You may have been able to make the next month’s payment or even catch up, but then you fall behind again and possibly miss payments on other credit cards.  And eventually those collectors start calling too.

Whatever and however you ended up here, you never meant to fall behind.  And you swear that you want to pay them back, but can’t.  Unfortunately, the calls do not stop.  What at first were friendly reminders and request for payments, turn into persistent and menacing calls for immediate payment.

Once the calls become undignified and insulting, the debtors collectors may have crossed the line and violated the FDCPA.  We’ve covered this law extensively in our other tutorials and recommend that you listen to them if you believe they may be misleading you, or if they begin to use profanity or other tactics which are harassing in nature.  If they do these things, you may have a claim.  You can also call us at 305 771-DEBT or visit us at www.defendusnow.com.

Now let’s suppose that the calls are respectful and, while firm, do not insult, threaten you or violate the FDCPA in any way.  But they are consistent. You’re tired of asking for more time, more understanding.  They give you time, but ask for some sort of payment.  You eventually stop answering their calls.

Now the ringing of the phone itself becomes the constant reminder that you’re behind on your payment.  When the phone rings, you’re thinking “I hope that’s not a 1-800 number”.  When you check the caller ID, if it is a debt collector, you may let it ring and may even delete the messages without even listening to them.

Well, it doesn’t have to be this way.  Simply answer the call and get the person’s name, their business name and business address and mail them a letter asking that the phone calls stop and that all communication be in writing.

Now, there are a lot of things you could have done better.  For example, you could have asked that they validate the debt.  This would have ceased all communication until they validate the debt.  Sometimes they may never be able to.  These calls will stop until they do.

Either way, send the letter, whether it be a letter asking that they validate the debt (which I recommend you do first) or a letter asking them to stop calling, but send the letter certified so that you can later prove that the letter was sent and received.

If the calls continue, they have violated the FDCPA and you have a claim against them.  You may never be able to pay them, but if you ever negotiate with them, be sure to know that a lawsuit for an FDCPA violation will certainly give you the leverage you need to get the terms that work for you.

If you’d like to get a FREE consultation with us to review your situation and tell you whether or not you have a claim, call us at 305 771-DEBT or visit us at www.defendusnow.com.  It is totally free.  It’s our way of giving back.  And if you do have a claim, you won’t have to pay us.  We’ll make sure that the debt collector pays our fees and costs – and if we don’t, then you still pay nothing.  But you have to call us now.  Call 305-771-DEBT or visit our website now at www.defendusnow.com.

I just ran into an Entrepreneur Magazine article with tips about writing off meals and entertainment costs for your business.  There was a time that meals and entertainment was 100% deductible as a business expense.  The IRS, however, has historically been very leery of some of these dinners and events and keeps chipping away at the expenses that qualify.  For example, you may not be able to write off the dinner your wife or husband enjoyed while you were legitimately having business dealings with a partner or prospect.  As always, be sure to consult with your accountant to determine what is and is not a deductible meal and entertainment expense.

Whenever you have a business lunch or dinner, though, be sure to write down (it is best to do this on the actual receipt) who was there with you, what sort of business was conducted and when (before, during or after the mean).  By keeping this information on the receipt, you also maintain the date, time and place of the lunch or dinner.

Has anyone ever had the IRS question a meal or entertainment expense?  We’d love to hear about what issue the IRS had and how you resolved it.

A: According to the scenario you describe, the mortgage lien is superior to your ownership interest and therefore you are responsible for paying off that lien if you want to keep the property.  Your responsibility, however, is limited to that ownership interest.  In other words, your failure to satisfy the mortgage by not making payments or paying it off entirely will not affect your credit (obviously – you did not sign the note) and the mortgage lender will not be able to pursue any deficiencies against you – but you will eventually lose your ownership interest in the property.

Property taxes, or ad valorem taxes, are very similar to mortgage liens in that your interest is inferior to any tax lien as well.  Your failure to pay property taxes will not render you liable for the tax bill in the future either except to the extent that you may lose your ownership interest.  Tax Certificates are sold and the purchaser can foreclosure on the property through a tax deed sale (similar to a mortgage foreclosure, but a lot easier and faster).

As the new property owner, you are liable for the condominium maintenance.  By failing to pay your maintenance, the condo association has the right to collect maintenance from you.  Although they rarely pursue personal money judgments, they can foreclosure on the property (isn’t this the way you ended up with the property in the first place?).  Also be aware that recent Florida legislation (effective as of July 1, 2010), condominium associations have the right to collect rent from tenants occupying units that are behind on monthly maintenance payments.  This is done through a simple and inexpensive process provided by this new law.  Arguably, they can even find a tenant and rent out your unit if it is empty.

Your right to collect (and keep) rental income, however, will greatly depend on the rights of the lender per the terms of the loan agreement.  Some mortgage agreements assign rental income to the lenders or allow them to place the property in receivership.  In order for the lender to exercise these rights, though, they must do so through the courts.  And they often do not.  Also bear in mind that, just as described above, the condominium association can always step in to collect the rent if the maintenance is not being paid.

As always, every situation is different.  It is highly recommended that anyone in a similar situation consult with an experienced real estate attorney to learn more about your legal rights and duties.

It's not yet time to relax.

Real Estate Agents must always remain in control of their real estate closings, beginning with the listing agreement and right on through to the closing.  Unfortunately, some Agents still believe that upon the signing of the Purchase and Sale Agreement, the only thing they need to do is sit back and wait for the commission check to arrive.  They couldn’t be more wrong.

Real Estate Agents who have been in the business for a while know that their work begins when the purchase and sale contract is signed.  If the following ten steps are taken, an Agent will find that the work that leads up to closing is much smoother and the chances of having issues preventing a successful sale are diminished considerably.

1.  Establishing the Effective Date.
If there is a fully executed contract and everyone has initialed every page and every handwritten change, an “effective date” of the contract can be determined.  When things are required to be done by the Buyer or Seller under the contract is first determined by the effective date.  Make sure both sides agree on the effective date and get out your date planner. It would be good practice to write a note to your clients outlining the dates.  It will help you remember all the important dates.  Be aware that every contract contains the phrase “Time is of the essence”, which means that ‘Almost’ only counts in horseshoes, hand grenades and nuclear war.  If you miss the date you’ve breached the contract.  Stick to the dates!

