By JAIMIE JULIA WINTERS
The April 1 deadline to file a tax appeal on the value of a home and property is approaching, but homeowners might have a harder time this year winning appeals due to a rise in housing prices.
In May of last year, Richard Stanton of Stanton Co. said the median sale price in Montclair was $799,500, up from $679,000 in April 2019. Two reasons are cited for the increase in price: City dwellers sought housing in the suburbs as the pandemic raged on, while housing inventory was down. By year’s end the median sales price increased by 16.1 percent in Essex County, while inventory dropped by 5.1 percent, according to New Jersey Realtors.
This matters because a successful tax appeal is based on sale prices prior to October 2020, going back about a year.
Montclair homeowners should have started receiving their property assessments on postcards mailed out by the township assessor’s office this week.
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By New Jersey law, homeowners cannot appeal property taxes, but can appeal their property assessments, which in combination with tax rates determine how much their tax bills are. A successful appeal proves the assessed value of a home is unreasonable compared to the true market value standard.
To do this homeowners must present recent sales, not assessments or taxes on homes. An appeal assessment based on comparable sales could result in lowering property taxes, explains Daniel Pollak, an attorney who conducts real estate tax appeals at the Brach Eichler law firm.
But, Pollak warns, homeowners need to do their homework and only appeal if they can prove they are assessed too high. Just as a successful appeal could result in lowering your assessment and in turn your taxes, it could also result in an under-assessed house being reassessed higher, thereby increasing taxes.
He suggested a formula for homeowners to use to determine if their tax appeal would have merit. If a homeowner’s property is assessed at $550,000 and the appealer could locate three sales from last year similar to their home that sold for about $500,000, they would take that price and multiply it by the ratio of assessed value to true value in Montclair, which is 88.05 percent. If you multiply that rate by $500,000, your assessment should be $440,000, and the homeowner can argue their property is assessed higher than it should be.
While homeowners file based on comparable sales, commercial property owners can use loss of income as an argument for appeal, which could mean more successful commercial tax appeals for landlords who experienced loss of rent, no rent increases and vacancies due to the pandemic, Pollak said.
In 2017, Montclair conducted a revaluation aimed at doing three things: updating property assessments to their true market values, redistributing the tax burden equally and limiting the number of tax appeals. In 2017, prior to a town-wide reassessment, the tax rate was 3.734.
This year’s municipal tax rate is 3.179, up slightly from 3.146 in 2019.
Since the assessment, more homeowners are filing tax appeals. Last year, with a July 1 deadline extension due to the pandemic, 129 tax appeals were filed with the county, compared to 101 in 2019. However after the revaluation in 2018, there were 166.
HOW TO FILE
- Get the packet
Begin by downloading a packet on the Essex County Tax Board Web site. A Comparable Sales Form/SR-1A for listing your comparable homes is available on the site as well. All municipal taxes, sewer and water bills must be up to date in order to file an appeal.
- Get your comps
You will need to come up with at least three comparable sales, or comps of recently sold properties, that are nearby and similar enough to your property to be used as a basis of comparison for assessed value. These sales must have occurred before Oct. 1, 2020. Comps can be accessed on real estate sites such as Zillow. You can do a search by town and price range. The comps should have comparable characteristics to your home, including similar square footage, similar lot size or acreage; should be in the same area of your property; should have the same zoning use, similar age, number of bathrooms and bedrooms and style of structure.
- Do the comps line up with your home?
Once the comps have been found, you need to get the assessment records on the comp properties and your own. Those records are accessible at Monmouth County Property Tax Search Site (it includes data for the whole state, and unlike some other tax search sites only requires an address) and also through the local tax office, using the lot and block number. The property card will list the number of bedrooms and bathrooms, lot size, garage, square footage of the home, year built and all recent transactions on the home such as sales, transfers and reassessments and those dates.
According to the county board of taxation, a good comparable sale should be as close as possible to the property you are appealing, sold recently but prior to Oct. 1 of the pre-tax year, and been on the real estate market for a “reasonable length of time” so that the market is determining its value — meaning both the buyer and seller were motivated and neither party was acting under duress.
- Watch for unusable comps
The property cards will also list a code under sales that will appear as “NU#.” If there is a number next to NU (“Not Usable”), the tax assessor will argue that the home cannot be used because it is an unusable comp. State statute lists 33 reasons why a comp is unusable as evidence in a tax appeal. Those codes are listed in the tax appeal packet on Essex County’s website. Short sales or sales between family members are examples of non-usable sales.
- Gather copies of deeds
Deeds should also be included as evidence with the comps. Furthermore, some non-usable comps may be argued by accessing the deed to the property and by calling the real estate agent who handled the sale. The deed and the real estate agent could counter that the sale was not a short sale or “made under duress.” Deeds can be requested from the county tax assessor’s office.
- A picture is worth a thousand words
Also include photos of your property and the comps, either taken by you or retrieved from a real estate site such as Zillow.
- Time to file
Once you have all your paperwork and forms together, you will need seven copies. File the appeal with the town clerk (one copy), tax assessor (one copy) and the county (five copies). Include a check for filing fees of $50 to $150 based on value with the county forms.
- What’s next?
A tax board has three months from the date of the filing deadline to hear and determine all appeals, and issue a judgment.
The municipal tax assessor could either counter with an offer lowering your assessment or set a hearing date to argue the appeal using his or her comps. A hearing can be avoided if a settlement between the attorney, assessor and taxpayer is reached in advance, and the board approves the stipulations.
- Preparing for the hearing
When a hearing date is set, the township will notify you of the date by letter and include the comps the tax assessor will use to counter your comps. Retrieve the property cards of the town’s comps. You could argue that the assessor’s comps are different type properties, are not in your neighborhood, have more bedrooms or could be unusable due to the codes.