Saturday, February 2, 2008
After 35 years in his five-bedroom Silver Spring house, Max Bronstein almost has a routine for this time of year.
Montgomery County sends a letter declaring the market value of his home. Sometimes it's up a bit, sometimes it's down. The retired businessman studies the letter, then files it away.
But this year was different. This time Bronstein's assessment jumped 30 percent, so for the first time he will appeal. "If I don't act now to do something about assessments, it's going to grab me in the future," he said.
During a housing slump that has driven down sales prices around the region, homeowners are hoping to see the drop reflected in the property tax assessments that local jurisdictions have begun distributing. This is prompting some homeowners to adopt new strategies and question their assessments.
In Maryland, assessments are rotated among neighborhoods every three years, so those receiving notices this year have not been assessed since 2004. The lag time means some residents will see an increase in their assessments despite a recent drop in local home prices. This year, the state issued assessments to 728,185 homeowners, who will see an average increase of about 33 percent. Meanwhile, in other parts of the Washington region, assessments may not be declining as quickly as some homeowners expect.
When house prices were rising faster than assessments, homeowners rarely fought them, said John McIlwain, a senior fellow at the Urban Land Institute. But, now, with prices falling faster than assessments in some communities, that could change, he said. "This is a new situation. We may see far more [appeals] ahead of us."
During the last housing slump in the early '90s, the proportion of assessments appealed in Maryland rose to more than 10 percent, double the rate during boom times.
Maryland will phase in Bronstein's new assessment over three years, increasing it to $427,323 this year, then to $467,086 next year and $506,850 in 2010. "Currently the housing prices have slumped dramatically in the last six months, and that isn't reflected," he said. "It's excessively high."
Local real estate agents have told him that it would be tough to sell his home for that much, he said. "We still have our original harvest-gold electric range," he said. "The house has had virtually no improvements."
A property tax assessment is an estimate of property value based on the value of similar homes nearby. It is an estimate of how much the local government thinks the home would sell for if the owner is not under distress or in a hurry to sell. Local tax assessors sometimes survey neighborhoods and track permits for renovations to determine the market value of properties in a neighborhood. Assessments are unrelated to appraisals, which are conducted for mortgage lenders.
In Maryland, for the first time, homeowners have also received an application for their homestead exemption along with their property tax assessment. They must return the application to document that their home is their principal residence and not a vacation or rental property. The homestead-exemption qualifies homeowners for a cap on property tax increases.
About 43 percent of affected homeowners have returned the application, and the rest will receive additional reminders, said C. John Sullivan, director of the Maryland Department of Assessments and Taxation. "Since they didn't apply in the past, many people weren't even aware they received" the exemption," he said.