2.  The Mortgage Application.
The first deadline is usually the mortgage application.  Make sure the Buyer does it within the timeframe specified, usually five (5) days.  Ensure that the Buyer has documentation verifying the date of the application.

3.  Additional Deposits.
Sometimes, contracts call for additional deposits to be made.  I hate to play lawyer (that’s not true) but failure to meet this date, or any other date, is a breach of contract!  Make sure you send or receive confirmation in writing.  Escrow letters should be made part of your file – ask for them.

4.  Title Documentation.
Get the title information (prior title policy) to the closing agent (me, I hope) or confirm that the Seller has none to give.  This should have been done upon listing the property.

5.  Existing Mortgage Payoff Information.
Get the mortgage payoff information (company, loan number and telephone number) to the closing agent so that the payoff can be requested early on.  It also doesn’t hurt to get a written authorization from the Seller (lenders sometimes require one before providing this information).

6. Condominium or Homeowner Associations.
If it is a condominium or homeowner association, obtain the necessary payoff information.  The association documents hopefully have been delivered to the Buyer, triggering the rescission period time clock.  If it is a condo, start the approval process immediately.

7.  Home Inspections, Municipal Code Violations and Buyer’s Right to Cancel.
Make sure inspections are done and the written reports delivered to the Buyer.  If the Buyer disapproves of the report, make sure a report is delivered to the Seller if the contract calls for it, and send notice of intent to cancel within the contract deadline.  Recommend to the Buyer that a municipal lien search (also referred to as “lien letters”) be obtained through the closing agent early on.  Some contracts require that municipal issues, such as code enforcement violations or citations and open permits, be raised and objected to during the inspection period, otherwise they are waived.

8.  Homeowner’s Insurance.
Make sure the Buyer has selected an insurance agent to obtain Hazard Insurance.  Insurance agents must take pictures of the property, which takes some time.  Even if it is a condo (where a homeowner’s policy is not necessary), suggest that the buyer obtain contents/liability insurance anyway.

9.  Boundary Survey.
Although the title agent orders the survey, don’t assume that it will automatically happen.  When the  Buyer is purchasing the property without financing (i.e., an all-cash deal), title agents often assume that the buyer does not want to obtain a survey or simply neglect to obtain one.  This is can turn out to be a terrible mistake for the Buyer.  There’s a reason why lenders demand that a survey be obtained: an encroachment can affect the use of the property, the value of the property and can affect the owner’s ability to later obtain financing.  It can also lead to litigation.  Worse yet, it can lead to a very upset client.  Make certain that the Buyer is aware of the importance of obtaining a survey.  If a survey will be performed, make the Sellers aware that a surveyor will come by to inspect the property boundary lines so that there are no confusion or delays.  Sometimes it may take some arranging to get the surveyor on the property, so make sure that the title agent doesn’t delay in ordering one.

10.  Following Up With Lender.
Follow up with the Lender to ensure that the Buyer has done everything required.  You want to make sure that the file gets submitted to underwriting!  If has not been submitted, something is incomplete and the Buyer may need some help.

Real Estate Agents should get to know an experienced Real Estate Attorney that is hands-on and should begin by asking other agents of known law firms that handle real estate closings.  By doing so, they may find that the deals close a bit easier and with less involvement on their part.  Getting an attorney title agent involved in the deal from the beginning, as opposed to just a title agent, will also allow title defects and other legal matters to be resolved quickly without resorting to a last minute search for an attorney to rescue the deal on an emergency basis!  After all, real estate attorneys do not charge any more for their closing services than title agents do.  And yet you get all the added benefits should the need arise.

Once the deal is closed, then you can start relaxing on your hammock.

To view a list of all approved credit counseling providers in Florida’s Southern District, visit the United States Trustee’s website here.

Prior to choosing any provider, verify that it is still on the approved list and that it can provide the service that permits a debtor to timely compy with the pre-filing credit counseling requirements.

In fact, several [title insurance] agents have reported receiving written cancellation of pending transactions involving these lenders. Accordingly, Old Republic policies may not be issued insuring REO sales after completion of foreclosure by these two lenders.

There is no prohibition on writing title insurance on short sales or following a deed-in-lieu of foreclosure involving these lenders or any prohibition against insuring titles where a mortgage foreclosure by Ally Bank/GMAC, JP Morgan Chase or Bank of America appears in the back chain of title.

The initial interest rate provided under the HAMP program, as well as in-house modification programs, gradually rises after the modification is finalized until they reach a predetermined ceiling.  Every case is different, but for the most part, that initial interest rate of, say, 2½% simply won’t stay there for long.  Inevitably, the interest rate will continue to rise and that initial monthly payment will rise right along with it.  Albeit, the overall terms may end up being better than the original, but homeowners can not ignore the fact that they remain underwater (the loan amount far exceeding the current value of the home).  A short-term reduction in the monthly payment, without a substantial reduction in principal, will not provide enough of an economic benefit to offset the negative equity in the home.

A recent article in CNNMoney.com found that lenders have come to the realization that, just like with short sales, modifying a mortgage loan is a less costly option for them than going through the foreclosure process and taking title to the property.  The government’s HAMP guidelines, however, are not flexible – leaving many homeowners out in the cold.  Lenders, though, are now more amenable to approving in-house modifications where guidelines are less rigid and even allow for principal reductions (though don’t bank on a sizable reduction) which are not permitted under HAMP.  In fact, as CNNMoney.com reported, far more in-house modifications have been approved by lenders than those under the HAMP program.

“Banks are doing nearly twice as many modifications under their own foreclosure prevention initiatives than under the Obama administration’s signature Home Affordable Modification Program, known as HAMP.”  Surprise! Banks help more homeowners than Obama, CNNMoney.com, By Tami Luhby, August 30, 2010.

Data released months ago shows that lenders lose 20-30% less money when they approve a short sale as opposed to foreclosing on the property owner.  And 10-20% less money is lost when they modify a loan.  A short sale, though, is not always appealing to a homeowner that wants to stay in his or her home.  Owners are far more likely to choose the short sale option when it concerns second homes and investment properties (which, by the way, do not qualify for modifications under HAMP, no matter what cousin Ed tells you).  Unfortunately, everything learned in Economics 101 goes out the window when it comes to a principal residence.  This leaves a large number of homeowners wanting a loan modification even though they shouldn’t.

