By Tomoeh Murakami Tse
Washington Post Staff Writer
Saturday, February 4, 2006

Just as Sara and Erik Franklin were getting over the price of houses inside the Beltway, something arrived in the mail at their North Arlington home that gave them a new dose of sticker shock.

Although the couple had a fixed-rate mortgage on their first home, the letter from their lender informed them that the monthly payment had gone up by about $100.

"I almost had a heart attack," said Sara Franklin, 34. "I said, what is this? Why did my payment go up? I called them up. I was livid."

The letter was her introduction to a downside of the thriving real estate market: Assessments go up. So do property taxes.

The Franklins paid $320,000 for their 72-year-old Cape Cod in 2000, about 15 percent more than they had hoped to spend. But the house is worth a lot more now. According to the Arlington County Department of Real Estate Assessments, the value has almost tripled in six years. Consequently, the Franklins' annual property tax, which they pay along with their mortgage, rose to $5,052 last year from $2,395 in 2000. "I was kind of naive. It took me a while to put the two things together," she said.

The Franklins, who have two young children, are hardly the only ones stretching to pay larger-than-expected tax bills. As local governments mail out assessments after another booming real estate year, many people are experiencing the double-barreled sticker shock of pricier homes and higher property taxes.

In Arlington County, for example, which sent 2006 property assessment notices last month, the average home value went up about 18 percent from the year before. In Maryland, which assesses a third of properties every year, home values went up by an average of 67 percent from three years earlier.

Those in other jurisdictions can expect significant increases, too, because the real estate market broke numerous records in 2005, despite the cool-off in the latter part of the year.

Higher assessments, of course, are a measure of the handsome nest eggs homeowners have built up in recent years. But more immediately, soaring values mean extra money out of pocket for those who don't plan on cashing in anytime soon. And that, after years of double-digit gains in housing prices, has altered the way many homeowners live and spend their money -- from young couples who scrutinize prices at the shopping mall to retirees who share their homes with their children.

The Franklins say they can afford the increase, although it has certainly pinched them in other areas. Sara, a part-time events and wedding planner, thinks twice before she buys a new bag or a pair of shoes. And Erik, 33, a sales engineer for a software company, limits their visits to the neighborhood steakhouse. That's for special occasions now.

And although they are "bursting at the seams" in their 1,800-square-foot house, Erik said they have put off plans for an addition to accommodate a family sitting room for fear of even higher property taxes. The house "has been a great investment," Sara said. Still, "I wish it would kind of level out a little bit."

Assessments, unlike appraisals, are estimates of property values based on clusters of similar homes. Local governments base property taxes on these valuations. A huge increase in assessments need not automatically lead to a big jump in property taxes, but it frequently does.

The District caps increases in property taxes on primary residences at 10 percent a year. Maryland caps the increase in taxable assessments at 10 percent -- even less in some local jurisdictions. Virginia has no cap.

The actual amount residents pay is determined each year by elected officials, who set the rate at which the assessed properties are taxed. The rates are set after public hearings.

In the meantime, homeowners who believe their properties were overvalued can appeal. Typically, only a small portion of property owners appeal -- from 1 to 6 percent depending on the jurisdiction, according to several area assessors. Of those who appeal, a third succeed in getting their assessment changed.

Because of the mass-review nature of assessments, tax officials readily acknowledge that some may be inaccurate. Each jurisdiction has a review and appeal process, as well as a deadline, some of which are fast approaching.

Assessors encourage homeowners to carefully go over the information about their houses. Data that is used to determine the assessment may be wrong or outdated -- for example, the condition of a basement or the number of fireplaces.

Thomas Rice, the director of Arlington County's Department of Real Estate Assessments, recalled a time years ago when he reviewed a property with records indicating it had two bathrooms. The owner said there was only one. What Rice discovered upon entering the house was a toilet fixture plopped in the middle of a 1,000-square-foot basement.

"It was recorded as if it were a finished bathroom with walls and doors and tiles," Rice said, guessing that the property owner had intended to construct a bathroom there.

