Wednesday, August 31, 2011


It's been a while since I posted, but thought it worthwhile to share my experience with property tax reassessment for our renovation, in the hopes that someone will find it valuable. We live in Santa Clara County, so what I'm about to say may not apply in other counties (and certainly not in other states!).

As those who live in California know, Proposition 13 was passed a couple of decades ago because property values were rising so fast that long-time homeowners were driven out of their homes because they weren't able to afford to pay for the increased tax assessment that came out of the rising home values. They weren't trying to sell their houses necessarily; only to live there. Prop. 13 changed the law so that assessments could only go up a small amount each year as long as the ownership of the property didn't change. Once a house was sold, it would get reassessed for the new owners at the new property value, and taxes would go up to what they "should" be. In years following, they'd creep up at the rate determined by Prop 13 until the next change of ownership occurred.

When a renovation is done, some part of the property can be reassessed. Going into our remodel, my understanding was that the property would be reassessed for the value of the new square footage, that is, the parts that we added on to the house. I also understood that the parts that had previously existed but were renovated would not get reassessed.

Our remodel finished around the time the economy tanked and the housing market plummeted. As a result, the assessors' office was swamped dealing with people who wanted their property taxes decreased, and it took them over a year and a half to reassess our house. Upon reassessment, we were shocked to discover that the value of the structure had almost doubled, especially given that we'd only added 750 square feet to a 3200 square foot house. It turned out that they had reassessed every square inch we had touched in the remodel, rather than just the new addition.

Our remodel finished in October 2007, and I had the assessor out to the house in the summer of 2009. I'd prepare a detailed explanation of repairs and other deferred maintenance we'd done in each part of the house we touched. I also gave him a spreadsheet of calculations on which I based my suggested lower assessment, based purely on the new square footage. He left sounding somewhat unconvinced. Several e-mail exchanges later and we were unable to come to a resolution, so I filed an appeal in fall 2009. In the meantime, we wound up having to pay an escape assessment for 2007-2008 based on their proposed value, a supplemental assessment for 2008-2009, and our property tax bill (new! higher payment!) for 2009-2010. It was a whopper! But pay it we did, as we had no choice if we were to avoid penalties and interest.

In May of this year, almost two years from the time we filed an appeal, we got notice of our hearing date in June. The case has to be heard within two years of filing an appeal or the county has to give you back the extra property tax you paid, and can't up the assessment until the case is heard.

Feeling woefully unprepared and not knowing how they'd calculated their view of the assessment, I contacted the senior assessor assigned to the case to try to get more information. He came out to the house, and I gave him the explanations and calculations I'd given to the appraiser two year's previous. I walked him through the house.

The visit yielded a couple of very useful pieces of information:

  • Although parts of a structure can be reassessed as "new" if they've been substantially rebuilt, the notion of what's "new" is based on standards of modern housing. Our house suffers from a few building trends from the era it was built: narrow hallways (not up to modern standard), and a low ceiling downstairs (since it was a finished basement). Our remodel did nothing to change those two aspects of the house, which was an argument in our favor.
  • The assessors' office is judged not on how much revenue they bring in, but how many cases they close by the deadline. At the time our appeal was to be heard, they had a ridiculous number of cases to close. Many of those cases were petitions for decreased valuation filed by people who had bought their houses shortly before the crash. Some were cases like ours. In other words, making it as easy as possible for the assessor to close our case was in our mutual best interest.

As the assessor left, he made an offhand remark that one part of that house (the part that really hadn't been remodeled) was completely out of the picture. So that was something!

A few days later, he e-mailed me to tell me that he was going to recommend for a reassessment based solely on the new square footage. Yay! He simply needed cost information. Although assessment should be about "value" and not cost, I was happy to comply. I prepared a spreadsheet with the costs related to just the new square footage, which included the amount apportioned to the new square footage only. In other words, if I paid $X for new windows, I estimated the amount that was attributable to the new square footage, since some of the new windows were for the existing structure. Amazingly the cost amount came out to what I'd originally asked our reassessment to be. I swear I did not dry lab this!

I sent it off to him, and then got a note a few days later saying that he was going to recommend that the assessment be changed to that amount. It wouldn't be final until the appeals board met, however. The appeals board met last week, and we got our official notification this week that our house has been reassessed. So now it's official! We'll get our refund check for the excess taxes in 4-6 months. I hope it will include interest and penalties!

The lessons for others who are asking for a reduction in their assessment is:

  • Do your homework. Prepare a set of written arguments that outlines why the assessment should be what you think it should be.
  • Do the math. Prepare a detailed spreadsheet with calculations if necessary. Include plans if it supports your argument.
  • Be persistent and don't give up.
  • Do as much of the work as you can for them, to help them help you. They have a ridiculously heavy caseload, and the less work they have to do, the more likely it is that you'll get what you want.

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