How to Slash Your Property Taxes by Vincent Czaplyski In July of this past year, the owner of a 12-unit motel on Florida's east coast made a startling discovery: She had been paying nearly $4,000 more in property taxes than she should have been. And she'd been doing it each year since she purchased the property five years age. How did it happen? Initial construction plans calling for a 16-unit building were registered with the local planning board. The original owner later decided to go with a 12-unit building, but his plans were misplaced and the assessor's office used the initial plans as the basis for an assessment. This was an error that both the original owner and the present owner could have corrected when they received their assessment notice. Unfortunately, like the majority of taxpayers who assume their assessment is correct, they never made an effort to determine if their assessment was accurate and fair. To avoid an overpayment, you need to know if your assessment is correct. Then, if you determine that it is too high, you can appeal it. If you prepare your case carefully and provide valid supporting evidence, you are likely to receive a reduced assessment and a lower tax bill for your effort. An Opinion of Value The property tax is an ad valorem tax ("according to value") imposed on all non-exempt land buildings within a taxing jurisdiction. The amount you pay depends on the assessed value of your property on the official tax rolls. Your local tax assessor determines your property's assessed value. This assessed value is essentially an opinion based on the expertise of the assessor and the accuracy of data available to the assessor. At any point in the assessment process errors may occur that can affect your property's assessed value. These may be mechanical or descriptive errors, valuation errors or legal errors. Mechanical or Descriptive Errors Mechanical errors include mistakes in measurement, incorrect description, or clerical errors. These errors typically occur when the assessor uses incorrect dimensions for your land or building. Descriptive errors occur when the description of your property is inaccurate. The description may add non-existent features (e.g., a more expensive construction type) or it may fail to mention internal problems (e.g. inadequate insulation) that would reduce its resale value. Valuation Errors Assessors use three standard approaches for determining the value of a property. They are the market data approach, the cost approach, and the income approach. Because each approach examines different aspects of market value, the results may be quite different. It is up to the assessor to reconcile these differences. The idea behind the market data approach is that market pressures set the price for your property in the same way that they set the prices of comparable properties. The assessor determines the value of a property by comparing it to similar properties that have sold recently in the same area. The cost approach assumes that an informed buyer would pay no more for a building than the cost to build a similar improvement on land of comparable value. The income approach uses a mathematical formula relationship between the amount of net income a property produces annually and a capitalization rate derived for the property. This is used for income producing properties only. Each of these methods contains areas where potential errors can occur. For example, the data that the assessor uses for a particular approach may be inaccurate. Legal Errors Legal errors are those that violate state laws governing administration of the property tax. For example, the assessor may have failed to give official notice of a new assessment. Develop Your Own Opinion The first step is to develop your own opinion of your property's value and compare it to the assessed value. Use each of the three valuation approaches and compare results to the assessor's opinions. Next, contact your county assessor's office and gather information about appeal procedures. Find out when important tax calendar dates will occur and determine what kind of help the assessor's office provides to taxpayers. The appraiser will provide you with a written expert opinion that often is more detailed and complete than the assessor's own report. An experienced appraiser will have extensive knowledge of most hotels and motels in your area. Because appraisers must make impartial appraisals, they will charge you a flat fee instead of a percentage of any savings. Meet with the Assessor If you determine that your assessment is incorrect, schedule an appointment to discuss your opinion with the assessor. Assessors will often correct mistakes at an informal meeting. If you have a strong case, the assessor is likely to offer you a compromise. It is up to you to decide whether to accept or not. Be sure you get any agreed compromise in writing. If you can't get any satisfaction, your nest step is the property appraisal adjustment board. The Adjustment Board The property appraisal adjustment board is less formal than the courts and provides a medium for individuals to appeal their assessments without hiring a lawyer. Because you probably won't have more than 15 minutes to make your case, it is important that you present it as concisely and unemotionally as you can. If you lose at this point, your next appeal levels are those of the Circuit Court and the State Supreme Court; and you will need a lawyer specializing in property tax appeals. Regardless of the path you choose, contesting an incorrect tax assessment can save you hundreds or thousands of dollars each year you own you hotel or motel. That can go a long way in contributing to a better bottom line for your home or business property. -------------------------------------------------------------- Vincent Czaplyski is CEO of Hampshire Cove Marketing, Inc. and co-author of "The Homeowner's Property Tax Relief Kit." Subscribe to his free bimonthly newsletter full of powerful marketing tips at http://www.SolidNetGold.com.