Homes in the Villages at Bridlewood in Clayton County.

Many tax assessments - and bills - too low

For years thousands of metro Atlanta homeowners have been paying too much in property taxes because of inaccurate county property assessments.

But the latest in a series of groundbreaking Atlanta Journal-Constitution investigations of local tax assessments shows many homeowners are finally catching a break. Assessments are still inaccurate, the newspaper found. But with the real estate market rebounding after years of decline, typical assessments in most local counties are now too low – sometimes by as much as 12 percent to 16 percent.

That means many homeowners now are getting a tax break of hundreds of dollars because counties have undervalued their property.

Not every homeowner has benefited. Typical assessments in Clayton, Douglas and Rockdale counties remain too high compared to the sale prices of homes there, though they’re closer to where they should be than in the past, the newspaper found. And even in counties where typical assessments are too low, many properties remain overvalued.

The inaccurate assessments could haunt county governments. State law requires typical assessments to be within 10 percent of market value, and counties that don’t comply when state regulators perform their official analysis could be subject to financial penalties.

But for now many taxpayers are benefiting from tax assessments that are too low.

That’s little comfort to those who say counties were too slow to cut values as real estate prices plummeted. Sandra Skypek fought Rockdale County last year over the tax value of several rental homes. Though the county eventually reduced the values of those properties, she resents what she sees as its resistance to doing the right thing.

“This [appeal] process was a huge waste of my time and taxpayer money,” Skypek said.

Accuracy is critical

Property taxes fuel billions of dollars in local government spending on schools, libraries and other important services. Tax bills are based in part on the value of property, as determined by trends in the real estate sales.

The accuracy of those assessments is crucial to ensuring property owners pay their fair share of taxes, but not a penny more or less. That’s why for the last five years the AJC has checked the accuracy of tax values by analyzing hundreds of thousands of residential assessments and tens of thousands of sales in metro Atlanta counties.

Beginning in 2009, the newspaper found typical assessments were too high in Clayton, Cobb, DeKalb, Fulton and Gwinnett counties. As the real estate bubble burst, local assessors cut tax values by billions of dollars. But it wasn’t enough to keep up with plummeting home values, the newspaper found.

The AJC later expanded its investigation to 11 counties and found similar problems elsewhere in metro Atlanta. Last year, as the real estate market stabilized, the newspaper found tax values much closer to market value in most counties.

This year, with the market rebounding, the AJC’s findings were strikingly different. The newspaper compared the sale prices of properties that sold in the first three months of 2013 to their county tax values as of Jan. 1, 2013. (See “How We Got the Story” for detailed information on our analysis method).

Among the findings:

*The typical assessment in DeKalb County was 16 percent below market value, as determined by sale prices. Typical assessments were 12 percent below market value in Cherokee and Henry counties.

*Typical assessments were 5 percent to 10 percent below market value in Cobb, Fayette, Forsyth, Fulton and Gwinnett counties.

*The typical Clayton County assessment was nearly 20 percent too high. Assessments also were too high in Douglas [15 percent] and Rockdale [7 percent]. Still, assessments in those counties were much closer to market value than in the past. Last year, for example, the AJC found the typical Clayton assessment was 48 percent above market value.

The findings don’t mean that every property in a county is undervalued or overvalued by a certain amount. For example, while the typical Gwinnett appraisal is 5 percent under market value, some homes are undervalued by much more, while others are overvalued.

Several assessors in counties with low assessments said the AJC’s findings mirror their own analyses. They say a recovery in the local real estate market – plus an assessment system that lags behind the market – are behind the AJC’s finding.

“I think the market has turned,” said Gwinnett Chief Appraiser Steve Pruitt. “We’re seeing [values in] at least certain areas of the county flattening. And certain areas of the county are increasing.”

Officials in counties where assessments remain high say they’re still suffering the effects of the real estate meltdown. Douglas Chief Appraiser Benny Waldrop said values are rising in some parts of the county. But he still sees banks unloading properties at rock-bottom prices.