Because homeowners are not as rational when evaluating the investment aspect of primary residences, they seem to be less concerned about owing more to the bank than what the home is worth.  While most will acknowledge that they are underwater (indeed, sometimes more than twice the value is owed), they dread the loss of the home even more.

Ignoring the hard facts masks the most sensible option: a short sale.  With far smaller rental payments for homes equal in size – if not larger – and in the same neighborhood, homeowners are nonetheless compelled to save their current homes despite the cost.  The old mindset that everyone should  own their home is difficult to shake.  Since the homeowner does not have to face the music for a few years, they cling on to the hope that their financial situation will improve and quite possibly find that that their home’s value has increased enough to have made the saving of the home worthwhile.

The future is unpredictable, but the numbers do not lie.  Saving a home worth far less than what is owed, is not always the answer.  Unless there is equity in the home or some other compelling reason, the homeowner should seriously consider a short sale and forget about a temporary modification.

Filed under: Foreclosure, Investment Property, Real Estate and Business, Short Sale Tagged: Mortgage Modification, Real Estate, Short Sale ]]> http://realestateandbusinessblog.com/2010/09/10/banks-more-willing-to-modify-mortgage-loans/feed/ 0 kldeeb Declining Homes Values Difficult to Avoid http://realestateandbusinessblog.com/2010/07/20/how-landlords-can-avoid-bad-tenants-and-quickly-evict-the-ones-that-are/ http://realestateandbusinessblog.com/2010/07/20/how-landlords-can-avoid-bad-tenants-and-quickly-evict-the-ones-that-are/#comments Tue, 20 Jul 2010 03:42:35 +0000 kldeeb http://realestateandbusinessblog.com/?p=77 ]]> Rental property owners often find themselves in the unfortunate predicament of having to evict a tenant.  More often than not, they learn expensive lessons that could have been avoided in the first place.  Giving little value to a lawyer, they proceed to rent to tenants without the advantage of having one draft and review the lease and provide other valuable advice or, worse yet, try to evict a tenant by themselves.  By the time landlords are able to remove bad tenants, they often lose considerable time and months of rent plus the costs of the eviction.  Further, should the landlord want to pursue the tenant for the money owed, more money in legal fees must be spent.

While there are no fool-proof ways of avoiding bad tenants, certainly there are steps that can and should be taken to minimize the risk.  Below are some steps to take and things to consider when renting your property.

1.  Perform a credit and criminal background check on potential tenants.
Potential tenants will never tell you about their financial difficulties.  Nor will they tell you that they recently were evicted from another unit for failure to pay rent or any other reason (e.g., noisy or destructive pets, more occupants than they originally let on).  Criminal activity may also cause you trouble with the county or municipality, not to mention a homeowner’s association or neighbors.  Once a tenant moves in, it could take many months to remove them – so be sure there are no obvious red-flags by checking their financial and criminal background thoroughly. A search in your county’s public records or civil dockets may reveal whether or not evictions were previously filed against the tenant.  It is also a good idea to perform the same background checks on spouses and other occupants.  While this does not guarantee that you will be getting a good tenant, it will certainly avoid the bad ones that could have easily been detected.

2.  Start the eviction process early and swiftly.

Bad tenants always have, it seems, a good reason for not being able to make the payment on time.  In fact, there are books written that provide them with a slew of good reasons to give.  Tenants frequently assure landlords that payments will soon be made and landlords have a tendency to believe them, rarely questioning them.  Before long, bad tenants are several months behind and landlords are then forced to dip into their own savings to make mortgage payments due on the property.  Many times, landlords are hesitant to start eviction proceedings against tenants early on, hoping that they eventually pay and fearing that the posting of a demand notice for rent is too adversarial and may cause the situation to worsen.

3.  Allowing a tenant to fall too far behind in rent will inevitably result in an eviction.
Once the Tenant falls a few months behind, the financial burden of bringing the rent up to date is too burdensome and they often make the strategic decision not to pay at all.   When having financial difficulties, people naturally make the conscious decision to pay bills that will result in service interruptions if otherwise not paid.  In other words, the squeaky wheel gets the oil.  If the tenant can string the landlord along, but not other essential services, it is an easy decision for them to make.  And  before long, past-due rent becomes so high that it becomes almost impossible for the tenant to ever catch up.  Soon, the tenant decides to simply stay as long as the eviction process allows – all at the expense of the landlord.

4.  Use Properly Drafted Notices.
Each jurisdiction has its own notice requirements.  Thorough research must be conducted to determine whether or not your notice complies with your specific jurisdiction.   It is highly recommended that you hire a lawyer to draft your notice.  Our law firm, for example will draft the notice at no additional cost if we are hired to file the eviction.  If a deficient or improperly drafted notice is used, you might later find that the judge dismissed your eviction complaint even though the tenant did not respond to the eviction complaint (this is particularly common in Broward County).  Even if the judge does not unilaterally dismiss the case, should the tenant hire a lawyer, the eviction will easily be defended and the case dismissed when the notice is defective.  Also be aware that there are serial bad tenants – referred to as “professional tenants” – that know the law well and go from unit to unit anticipating an improperly filed notice or eviction and use it to their advantage.   Be very leery of forms found on the internet – there is an abundance of inaccurate forms and information on evictions.  For a complimentary FLORIDA Three-Day Notice click here.  Although this form is statutorily adequate in Florida, it may not comply with other state jurisdictions.  And calculating dates and rents due without the assistance of an lawyer can be extremely risky.

5.  Hire a Lawyer.
Why go it alone?  An attorney can draft and review air-tight leases and, should the need arise,  file the eviction compliant – all at affordable prices with the expertise to gain quick results.  A landlord can unknowingly prolong the eviction process by entering into a badly worded lease agreement, improperly filing an eviction or filing court paperwork (pleadings) at the wrong time.  Although a seemingly self-serving statement, the hiring of a lawyer can not be stressed enough.  Case in point, I once went down to my local courthouse and asked the clerk to provide me with the last 30 evictions filed that day.  After looking through them all, I found that only four of them were properly filed.  And those four were all filed by lawyers!  Had a tenant in any of the other cases hired an attorney, the case would have be dismissed.  To add insult to injury, the landlord would have also been required to pay the tenant any attorney’s fees spent – before refiling the eviction again.  When all is said and done, an experienced eviction attorney can be relatively inexpensive considering the potential for losing a considerable amount of time and money.

