Richard Landis bought a house in Anne Arundel County for $165,000 last spring, but the state - for tax purposes - values it at $268,000. The disparity isn't, so far as he can tell, because he got a screaming good deal. It's because the state last assessed his neighborhood two years ago, before prices really began to fall.
"It just makes you feel like, 'Lord, I'm being held up without a gun,' " said Landis, 68.
So he appealed, rather than wait another year for assessors to return to his Severn neighborhood.
Local real estate experts call it a little-known option, but more and more Marylanders are realizing that they don't have to wait for their turn in the three-year reassessment cycle to challenge the state's figures.
Such "petitions for review" jumped from fewer than 5,200 for the last tax year to more than 15,500 for the current one - especially from the recent buyers, second home owners and real estate investors who do not benefit from a tax break aimed at longer-term owner-occupants. Most Baltimore-area assessment offices are seeing similar numbers of petitions coming in now for the next tax year, which begins July 1; the deadline to file for a review is Jan. 1.
"We're sitting at about 1,200 residential petitions," said James W. Roesner, supervisor of assessments in Baltimore County. "Before this recession hit, we only got about 300 total. That would be a typical year before the bottom fell out of the real estate market, and at that time, most of those were commercial."
Baltimore-area home sale prices in November were 16 percent lower on average than they were two years ago, and some communities have seen much sharper drops. That has struck some firms as a business opportunity.
Dominion Properties, a Baltimore real estate investment company, has been appealing the assessments of so many of its rentals and rehab projects that it recently started a service to appeal other people's properties. Advantage Title Co. in Eldersburg opened Advantage Tax Appeals a year ago after many home-buying and refinancing clients asked about the process.
Barbara Floyd, who started the Glen Burnie-based Property Tax Reduction Specialists in 1991, an earlier down market, said business is definitely up.
"It's not trying to cheat the government of what they're legally entitled to, but there's no reason you should be paying more than your fair share," she said. "The assessment people will tell you that, too."
Some see national - and lasting - potential. Charlie Walsh founded the Seattle-based ValueAppeal this year to offer an online appeal-assistance service for $99. The firm covers five counties in three states so far, with plans to expand into other markets, including Baltimore, next year.
Walsh, who has a master's degree in real estate development from the Massachusetts Institute of Technology, said studies suggest that the mass-assessment process used by government agencies invariably misses the mark on a large chunk of properties, even when the market isn't rapidly changing.
"I don't blame them," he said. "It's just not feasible to do it any other way. But one of the things that's beautiful about real estate is that each individual property is unique."
Landis, a retired signalman for CSX, appealed because he doubts he could resell the small house he bought in April for the $165,000 he paid for it, let alone the $268,000 assessed value. It's being taxed on $242,000 of that amount this year, but an increase to the full amount is scheduled in July as part of the normal three-year phase-in process. That would mean a $250 increase over this year's tax bill, and $1,000 more than if the assessed value equaled his purchase price.
Landis said he's never appealed a property assessment before, "but I thought that was just too much."
He's appealing more for his son than for himself. Landis, who lives a few houses away from the newly purchased property, is in the process of transferring it to the state trooper, who wasn't in a position to buy when it hit the market. The next tax bill will be Dwayne Landis' to pay.
Jordan Takas, 32, who went to Advantage Tax Appeals to handle his petition, moved from one home in Canton to another this year and is trying to get the assessment on the first one lowered. He thinks he has a good argument: The assessed value is $454,000, but he got "no offers, no bites" when the property was on the market last summer for $5,000 less.
"The assessments in the city are somehow, in this horrible real estate market, going up," said Takas, a medical-device salesman.
Absent intervention, his taxable assessment will rise slightly in July as part of the phase-in process. He's especially interested in lowering the figure, and thus the tax bill, because he thinks it would help him sell. The annual property tax tab comes to about $10,000, which he figures is a turnoff for buyers.
Takas also expects to appeal the assessment on the home he moved to, about $250,000 above the price he paid.
Tim Rodgers, president of Hill & Co. Realtors in Baltimore, has seen many disparities like that. A Baltimore rowhouse, assessed at $520,000, that recently sold for $390,000. A Colonial in Reisterstown, assessed at $919,000, that sold for $650,000. A six-bedroom house with a three-car garage in Owings Mills, assessed at nearly $1.3 million, that sold for $745,000.
Like anyone else, new buyers can appeal by Jan. 1 to have their assessment reconsidered for next July. But those buying from January through June do not have to wait more than a year for relief: If they appeal within 60 days of purchase, the state will re-evaluate their assessment for July of that year rather than the next.
Rodgers says he's advising clients to appeal "the minute they buy."
Howard and Harford counties have fewer petitions this year than last, possibly because more homes have since been reassessed downward. "We're catching up to the true market," said Nancy Schmidbauer, assistant supervisor of assessments in Harford.
But the assessment offices in the city and the counties of Baltimore, Anne Arundel and Carroll are all seeing high numbers of petitions on par with this time last year.
That hasn't made life easy for assessors, coming as it does after budget cuts. "Our staff is down 20 percent from 2005," said Roesner, the Baltimore County supervisor.
Ben Frederick III, who owns rental units in the city and is president of the Property Owners Association of Greater Baltimore, has had a hard time getting hearings scheduled promptly and finds "a tremendous reluctance to revise assessments downward" when hearings do go forward.
But Jack BeVier of Dominion Properties, the city real estate investment firm, said assessors have been "very reasonable" when he's appealed properties. And that's happening a lot.
"Ninety percent of the houses we're buying, we're appealing," he said. "Generally, we're buying a property for 30 grand that's assessed for 80."
A successful appeal doesn't necessarily translate into a lower tax bill. Many homeowners aren't paying on their full assessment because the state caps the annual increases that owner-occupants see, said Henry Sikorski, state supervisor of assessments. To end up with a smaller bill, a property owner whose full assessment is $300,000 but whose taxes are calculated on $200,000 of that would have to get more than $100,000 shaved off in an appeal.
That's why many petitions come from real estate investors, who do not get the homestead tax break, and recent buyers.
"I would say at least 50 percent, maybe 80 percent, of the population is over-assessed," said Chris Breck, an owner of Advantage Tax Appeals. "But only a third of those can financially benefit from appealing."
He helped Nelli Zafman win an appeal on a Pikesville house she bought in May for about $300,000 less than the assessed value. The state agreed it was worth what Zafman and her husband paid, which should cut their annual taxes by about $3,000. She's happy about that, though she'll be happier once it takes effect.
"We are still waiting for the actual tax bill to be adjusted," said Zafman, a nurse practitioner. "When we purchased the house, it was a little bit of a strain for us. I purchased it with the expectation that the bill will go down and our escrow will be less than it is now. So I can't wait to actually see that."
How to appeal
Maryland reassesses properties once every three years, so one-third of state homeowners will be getting notices in the mail late this month or early January about their new assessments. They have up to 45 days to appeal.
But homeowners who are not due for reassessment for another year or two can appeal, too. It's called a "petition for review." The deadline is Jan. 1 of any year for reconsideration of the assessment - and thus the tax bill - in effect the following July 1. As in any assessment appeal, it's a good idea to offer details, such as sales information about comparable homes, that support a different value for your property.
You can request a hearing to make your case or simply ask the state to take another look at your assessment.
The state might not agree that your home's assessed value should be lowered, but it can't raise it based on your appeal. Commercial property owners, on the other hand, run the risk of getting a higher assessment after an appeal.
Petition information and forms: www.dat.state.md.us/sdatweb/appeal.html
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