Waldrop said his appraisers are not deliberately trying to keep values too high. He said property owners can appeal if they think the county’s values are wrong.

“You can’t appeal your sales tax. You can’t appeal your income tax,” he said. “But you can appeal your property tax.”

But appeals don’t always bring taxpayers quick relief. John Wilson of Roswell appealed last year when Fulton County said his home was worth $232,300. The county later cut the value to $215,900, but Wilson thought it was worth as little as $195,000 based on sale prices of other homes in his neighborhood.

Getting that reduction would save Wilson nearly $270 on his tax bill. But a year and a half after he filed it, his appeal is still pending.

“It was a different market a year and an half or two years ago,” he said. “My situation is kind of behind the times.”

Rising home prices

Each year assessors determine the value of tens or hundreds of thousands of properties for tax purposes. Counties don’t have the resources to inspect every property, so assessors use sale prices for comparable homes and statistical methods to revalue entire neighborhoods.

These “mass appraisal” methods are imperfect even in the best of times. Assessors use the previous year’s sales to determine property values as of Jan. 1 each year. The sales they use can be up to a year old, and in a fast-moving market county values are often out of date.

In recent years, with home prices plummeting, that meant county values were often too high. This year, with a recovery well under way in most counties, they’re often too low.

Over the last year average home prices in metro Atlanta rose 16.4 percent, according to the latest CoreLogic Home Price Index. Tales of banks selling foreclosed homes for pennies on the dollar have given way to stories of sellers receiving multiple offers and sale prices above the asking price in some areas.

Meanwhile, most county assessors were still cutting values this year. Collectively, assessors in the 11 counties examined cut residential property values by $3.1 billion in 2013. That combination of rising sale prices and declining county values led to tax values that were about right in some counties last year and too low this year, the AJC found.

But it often took concerted effort by property owners to get the counties to cut values. Tens of thousands owners appealed their tax values in recent years. Skypek was among them.

She appealed the value of seven rental homes she owns in Rockdale County in 2012. She bought one of those homes for $31,500 in 2010, but the county initially said it was worth $77,100 last year.

Skypek appealed to a board of equalization, which cut the value to $70,300. Still not satisfied, she appealed to Superior Court. The county eventually settled the case by cutting the value to $26,700.

She thinks that value is about right. But while the county reimbursed her for appeal expenses, she’s upset about the time and hundreds of dollars she spent on appraisals, court fees and other costs.

“It really does make me angry that I had to go through all of that effort,” Skypek said. “What about people that can’t afford to do that?”

Taxpayer advocates said counties resisted lowering values for years. Now they fear assessors will be too quick to raise them with the real estate market showing signs of life.

“They’ll go up on them a lot faster than they came down on them,” said Stan Anderson, a private appraiser who handles appeals for the Fulton County Taxpayers Foundation. “I promise you that.”

Assessors say they won’t jack up tax values unnecessarily.

“We’ve been somewhat conservative following the values down, and I’m going to be somewhat conservative following the values up,” said Gwinnett’s Pruitt. “That’s the best I can do.”

Homeowner complaints about tax assessments spiked during the real estate collapse, and state lawmakers responded after the AJC’s first investigation. Among other things, they passed laws making it easier for property owners to appeal tax values and forcing assessors to consider bank sales and other “distressed” sales when they calculate property values.

Though assessments are no longer too high in many areas, state Rep. Ed Lindsey, R-Atlanta, is not convinced the system is fixed. He said the AJC’s findings – with some county assessments appearing too low and others too high – confirms his belief that property owners are treated differently, depending on where they live.

Lindsey favors capping assessment growth at 3 percent annually or the rate of inflation, whichever is lower. He may propose the cap in the upcoming legislative.

“The first rule of taxation is, is it fair?” he said. “I find very few people out there who believe the present system is fair.”

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