Being a landlord can be profitable and hassle-free.  To ensure that it is, however, these are all necessary steps to take.

If you’re like everyone else owing more than it’s worth, you’re probably considering a short sale.  But is a short sale right for you?

Short sale expert, Michael B. Citron, describes a short sale candidate in his book, The Art of the Short Sale, as having “the one key ingredient …  a financial hardship.”  While you can come up with many reasons why you don’t want to pay the mortgage on the house, you must have a good reason why you can’t pay.  Don’t fool yourself into believing the lender won’t care that you have a nice nest-egg sitting in your bank account.   And don’t believe for one moment that simply being underwater on the home is a financial hardship.

So, assuming that you are a candidate for a short sale, here are seven ways you can make sure that your short sale is successful:

1.  No Straw Buyers or Accepting Money From the Buyer Outside the Closing.

There’s no more sure-fire way to end up in prison than to try to purchase the home from yourself by selling to a friend or relative.  And secretly asking for money back from the buyer after closing is no different. If you would like to find yourself back in homeownership, there are ways you can go about it legally.  For instance, credit restoration expert, Michelle Deeb, explains that the damage to your credit score isn’t permanent and will improve over time.  She explained that “a short sale does not negatively affect your score like a foreclosure or collection does.”

2.  Make Sure the Real Estate Broker Commission is Due Only Upon a Successful Closing.

Some commission agreements state that the agent has earned a commission when an agent finds a buyer.  In a short sale (in fact, in any transaction), however, finding a buyer is only the beginning.  I can appreciate the hard work a real estate agent puts into getting your home under contract, but you wouldn’t want to find yourself owing a commission even though the deal doesn’t close.  This, of course, is not the only listing term that should be negotiated.  An experienced real estate attorney can help advise you on what else you should be looking out for.

3.  Find a Real Estate Agent that is Experienced in Short Sales.

While short sales have been used as a method of pre-foreclosure workouts for years, never have they been so common.  Many agents declare themselves to be experts after only a few successful deals.  Ask for referrals and find out who will actually be doing the negotiating with the lender.  Sometimes the agent hires a loss-mitigator experienced in dealing with lender.  This may not necessarily be disadvantageous to you, but you should then inquire as to the loss-mitigator’s credentials.  Also, be concerned when the loss-mitigator wants to buy the house from you – you may very well end up being the victim of a fraud.

4.  Contract Contingencies.

As a seller, you want to make sure that the Purchase and Sale Agreement is contingent on all your lenders (there may be more than one) approving the short sale and agreeing to release you of all liability.  From a legal perspective, you may be on the hook with the buyer absent this contingency even though the lender did not agree to the short sale, or agreed to it, but still wants to hold you responsible for the deficiency.  Assuming that you you are experiencing a financial hardship – which is the reason your attempting a short sale in the first place – the buyer may have little incentive to follow through on any legal claim against you.  But why take the chance?  This is another good reason to seek the advice of a real estate attorney and have your contract reviewed.

5.  Take Control of the Closing.

Every jurisdiction is different.  In Florida, depending on the county, the buyer usually controls the closing and chooses the closing agent.  Regardless of what is customary in your county, you should control the closing since the closing agent will be taking an active role in negotiating with the lender.  The extent of the closing agent’s participation will differ from deal to deal, but will, at a minimum, include acquiring the short sale payoff approval and making the actual payment to the lender.  Another good reason to choose your own closing agent is that you can pick one that is a real estate attorney and have him help you through the short sale process in exchange for the closing and title work fee (which the lender pays anyway).  Essentially, you get an attorney to review your contracts for free.

6.  Consult with an Accountant.

Do not accept tax advice from your real estate agent or lawyer.  Just like you wouldn’t want your pharmacist to give you medical advice, why depend on someone other than a CPA to determine your tax liability.  Sure, you might be able to do some research on your own, but why take a chance?  There are exceptions to every rule.   Contrary to what you might have heard, there are certain circumstances that you might not have tax consequences on second homes and investment property.  Again, consult an accountant.

7.  Review Your Lender’s Short Sale Payoff Statement.

This is another great reason to hire an real estate attorney.  There are many different ways that lenders word their short sale approvals.  And it’s all in the wording.  Sometimes they reserve the right to pursue you for the deficiency.  There are other times when the lender is silent about it.  Either way, it is important that the short sale approval be examined and reviewed carefully before you proceed to the closing.

Bonus Tip:  Make sure the agent’s listing agreement allows for a reduction in the commission if the lender refuses to pay the entire amount – it is almost a certainty that they will.

There are many things that can go wrong with a short sale.  Have you experienced a short sale nightmare?  Be sure to comment below and share them with us!

Primarily, real estate SBA loans allow business owners to maintain liquidity and working capital by providing for low down payments and low monthly payments with flexible terms.  The SBA also provides cash loans and equipment loans – seven years and up to fifteen years, respectively

It was announced that as of  February 22, 2010, the SBA had reactivated Recovery Act loan applications through its queue system.   Their queue system provides options to lenders and small business borrowers when the funds under the Act for fee relief and higher guarantees have been exhausted, by allowing funding from cancellations of other loan applications or Congress comes through with more money to fund the program.

The Act eliminates the upfront guarantee fee for loans with maturities greater than one year depending on fund availablity.  Under the Act, however, higher SBA guarantees for lenders under the 7(a) program expired.

The US Small Business Administration, however, has indicated that the end of the acceptance of applications under the queue programs draws near.  Small business owners should take advantage of these programs while they last.  For more information, contact your banker or visit the US Small Business Administration website for more information on this program.

When the lender forecloses on real property, it obtains a final judgment for the total amount due on the mortgage, including interest, costs and attorney’s fees.  When the property is worth less than the judgment, it is very unlikely that an investor third party will bid on and buy the property at the public auction.  When there are no bidders, the lender then takes title to it.

