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Are you Overpaying Real Estate Taxes?
Are you Overpaying Real Estate Taxes?
A message to tenants in need of free legal services: We regret that our public health emergency has resulted in so many tenants in need of free legal services. However, Shanahan & Voigt, LLC and Nicole L. Voigt, Esq. do not provide free legal services. If you are in need of free legal services, we recommend that you contact Legal Services of New Jersey and/or search for assistance through not-for-profit or similar programs in your area. In addition, you might find helpful information at the State of New Jersey, Department of Community Affairs, Landlord-Tenant Information Service.
Your real estate taxes are based upon the assessed value of your property. Every year, the municipal tax assessor determines the value of your property, with the annual real estate assessment. Your assessment includes two parts: the value of the land, and the value of the building, for a total assessed value. The assessment is always determined based upon the value of the real estate as of October 1st of the prior year. Your 2020 assessment will be the assessed value of the home as of October 1, 2019. 2020 real estate taxes will be computed based upon the assessed value. Each Notice of Assessment must be mailed to the owner of record postmarked by February 1st of each year.
It is important to understand that a real estate assessment is not considered the true market value of your property. It is not a reliable appraisal. Assessments become inaccurate with time, based upon changes in market conditions, deterioration or improvements to the property, or other changing factors that affect the value of real estate.
If your property is over-assessed, the tax assessor has determined that your property is worth more than true market value, and you are paying too much in real estate taxes.
If your property is under-assessed, the tax assessor has underestimated the true market value of your property, and you are paying too little in real estate taxes.
Every year, the New Jersey State Division of Taxation surveys actual sales of property in each municipality, compared to the assessed value of those properties. These ratios are averaged, creating a “Common Level Ratio” for each municipality. You may only appeal your assessment if the true market value of your property, compared to the assessment, is outside of a reasonable range of the municipality’s Common Level Ratio.
To determine if your property is outside of the reasonable range, you must provide documentation of at least three to five acceptable, comparable sales, or obtain a professional appraisal report, to determine the actual True Market Value of your property. Comparable sales cannot include foreclosure sales, or similar sales which are not bona fide, arm’s length property sales. You then calculate the ratio of the assessed value of your property, divided by your claimed True Market Value, to determine your property’s Estimated Property Ratio. [Assessment / True Market Value = Estimated Property Ratio].
If your Estimated Property Ratio is within +/- 15% of your municipality’s common level ratio, you will not qualify for an appeal. If your ratio exceeds 15% of your municipality’s common level, you qualify to have the assessment reduced to the true market value multiplied by the common level, and to a reduction in real estate taxes. If your ratio is less than 15% of the municipality’s common level, and you have appealed the municipality must increase your assessment, and you will pay more taxes.
Given the complexity, it is wise to contact an attorney, or an appraiser, for a determination of whether your True Market Value sufficiently exceeds the common level ratio for your municipality.
In addition, tax assessment appeals must be received on or before April 1st, with very limited exceptions. Late filing will not be accepted. Applications must be supported by credible evidence of the True Market Value. Most appeals are filed with the County Board of Taxation. Properties in excess of $1 million may be filed with the State Tax Court or with the County Board of Taxation. If the case is not settled, a hearing will be conducted.
BE ADVISED that these comments are not legal opinions and are not to be relied upon as legal advice. If you need legal advice, contact your county bar association; most of which have referral services.