Tax office employees say a common question from callers is how the value of a home can go up so dramatically even when improvements haven't been made.

However, the physical condition of a house is only part of the equation. Assessments are based on fair market value, or what the house might fetch if it were to go up for sale.

If a homeowner decides to appeal an assessment, an emotional plea about how quickly the valuation has risen won't go very far. Instead, those who appeal should "arm themselves with as much sales information as they can," said Daniel Ercolani, an acting Montgomery County supervisor for Maryland's Department of Assessments and Taxation.

If similar homes in the neighborhood have recently sold for less than the disputed assessed value, a homeowner may have compelling evidence for a successful appeal, officials said.

Homeowners should also find out how assessors described their properties and point out any problems such as chronic mold or a leaky roof. Many jurisdictions provide online access to information used to calculate assessments, as well as recent neighborhood sales information. Local tax departments can also provide more information about the legal process necessary to appeal, which varies from place to place.

Marie Howland, professor of urban studies and planning at the University of Maryland, said higher taxes benefit residents in the form of better schools and more desirable communities in which to live and work.

"It's like everything in life. There's this tradeoff. If prices were falling, we'd be complaining," she said, noting that property taxes in the Washington area are relatively low compared with places such as New Jersey. "It's been a huge capital gain for people who own houses. . . . It's hard for me to muster up a lot of sympathy."

But it's a different story, Howland said, for homeowners on fixed incomes.

For instance, since he retired in 2000, George Sauer of Potomac has seen his property taxes increase by a third to $4,000, even with more than $1,000 of tax and homestead credits.

He and his wife, Wilma, who together receive about $22,000 annually in Social Security, have been paying their taxes with a credit card and money from retirement accounts, Sauer said.

"My wife pays the property taxes and I pay for the cars and medicines," said George, 71, a former systems analyst for a government contractor. "When September rolls around, she tries to save up for the taxes, but she tends to run a little short. . . . We've had to carry a balance from time to time."

To save money, the Sauers were considering selling the four-bedroom house where they have lived since 1964. However, the forces of the local real estate market produced an intergenerational solution. Their daughter's family was relocating to the area, and needed a place to live.

"They could afford to rent but they couldn't afford to buy," Sauer said. "So they moved in to help us with the costs, of which property taxes are a big chunk."

But even those at the prime of their earning capacity say they feel the bite.

In recent years, Michael and Marguerite Willner of Lorton have watched the value of the Georgian-style house they built in 1989 make a breathtaking rise. Since 2001, their property taxes have more than doubled, to $30,311.58 last year.

Marguerite said she sees the benefits her dollars will bring to her community. Her two teenage children attend the new South County Secondary School. One problem, she said, is that it is difficult to plan for the tax increases, particularly because her family's income fluctuates.

"It's just thrust upon you. My husband is an inventor. He works at home," said Willner, who wants assessment caps in Virginia and joined the Fairfax County Taxpayers Alliance a few years ago. "I think it's safe to say most people's incomes don't double."

Bill Helbig, 53, a commercial airplane pilot from Berryville in Clarke County, said his income has actually shrunk. His salary, he said, was cut by 25 percent because of financial problems at the airline where he works.

He and his wife were just two years into paying off their 30-year mortgage when they received a letter from the local tax office a few weeks ago. Their home, it said, was now worth $626,500. The house was assessed at $300,400 when the couple moved there in 2004.

Anticipating a substantial rise in property taxes, the mortgage company notified them that the monthly payment would go up by more than $300, Helbig said.

The news has forced the Helbigs, who have asked the county to review the assessment, to shift their short-term plans and reevaluate their long-term ones.

For the time being, they have put off replacing their 1994 Mazda van.

And although their house -- a bungalow with an open layout, stone fireplace and catwalk -- is where they had hoped to retire, Helbig said future is now uncertain. "I'm all for paying taxes . . . but you can't control the value of your house," he said. "It's blindsided a lot of people."