Lender owned property (also known as “Real Estate Owned” or “REO’s”) will later be listed with a real estate agent and sold at market value which, during these times, will most likely be less than the final foreclosure judgment.   In addition to the real estate agent’s commission, the lender will also incur closing costs which will reduce the amount of money they will receive at closing.  The difference between the final judgment and the amount of money the lender recovers when it sells the property is referred to as the “deficiency.”  And the lender is then free to seek a “deficiency judgment” against the borrower (the party that lost the property in foreclosure). 

Should the lender be required to remodel, repair or purchase appliances in order to sell the property, the deficiency will only grow and therefore the deficiency judgment will be greater.  The same is true when the selling price reflects the property’s poor condition.

Aside from the ethical issues raised when one destroys or strips the home before losing the property at public auction, it is, or can be, financially detrimental to do so.  Currently, it seems, most lenders are so inundated with foreclosures that they have yet to pursue deficiency judgments against those they have foreclosed upon.  It is only a matter of time, however, before the number of foreclosures is reduced to the point where the lenders can then focus on collecting on these deficiency judgments. 

As an attorney, I have yet to see lenders pursue these judgments.  Indeed, no one has come to me for help for protection under these circumstances.  But I believe that it is all a matter of time before it happens.  Obviously, there are other alternatives to allowing the property to be sold at public auction.  In previous posts, I have discussed other options such as short sales and deed-in-lieu as possible alternatives to foreclosure.  Albeit, the lenders are not always agreeable to forgiving the deficiency when accepting a short sale or deed-in-lieu, but when they do, this is the best course of action for the property owner to take when in foreclosure. 

Property owners that ignore or neglect a foreclosure will only face deficiency judgments later on, when they incorrectly assume that the public auction is the end of the road for the lender.  There could be no bigger mistake for the property owner assuming that stripping or vandalizing the home is a way to get the last “jab” in against the lender.  They could, more likely than not, be faced with a judgment that includes amounts for the items stripped or damaged – much more than what they were able to get during the fire sale or the short-lived and misguided satisfaction they received in damaging the home in the first place.

In addition to defending the foreclosure lawsuit, property owners should seek a modification of the mortgage or, when a modification is not viable, short sale of the property before the foreclosure sale takes place.  A short sale, also called a short payoff, occurs when a mortgage lender, usually a nationally chartered bank, accepts less than the actual mortgage balance due in order to avoid taking title to the property through foreclosure – essentially taking on the responsibility of selling the property along with the negative affect it has on their balance sheets.  Through a short sale, lenders avoid carrying costs and maintenance fees while receiving a substantial portion of their money.

Although the procedure to complete a short sale is complicated and time-consuming, a short sale benefits the property owner as well. The property owner is not allowed to receive any money at closing, but they do escape, in most cases, the remaining loan payments (in other words, the deficiency, which a deed-in-lieu of foreclosure or a foreclosure judgment does not avoid) and also reduce the extent of the damage made to their credit (although a short sale still harms one’s credit score).  While the lender will issue a 1099-S to the property owner for the portion of the loan that has been forgiven, the Internal Revenue Service considers this a non-taxable event when the property is homestead.  This is not necessarily the case with investment or commercial property.  The property owner may still avoid taxation when a 1099-S is issued on non-homestead property by being deemed “insolvent.”  Regardless of the circumstances, it is highly recommended that one seek the advice of a Certified Public Accountant regarding tax liability before commencing with a short sale.

The process of completing a short sale requires much communication with the mortgage lender detailing the reasons the mortgage cannot be completely paid off, for example; therefore seeking a professional may be beneficial. During the short sale process, an experienced attorney has the ability to provide the lender with a proper and legal explanation for the hardship and provide the necessary documentation to prove it – while still protecting the interest of the property owner. And at NO COST to the property owner as the lender picks up the tab.  An attorney will also have the capacity to find a suitable real estate agent to manage the marketing of the property in a way that is acceptable to the lender. The presence of an attorney throughout the short sale will provide legal guidance and security, resultantly making the short sale transaction as smooth and as simple as possible for the property owner at no expense.  While I see no disadvantage in hiring an attorney to assist you in a short sale (after all, an attorney has a duty to protect his or her client’s best interests, while real estate agents and other professionals do not), I welcome feedback should you feel any apprehension in hiring one.   

Finally, the homeowner should consider the fact that a short sale transaction will come at little, if no, cost to them.  At a time when cash flow is scarce, and a modification of the loan is not viable, this option is best.  Avoiding the foreclosure sale and any deficiency judgment is tantamount.  The short sale accomplishes this and more.

If you have determined that your tax bill is too high or that the government is claiming that your house is worth more than it really is, the next logical step would be to determine how to appeal the tax bill.  There are also occasions when the value of a property has dropped and the county has not taken that into account, or maybe they have, but just not enough.  There might also be instances where the property assessment has dropped along with the market value and yet the tax bill has increased!  So you’re understandably upset.  I get it.  You want to fight it, but you feel you can’t. 
 
Well, I’m here to tell you that you can.  And I’m going to show you how.  When we’re done, you’re going to realize that it’s easier than you once thought.  All it takes is some patience and determination and you’ll be able to save hundreds, if not thousands of dollars.

The Ad Valorem Tax.  What Is It And How Is It Calculated?

The ad valorem tax is defined by Black’s Law Dictionary as a tax imposed according to the value of property. It is the Latin phrase for “according to value”.  It is commonly imposed by states, counties, and cities on real estate but is also used to tax other property.

The amount of the tax bill is determined as a percentage of the value.  The percentage is the tax rate (or millage rate – we’ll use these terms interchangeably) set by the property owner’s municipality and it is applied against the assessed value of the property itself. 

The assessed value is the value that the government has determined your property is worth.  The tax rate (or millage rate) is the rate the government determines is the amount that needs to be applied towards all assessed property to come up with the amount of tax money they need to fund their budget.
 
One would then correctly conclude that the combined assessed value of all the properties in the municipality (called the tax base) would then determine the total amount of money the government will collect. 

You would then conclude that it is in the municipality’s best interest to assess the property at its maximum value, if not more.  This would, for argument sake, give you the ammunition needed to contest the government’s determination of your property’s value.  But this is not always the case.
 
