, and construction materials to extras like a back porch, a new bathroom, or a finished basement.

“Dozens of different characteristics are analyzed in this process, and factors and rates for each are developed to calculate the value of the buildings,” OTR spokesperson Natalie Wilson relayed via email. Still, the average citizen may never grasp exactly why their house’s value increased by five percent while their neighbor’s went down by two percent.

But luckily, for those homeowners whose assessment seems egregiously high, DC has an appeals process that’s somewhat streamlined and relatively effective. The red tape isn’t terrible, and roughly one in five appeals results in a lowered assessment, according to OTR. The key, though, for any homeowner determined to try it, is persistence, as the process includes three different stages and can take months from start to finish (the deadline for the first step is April 1st).

Scott and Caldwell can testify to the need for patience and persistence. In fact, last year wasn’t the first time they’d had a dispute over their property assessment. The year before, the pair had just gotten their home reappraised as part of refinancing their mortgage when they received the assessment notice, which put the home’s value $100,000 higher than the appraisal.

(Note: The terms “appraisal” and “assessment” are often confused: an appraisal is conducted by a private professional to determine a home’s market value, while an assessment is done by a municipality in order to levy taxes on the property. The two figures are often close, but are not usually the same.)

Scott, 34 and a landscape architect, explained that if the bank hadn’t required a reappraisal she and her husband wouldn’t have known the discrepancy was so large. She and Caldwell, a 41-year-old researcher, bought their condo in 2006, at the top of an overheated real estate market, so they weren’t surprised that the value had gone down three years later. But it appeared that OTR saw things differently.

Scott and Caldwell’s first step in appealing was to follow the directions at the bottom of the assessment letter, which directed them to fill out and send in a form outlining their case, also known as a first-level appeal. Weeks later, they received notice that they had lost, but were given the opportunity for a second-level appeal, which is a hearing with DC’s Board of Real Property Assessments and Appeals, an 18-member commission composed of private real estate professionals.

The couple hadn’t submitted any attachments on their first-level effort, but Caldwell brought the appraisal documents with him to the hearing, and subsequently won the case. “The [adjusted] assessment was still $50,000 more [than the appraisal], but they reduced it to the previous year’s level,” explained Scott.

Fast forward to March 2010 when Scott and Caldwell’s assessment was, once again, way up. So, the couple went through the appeals process again. This time, though, they lost both first and second-level appeals. “We made a mistake,” said Scott, explaining that they supplied sales data for comparable homes, but OTR deemed the comps old, and they weren’t all from Bloomingdale.

That left a final option: a third-level appeal, which is a hearing through the DC Superior Court. This time, Scott and Caldwell got serious, contacting neighborhood real estate agents to gain up-to-date sales prices on nearby homes, and combing OTR’s online real property database to find assessment numbers for comparable Bloomingdale homes. In this case, “comparable” was crucial, as the couple’s condo, a four-bedroom unit that comprises the upper levels of a row house, isn’t common in the neighborhood. In fact, Scott and Caldwell thought the assessor’s unfamiliarity with the unit might be part of the reason it was being assessed so high.

The hearing included the assessor plus two arbitrators. “We presented our case and [the assessor] presented his,” remembered Scott. “We said that we didn’t know where they were getting their numbers from; based on the sales we’d seen in the neighborhood, you could buy an entire house for what they were assessing our condo at.”

The arbitrators seemed sympathetic to the couple and ruled in their favor, reducing the assessment to the previous year’s adjusted figure. Scott and Caldwell received the decision by mail just a few days later. By then, it was the end of November, more than eight months after they’d begun the process.

Homeowners combating a way-too-high assessment should first make sure all the details about the home listed in the assessment letter are correct. After that, including a professional appraisal or timely comps on nearby home sales in the appeal is probably the best way to proceed. Scott added that a supportive community can provide a real boost, too; a neighborhood listserv can be a vehicle for soliciting advice and resources, and an active ANC commissioner might be able to help if the process gets stuck.

At this point, she and Caldwell are becoming veterans: their new assessment for the 2012 fiscal year, which they received a couple weeks ago, was once again roughly $65,000 higher than the prior year’s figure.

The two, who are planning once again to appeal the assessment, say they have no idea why OTR continues to over-value their house without taking note of the previous years’ adjustments. “But this year, I will be asking,” said Caldwell. His wife added that they plan to contact their councilmember about the problem, particularly if they have to go through all three levels of appeal again. OTR did not return requests for comment on the case.

Visit the Real Property Assessment Appeals and FAQ sections of OTR’s website for more information on the appeals process.

See other articles related to: tax assessments, editors choice, dclofts

This article originally published at http://dc.urbanturf.com/articles/blog/a_homes_worth_appealing_dcs_property_tax_assessment/3167

10 Comments

  1. David Bediz said at 4:38 pm on Thursday March 17, 2011:

    Ugh, what an ordeal! And how frustrating to find the same thing happen the next year. When I appealed mine, I never heard a response, but luckily I did see a $55,000 reduction in the value for the next year. DC is getting better but still has a little ways to go.

  1. lex said at 8:07 am on Friday March 18, 2011:

    two things:

    1. tax on $65,000 is about $565. for what it’s worth.

    2. OTR probably screws this up so frequently because they probably don’t put last years assessment in their “multiple regression analysis.” if they did every house on h street would still be valued at around 30K. they put in “four bedroom” and “Bloomingdale” and the computer sends back an assessment of $$$.

