If you look really, really hard, you might find a silver lining in the darkest of clouds. When it comes to the gut-churning drop in home prices, the silver lining is the chance to reduce your property taxes. Maybe.
In most parts of the country, property taxes are used to support schools and local and county government. Since property, or real estate, tax is based on the property’s value multiplied by the tax rate, the tax should go down if the property’s value falls.
But it probably won’t go down automatically. Unless the home has sold recently, taxes are typically based on the latest assessment, and it’s common for years to go by between assessments. Tax authorities aren’t eager to reduce tax bills, so the homeowner has to take the initiative by filing an appeal.
Just because your property has lost 20% or 30% of its value in the past couple of years doesn’t guarantee an appeal will win you a tax cut. If your tax is based on an appraisal that’s seven or eight years out of date, your property could be worth more than its appraised value despite a recent drop. In that case, drawing the tax folks’ attention by filing an appeal could backfire.Instead of paying these taxes directly when they are due, once or twice a year, many people include part of the tax payment in their mortgage payment. Money builds up in an escrow account and the mortgage servicing company pays the tax. It’s easy, then, to lose track of how much you are paying, but it could well be thousands and thousands of dollars a year.
The first step is to find out how much. The annual statement from your mortgage company will say, but if you can dig up the actual tax bill it should also state your home’s appraised value.