You see, the municipality works out the numbers backwards.  It first puts out a proposed budget which provides the total amount of tax dollars that are needed to be raised in order to fund it.  They then take this total and divide it by the combined assessed value of all the properties (again, the tax base).  The resulting number is the tax rate or millage rate.  I’ve simplified this a bit, but bear with me here.  The millage rate is equal for all property owners within that municipality.  In the aggregate, the millage rate is not tied to the market value of the properties, but rather just the assessed values.  In other words, the taxes paid are determined by the assessed value and not necessarily the fair market value of the property.
 
Therefore, the municipality can assess the properties well below fair market value and still raise the same amount of money had it been assessed at its maximum.  All it requires is a higher millage rate, which, as I’ve already stated, is determined by the municipality’s proposed budget. 
 
Since the tax is set by the budget and the tax rate, a property owner’s tax bill might go up or down regardless of what the assessed value is.  One individual could even find that the assessed value went down, but the tax bill went up!
 
The key here for the individual property owner is not necessarily whether the assessed value of his or her property is too low or too high, but whether it is fair in comparison to other properties that are similar.   

How Is The Value Of Real Property Determined?

As previously stated, the key is to determine what the Fair Market Value of the property is and, along with the Assessed Value, how it stacks up against similar properties.

“Similar properties” or “similar sales” are those properties that have recently sold and reasonably resemble the subject property taking into consideration such factors as location, size and sales price.  Other factors considered are conditions surrounding the sale, such as date and character of sale, advantages and disadvantages, and whether unimproved, improved or developed.  “Similar” requires that the property is reasonably near, usually within a one mile radius of the subject property, with the same amount of bedrooms, bathrooms and built and designed similarly.

There is no specific rule to determine the degree of similarity necessary for the property to be adequately considered a comparable property.  This is where the disagreements will occur with the municipality’s Property Appraiser’s assessment of value and is where the property owner will fail or prevail. 
 
When the Fair Market Value assigned to a property is greater than that of a similar property, there are grounds for an appeal. 

The obvious question here is: What does the fair market value have to do with the assessed value?  Well, if it can be proven that the market value is less than that which the Property Assessor established, then the argument would then be that the assessment is also lower.  In this situation, ratios need to be reapplied and, under the right circumstances, the argument can be won.  Ratios should be uniform across neighborhoods and districts.  In other words, if similar properties have assessments at 80% of fair market value, a proven decrease in the fair market value would therefore mean a proportional decrease in the assessed value.   Be aware, however, that homesteaded properties carry lower ratios because of the limited annual increase allowed.  Therefore, when calculating ratios, homesteaded properties should be excluded (with the exception of properties purchased and homesteaded at the same time as the subject).

A SPECIAL NOTE ON HOMESTEADED PROPERTIES:    If the subject property so happens to be homesteaded property, a notable distinction must be made.  As long as the market value of the property does not fall below the assessed value, Florida’s Save Our Homes law allows the Property Assessor to increase the assessed value by 3% or the Consumer Price Index, whichever is less.  Due to this law, the municipality is able to recapture some of the assessment increases they would have benefited from had the homestead exemption not applied.  In other words, homesteaded properties benefit from limited increases to its assessed value from year to year.  Therefore, when there is a decline in market value, the Property Assessor can then recapture some of this lost assessment value by not lowering the assessed value, in fact they can actually raise.  This year, the assessments on homesteaded properties increased according to the CPI figure of 0.1% (actually, it is a tiny fraction less than 0.1%) when fair market value did not fall below the assessed value.  On the other hand, when homesteaded property experiences a drop in fair market value below that of the assessed value, then the Property Assessor must lower the assessment to the fair market value of the property, but is not required to go any further down.  If one is contemplating the challending of an assessment on homesteaded property, the initial analysis is to determine if the market value dropped below the prior year’s assessed value.  If it did, then both figures should be equal (if they do not equal, there is a basis for an appeal).  If the fair market value did not drop below the assessed value, then the assessed value should have only increased by 0.1%.  Under these circumstances, if the assessment increased more than the 0.1%, then there are grounds for an appeal. 

POINTER:  Another necessary investigation requires that one access the property tax records at the county Property Assessor’s office (or website, if it has one) to find “material” inaccuracies in the data pertaining to the square footage of the structure, square footage of the lot, the number of total rooms, the number of bedrooms and bathrooms, the classification of the property (residential as opposed to commercial), etc.  It is also imperative that the actual tax bill be examined to ensure that all exemptions were applied, if any.  An example of an exemption is the homestead exemption, but there are others.  Also, if the property has been damaged by fire, wind or flood, the assessment should also take this into account.  If square footage of the property was increased or decreased, this too would affect the assessed value.  Each case is different and one must take all relevant information and review for any inaccuracies. 

Furthermore, one must not focus so much on the tax amount due.  The tax due might go up or down on any given year and the assessed value amount still remain constant.  Also, one must not get caught up with the separate assessments listed on the bill (for example, school district, fire, etc.), as the total amount due is what is required to be paid.

It is important to understand the dynamics between increasing or decreasing property values and what the municipality is actually taxing.  When properties benefit from increasing values, the municipality would, in theory, lower the tax rate or millage rate to collect the same amount of tax dollars as the previous year.  Of course, the tax rate must decrease enough to offset the increase in assessments.  Since tax bills are calculated by applying the tax rate to the assessment of properties, without a decrease in the tax rate, increases in assessments will naturally lead to a higher tax bill.  While I doubt that it happens often, I am sure that some municipalities have, from time to time, lowered their tax rates to compensate for higher assessments.  The cynic in me, however, tells me that most budgets will increase if politically feasible.

We recently witnessed a boom in the real estate market where prices were soaring.  Whether or not a particular municipality lowered their tax rate to adjust the taxes collected on higher assessments would have to be determined on a case-by-case basis.  Municipalities could have maintained the same tax rate on higher assessments thereby growing the amount of taxes collected for their budget while remaining under the political radar, sort of speak.  Few, if any, of the constituents were even aware of the increasing budgets because, after all, the municipality could declare that the tax rate remained the same.  We are, however, currently seeing tax payer protests regarding these taxes. Budgets are proposed and voted on in August and September, so this is the time to speak up. 