  1. JT said at 11:04 am on Friday March 18, 2011:

    Having just closed on a house in Cap Hill, I saw the 2012 tax assessment at almost $200k higher than the purchase price.  I sent in a first level appeal with the HUD-1, but then discovered DC put in place a slightly different process for new home owner appeals.  Should I re-submit under the new owner process?

  1. John said at 12:31 pm on Friday March 18, 2011:

    Can anyone steer me to the comparable website for Montgomery County?  Our MD home was valued at over $100k above a recent appraisal of our home (done for refi).  Anyone out there with similar experiences in Mo.Co., MD?

  1. Wes Grooms said at 4:04 pm on Saturday March 19, 2011:

    Good point, lex.  An analysis of the actual cost of the assessment vs. the value of ones time should be conducted to ensure the effort is worthwhile.

  1. stephanie said at 12:18 pm on Tuesday March 22, 2011:

    John- Maryland assessments are done through the state every three years, with the state divided into thirds and revaluation being rotated through each third.  This method of valuation means that the assessments tend to lag behind the market.  The refinance appraisal will be much more current, generally with sales comps that occurred in the last 30 to 90 days. There is an appeal process in place, if you go to the state’s taxation department website, you should be able to find instructions and forms for an appeal of assessment.

  1. LizinDC said at 9:19 pm on Monday July 4, 2011:

    Does it matter, on a second-level appeal of your DC assessment, whether you request an in-person appearance before the board? I guess it’s worth the time off work to make the best case I can…

    I am appealing my assessment based on DC ST § 47-820.02, which says that housing with affordability covenants on it should only have the assessment go up by area CPI. There doesn’t really seem to be a space to check for this under “Basis of Appeal” on the form…

  1. 11luke said at 1:04 pm on Wednesday March 5, 2014:

    We’re in the exact same boat.  Condo owners in Bloomingdale are targeted for some reason.  What makes me so mad is that only condos in Bloomingdale are “marked to market”, ie, they look at comps and go with the highest possible number that isn’t laughable.  Developers who scoop up the houses and sit on them (before they turn them into condos) never have their assessments raised from year to year, probably because its harder to value the fixer uppers in various stages of disrepair.  But if my condo is going up the maximum amount each year, shouldn’t other types of properties be appreciating by similar amounts as well?  Apparently not. And I suspect this is part of a concerted effort by the DC govt to “soak the newcomers” (who were likely priced out of the rowhouse market) and are just starting out.  I appealed my assessment at both levels last year and lost both. This town…

  1. SB said at 9:13 am on Tuesday March 11, 2014:

    If you appeal your property assessment, is there anyway that the new assessment could be higher than the original one?

  1. Capital Market Appraisal said at 11:35 am on Tuesday July 1, 2014:

    Well researched and informative article, I hope people get a chance to read it.  As lex pointed out in the comments a $65,000 discrepancy would amount to a $552 tax increase/decrease—which is calculated by taking your ‘property’s assessed value and dividing it by 100 then multiplying by 0.85 (assessed dollar value / 100 x 0.85 = annual DC real property tax).

    Having an appraisal that shows your home’s value is less than its assessed vale is one of the most powerful pieces of evidence you can bring to the appeal process; unfortunately, appraisals costs money and there is no guarantee the appraisal will be lower than your property’s assessed value.  Our practice charges anywhere from $240 to $490 for most residential property appraisals.

    In this article’s example, ordering an appraisal would cost at least half of the potential tax savings, so deciding on whether to purchase an appraisal requires some subjective cost benefit analysis.  The higher the potential assessment discrepancy the smaller the relative cost of ordering an appraisal.

    Regulation prohibits appraisers from providing an opinion of property value without completing the full analysis required of an appraisal; however, we can (and would be happy to) provide you with a range for what a specific property type sold for in a given neighborhood over the prior 12 months—just give us a call or send us an email and mention this article.

    One thing not discussed in this article that we sometimes see, is a property that has been assessed for higher than it’s sale price in the very same year for which it was sold.  In other words, say you just bought your condo in January for $400,000 but three months later come tax time you receive a letter in the mail informing you that your condo’s assessed value is $475,000. 

    Remember the first line of the ‘Administrative Review Application’ from the top of the article—it reads, “The Real Property Tax Administration (RPTA) strives to assess property at 100% of estimated market value.  Estimated market value is defined as the most probable price that a buyer would pay a willing seller on the open market”. 

    Assuming your home constitutes a ‘fair market’ sales—most are—there is no better evidence for the estimated market value than the actual market value.  That’s not to say your homes’ value hasn’t changed in the months since it was purchased, but generally speaking, the closer the contract date on your property purchase to the March 31st tax deadline, the better your case.

    Lastly, make sure you are collecting your ‘homestead deduction’ if you’re eligible—it’s the first thing every homeowner in the District should check for concerning his or her tax bill in my opinion.  For the most part, you’re eligible for a homestead deduction if your home is your primary residence, and the deduction reduces your property’s assessed value by $70,200 (that’s $596 net tax savings after the ‘/100 x 0.08’ tax rate is applied). 

    Also if you’re over 65 and own at least 50% of your primary residence you are probably eligible for a senior citizen deduction which reduces your tax bill by 50% (getting older has it’s benefits☺). 

    If you’d like to know more about homestead or senior citizen deductions visit http://otr.cfo.dc.gov/page/homesteadsenior-citizen-deduction, the process is fairly straightforward.

    For anyone interested our company publishes original market data on DC neighborhood trends at our website http://www.capitalmarketappraisal.com under ‘market research’ — and it’s free.

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