Prop8

Is your home worth less today than when you bought it?

If the answer is yes, you probably purchased your home between late 2003 and mid 2007. We all know from the news that home prices have dropped significantly in California; some sources say as much as 60% in some areas of California.

There is no real effective way to ease the pain of a drop in the market value of your home, but there is some relief that can help you with the amount of property taxes you pay on your home.

Most everyone has heard of Proposition 13, the Jarvis Gann Initiative that passed into law in July of 1978. Prop. 13 helps limit our home’s value for property tax purposes to an increase of 2% per year. This is a wonderful tool and benefit when real estate values are growing at double digit rates, like from 2000 up until the current downturn in values. So what protection do we have when market values begin to fall below what we paid for our homes? Well, the Legislature after the passage of Prop. 13 created a means by which to deal with temporary downturns in the real estate market, the result was Proposition 8 (not to be confused with Prop. 8 of 2008). This Prop. 8 allows for a review of your property value due to a decline in value, it is referred to as an Application for Changed Assessment or commonly called an assessment appeal. This allows the assessor to adjust your property’s value downward until such time as the market rebounds.

Let’s look at an example of the benefits of a Prop.8 appeal. Let’s say you bought your home in 2004 for $700,000, by 2008 your assessed value for property tax purposes would have increased to approximately $750,000 (purchase price indexed by the 2%, per year compounded) this would make your annual property taxes (the basic 1% per Prop. 13) approximately $7,500.

If due to the current market conditions your home’s value has dropped to say $600,000, your assessed value would be higher than the market value ($600,000 vs. $750,000) and you could file a Prop. 8 appeal. If successful, you could save $1,500 a year in property taxes.

To estimate how much you could possibly reduce your property taxes, just remember each $100,000 of assessed value equals $1,000 in taxes.

Now how do you go about filing a Prop. 8 appeal?

This is a fairly simple and No cost procedure. The value you must estimate is the market value of your home on the lien date, which is January 1st of each year. For the current 2008-09 fiscal year (July 1, 2008 to June 30, 2009) the assessed value on your tax bill will be based upon the market value at January 1, 2008.

If the January 1, 2008 assessed value is more than the market value on that date, you may qualify for a reduction in value.

To file a Prop. 8 appeal you can either call the Clerk of the Board of Supervisors at (909) 387-3841 and ask to have an Application for Changed Assessment (appeal form) request more information here.

Once you have received or downloaded the form, you will need to be able to furnish certain information such as the name on your tax bill, the property address, the assessor’s parcel number. You will be required to complete the form by filling in Section 1. Applicant’s name (as it appears on your tax bill), Section 3. property identification information, this will be the assessor’s parcel number again from your tax bill and the address of the property, Section 4. Value, under column A. Value on Roll, put the assessor’s value from the tax bill, under column B. Applicant’s opinion of Value; put your opinion of the market value. Then go to box 6. and check A. Decline in Value, go to box 7. Written findings of Facts, check are not requested and under 8. Certification sign the application, check owner and be sure to date the form.

Now it is important that you make a copy for your file of the completed and signed form and mail it to the address on the form before the November 30, 2008 filing deadline.

Once the appeal is filed and received by the Assessment Appeals Board you will be notified in writing of the appeal application number and be given further instructions. Now be patient, the assessor’s office will likely have thousands of these type of appeals to review and resolve, so it can take many months to be completed. It is important that you pay your taxes on time in the interim and if you are successful in securing a reduction, you will be refunded any overpayment due to over-assessment.

Remember most all real estate slumps turn around in time, the Prop. 8 appeal must be filed each year as long as the values are down. The Prop. 8 decline in value is just away of saving you money until values rise back up. Hopefully this information will ease some of your concerns and lead to property tax savings.