Now that the proverbial real estate bubble has burst, the situation is different.  With declining real estate market values, the municipalities must raise their tax rates in order to simply maintain their budget levels from the previous year as assessments decline.  While it might not be obvious, for this to occur, the overall assessments would have to decrease.  The assessment, however, does not necessarily have to decrease on a particular property.  Each property is different.  It is the overall effect of decreasing assessments that causes this situation.  Whether or not municipal budgets grew too big during the real estate boom is outside the scope of our topic, but suffice it to say that municipalities have come under scrutiny for having recently raised tax rates to meet their current budgets.

Politically, the municipality likes to see overall assessments increase from year to year.  If the overall assessments increase, the municipality would be able to collect more tax dollars without increasing the tax rate.  When the overall assessments decrease, the municipality would have to raise the tax rate just to collect the same amount as the previous year – what could end up being political suicide for the elected officials. 

Common Errors on Property Assessment Data

• Square footage of lot incorrect
• Lineal footage of lot incorrect
• Land restrictions (wetlands, building moratoriums, etc.) incorrect or not accounted for
• Style or usage (residential vs. commercial) incorrect
• Age of structure incorrect
• Condition of property – more worn out or obsolete than indicated – kitchen or baths are outdated
• Square footage of structure incorrect
• Square footage of air-conditioned areas incorrect
• Number of total rooms incorrect
• Number of bedrooms or bathrooms incorrect
• Size of garage (one vs. two car garage) incorrect or carport listed as closed-in garage
• Amenities (pool vs. no pool) incorrect
• Window air-conditioning units vs. central air-conditioning
• Major damage not accounted for (fire, wind or flooding damage)
• Septic tank vs. sewer connection
• Type or quality of roof incorrect
• Flooding issues not accounted for (flooding of street during rain storms)
• Nearby conditions not accounted for (rental apartment buildings, malls, dump sites, airports, etc.)
• Zoning restrictions or easements not accounted for
• Statutory guidelines not followed
• Increase of assessment greater than allowed by law (homestead exemption limitations)
• Valid comparables ignored or eliminated from valuation
• Computation of tax amount incorrect

CAUTION:  Be weary of arguing that the property is in disrepair or has deteriorated substantially.  When arguing that the property is in disrepair, damaged or otherwise not in the same condition, but worse, as the properties surrounding it, bear in mind the risk involved in doing so.  The municipality’s Property Appraiser’s office (or Property Assessor’s office) may alert other agencies or departments of the condition of the property.  By forcing the repair and following its progress to completion, the Property Assessor may then be able to reassess the property and arrive at a higher assessment at that time.  Of course, if the property is damaged by some calamity such as fire or windstorm, the Property Assessor should be able to understand the circumstances and not follow suit with a reassessment once the repairs are completed.  Another issue to consider is when an addition or improvement is done to the property.  The Property Assessor will inevitably want to reassess the property at a higher value.

The Three Appraisal Methods

The Property Assessor may use three different approaches to valuating your property. 

The most common approach is the Comparable Sales Market Value Approach.  Here, the subject property is compared to similar properties (also known as comparables) recently sold within a one mile radius.  Any differences between the subject property and the comparables are taken into account by making adjustments to the comparables’ sale prices.  The resulting sales prices (after adjustments) of the comparables are then averaged to come up with a value.  This value is presumably the Market Value of the subject property.  This is the method used by the Property Assessor’s office to value and assess residential real estate (less than 9 units).

A second approach is called the Cost Approach.  This value analysis is based on the cost of the land plus whatever it costs to rebuild the structure.  Adjustments (or depreciation) are made based on the age of the structure.  The resulting figure is the value of the property.  This approach is not always accurate, which is why it is not as commonly used.  This method, however, may be effectively utilized when appealing taxes on new residential properties.

Finally, you have the Income Approach.  This method takes the rental income of the property and analyzes it as an income stream annuity, taking into account all expenses of the property (for example, electricity, water, insurance, etc.) and the inherent risk of the investment.  Obviously, this method works best with rental properties, whether residential or commercial.  This method does not work well with single family homes, even if it is income producing property.

NOTE:  Be prepared to argue against the use of market trends as a factor in the valuation process.  When arguing that an assessment is too high, the assessor or board may claim that the market “trend” in the neighborhood of the subject property shows an increase in value.  In other words, the municipality may claim that values in the neighborhood are rising too fast and the assessment reflects this trend upward.  If it can be shown that the trend is actually downward or that there is no trend at all (flat-line) or even that while the trend is upward, it has not yet reached the assessed value placed on the property, then this argument can be won.  To prove this, recent comparable sales must be provided as evidence. 

Hiring an Appraiser

If feeling overwhelmed by the task of appraising a property, there are licensed appraisers that can be hired to perform it.  Realize, however, that the appraiser will not be at the hearing to defend the appraisal report unless hired to do that as well.  If a property owner decides to attend the hearing without the appraiser, the appraisal report must therefore be detailed enough to help sway the decision – written explanations can go a long way in the argument being made.

An appraiser can provide what is called a “pencil search”.  This report will simply list the properties that may be used as comparables without making adjustments against the subject property.  The appraiser does not visit the subject or comparable properties.  In other words, it is raw data and a thorough analysis is not made.  This can be a good starting point for the property owner, giving him or her more confidence in the comparables selected while saving some extra expense of a full appraisal.  The property owner must then analyze the data further and detail the process in preparation for the hearing. 

A “Certified Appraisal,” however, is a full appraisal.  It is thorough analysis of the data with explanations as to the comparables selected, adjustments being made and conclusions presented.  Visits to the subject property and the comparable properties are required.  This report carries the most weight at the hearing as evidence that is supported by an expert in the field.  Depending on the property owner’s budget, this is the most useful and effective report that can be obtained, but also the most expensive.

The property owner may procure an appraisal report that falls somewhere in between a pencil search and a certified appraisal report.  An appraiser can take a pencil search and analyze the data and make adjustments with explanations, but without visiting the properties.  Obviously, this is a deficiency that the Value Adjustment Board may notice and question, but overall would be better suited to help the argument than a simple pencil search. 

