So many people receive their tax assessment cards and
see an assessment that is far lower than the market value of their properties, so
they don’t consider an appeal. But what many don’t know is that every
municipality in New Jersey has an ‘Equalization Ratio’ that must be applied to
determine what the tax assessor actually
believes your property to be worth, often resulting in a substantially different
number than appears on your tax card.
So, for example, even if your total assessed value
(land + improvements) for 2017 is $250,000, but you think your house is worth $280,000
based on comparable sales and/or an appraisal, don’t be so quick to decide you
are ineligible for an appeal!
HERE IS HOW IT WORKS:
STEP 1: Determine your Fair
Market Value.
While the actual deadline for filing an appeal is April
1 (in most counties), now is a great time to begin your analysis being that the market value of
your home as of this month is the basis
for your tax appeal.
If your home actually sold during the previous year,
that makes things easy. We call those appeals “sales of the subject,” the sales
price being pretty convincing evidence of the true market value of your
property. If not, to determine your fair market value, check out recent arms-length
sales in your neighborhood that sold as close to October 1 of 2015 through October
1, 2016 as you can find. Each town codes sales as ‘usable’ or ‘non-usable’ based
on the details of the transaction, and publishes them online, so seeking that
information is very helpful, as is consulting with a local realtor. Obtaining
an appraisal is another option, which can then be used as evidence at your
appeal hearing along with expert testimony.
Example: You would have a good basis to believe that
your property is worth $280,000 if four or five houses in your town of the same
style, built around the same time, with comparable upgrades, features and
configuration, situated on similar properties to yours sold for around that
amount.
STEP 2: Determine your
Municipality’s Equalization Ratio.
Each year the Department of Treasury publishes a list
of ratios for New Jersey municipalities. Those ratios, as applied to your
assessment will tell you what your municipal tax assessor believes your true
market value was as of the prior October 1 (which is the valuation date for tax
appeals).
Example:
§
As noted above, your assessment is $250,000.
§
Your town has an Equalization Ratio of 72.63%.
§
That means that the assessor believes your
property is worth $344,211.
You just may be the perfect candidate for an
appeal!
STEP 3: Do You Fall Within the
Chapter 123 Corridor?
Unfortunate for us, the New Jersey Legislature
imposed Chapter 123 regulations, commonly known as the 15% ‘corridor’ rule. An
assessor can be off by up to 15%, and their assessment will still stand. It is
interesting to note that there is a pilot program currently in place in some
New Jersey counties which, if a success, among other advancements will do away
with the corridor. But for now, we have to take it into consideration when
analyzing our likelihood of prevailing in a tax appeal.
To determine whether your property falls within the
corridor, you would add 15 percent to the Equalization Ratio to find the ‘Upper
Limit’ (a table of Upper Limits can also be found online). Even if your equalized
value is higher than your true market value, if it falls within the corridor,
you are out of luck for this year.
Examples:
VIABLE APPEAL:
·
As noted above, your town’s Equalization Ratio
for 2017 is 72.63%.
·
The Upper Limit ratio is thus 87.1%.
·
When you divide your assessment ($250,000) by what you believe to be the
market value of your property ($280,000), you arrive at 89.3%.
89.3% being higher than the upper limit, you
have a good appeal!
UNLIKELY TO SUCCEED:
·
Same facts as for the viable appeal, but here,
you have determined that your market value is $300,000.
·
When you divide your assessment ($250,000) by what you believe to be the
market value of your property ($300,000), you arrive at 83.3%.
While the $300,000 is still less than the $344,211
equalized value, and by quite a bit, an appeal would nonetheless be unlikely to
succeed because 83.3% is less than the Upper Limit, and thus within the
corridor. Now, this doesn’t mean you couldn’t possibly settle with the assessor
and knock off a few bucks, but the tax board would not lower your assessment if
you did proceed to a hearing.
STEP 4: Speak to an Attorney.
After completing Steps 1-3, if you find that you may
have a good basis for an appeal, contact an attorney who is experienced in
filing and prosecuting tax appeals to review your case. Getting a head start
can be useful so that your attorney has the option of calling to negotiate with
the tax assessor before the bulk of your town’s appeals start flooding in.
My firm has handled thousands of appeals, so I am
happy to answer any questions, or if you wish to discuss the possibility of
filing a 2017 tax appeal, please feel free contact me. Best of luck!