Finally, it is important to be aware of the Property Assessor’s bias towards its own comparables and results.  The Value Adjustment Board will also put greater weight on a Property Assessor’s conclusions as to value than that of the property owner.  Therefore, if the owner is not able to properly evaluate the value of the property or justify the data, the assistance of an appraiser is highly recommended.  Unless there are obvious inaccuracies in the Property Assessor’s property data (as previously explained), the Value Adjustment Board will accept the initial assessment as correct if the property owner does not adequately establish that it is wrong or unfair.  The simple truth is that the burden of proof is on the property owner. 

The property owner must ensure that any attempt at valuating the property and defending the conclusion takes this into account. That is, that the appraisal effectively establishes that the assessment is wrong or unfair.  This requires that the property owner not allow his biases to drive the analysis.  The appraisal report must provide adequate comparables and accurate adjustments.  A clumsy attempt at using a property that is not a suitable comparable or making a baseless adjustment would turn, in the eyes of the Value Adjustment Board, what would otherwise be a good and sound valuation into unreliable evidence that does not controvert the Property Assessor’s assessment.

In Miami-Dade County, the Property Assessor will include short sales if the seller listed the property with a Realtor in the open market.  This distinction is very important.  If the property was not listed in the open market, then the Property Assessor will not use the property as a comparable.  Further, properties sold at a foreclosure auction are also excluded as adequate comparables when appraising a property.  It is important to point out, however, that this might not be true of all county Property Assessors.  If the property is not in Miami-Dade County, it is recommended that the property owner investigate as to the county’s policy with regards to short sales and foreclosures.

Another important factor to consider is that the Property Assessor conducts “mass appraisals” and uses quite complicated formulas to derive their market values.  They use statistical analysis to ensure accuracy and point to standard deviations to rely on comparables and to formulate values.  If the sales price between the comparables differs by more than 15% of each other, the Property Assessor will investigate further and make adjustments accordingly.  The Property Assessor is also aware of the value given to waterfront property and will value it accordingly.  Similarly, properties backing up into a strip mall will also have their assessment adjusted to account for this undesirable attribute.

Challenging the Assessment

A tax assessment challenge begins with the filing of the formal appeal.  Most counties in Florida have deadlines ranging from September 8 through September 18.  For specific deadlines, check with your county’s Value Adjustment Board.  There is also a small filing fee to pay.  Again, check with your county for details.

Clieck here for copies of the 2009 appeal forms for Miami-Dade County and Broward County.  For other Florida counties, please check with your local Property Appraiser’s Office or Value Adjustment Board.

Realize that going through the local Value Adjustment Board must occur first before seeking an appeal with a state court.  It is important to note, however, that statistics have shown that the earlier in the appeals process one is, the greater likelihood of success.  Therefore, brushing off an opportunity to informally meet with the Property Assessor or not properly preparing for the hearing with the local Value Adjustment Board with the idea that further appeals are available could be a mistake.  The likelihood of success is greater with the local Value Adjustment Board.  Further, the cost of appealing in court may very well outweigh the savings obtained even if successful. 

It is very important to check with the Property Assessor’s office to determine if it is offering availability for informal meetings to discuss any inaccuracies with the data or with the assessment placed on a property.  If such informal meetings are being arranged, it is highly recommended that this opportunity be taken.  As such, the correction is more likely to occur with the Property Assessor’s office since new or more accurate data can be brought to light to the very source of the assessment.  In other words, the Property Assessor might be more reasonable in accepting new information they simply were not aware of. 

The Value Adjustment Board Hearing

Once the appeal is filed, the property owner must now prepare for the hearing with a Special Master.  If the owner has not already compiled the list of comparable properties and checked for data inaccuracies, now would be the time to do so.

It is recommended that the property owner conduct a preliminary investigation to determine if there are grounds to challenge the assessment.  Although not a terrible miscalculation, should a property owner file an appeal only to later find that the assessment is accurate, the appeal should be withdrawn.

Certainly, if time constraints simply do not permit for a preliminary investigation, by all means file the appeal if you feel that the assessment is wrong or unfair.  Indeed, once the deadline to file the appeal is missed, a challenge for the current assessment will not be allowed unless the property owner can show cause.  This scenario is outside the scope of our topic, but suffice it to say that the appeal must be filed before the deadline.

NOTE:  In order to obtain early payment discounts on your property taxes, the tax bill must be paid when the discounts are being offered.  The filing of the appeal does not toll the time for payment of the taxes when they are due nor for the availability of early payment discounts.  If the appeal is successful, a refund would follow.

Property owners are given sufficient time to plead their cases, but long and drawn out arguments are counter-productive and might not even be allowed.  If the argument is prepared and practiced in advance, there should be no need for it to be lengthy.

Obvious data inaccuracies are easy to argue and prove.  Usually, the Value Adjustment Board is quick to accommodate these property owners without much resistance, unless the discrepancies are found to be immaterial.

Value Adjustment Board hearings are informal to the extent that the Rules of Civil Procedure and Rules of Evidence are not followed. There are, however, some procedures to follow.  For example, the property owner must provide the Value Adjustment Board with a packet, presumably containing the evidence that will be presented at the hearing.  In turn, the Property Assessor’s office must provide the property owner with the information and data used to arrive at the assessment, which contains the comparables used to valuate and assess the property. 

This process, called the Exchange of Information Period, occurs 15 days prior to the hearing and allows the property owner to better prepare for the Property Assessor’s arguments at the hearing.  A property owner should check with their local Value Adjustment Board to determine exact deadlines and procedures for the Exchange of Information Period for their particular case.

The packet should contain a cover letter supporting the request for an adjustment to the assessment and include all relevant proof.  Relevant proof might include:

• market analysis
• data (with adjustments) concerning the comparables properties used (including photographs) and explanations for the adjustments being made
• copy of the subject property’s data sheet at the Property Assessor’s office;
• copy of the sales agreement (if the property was recently purchased and if relevant to the argument)
• copy of the actual tax bill
• copy of a formal appraisal, if one was obtained

The packet should briefly explain the negative circumstances that might impact the value of the property such as nearby airports, waste sites (especially if toxic), flooding issues, neighboring homes in disrepair, nearby commercial or industrial properties and apartment buildings, heavy traffic areas, etc.  Pictures and other supporting documentation depicting or describing the undesirable elements of the property and the impact they have on the property are very helpful as well.

Overall, it is important to provide a written basis for the argument.  Saying that the assessment is unfair or inaccurate, without proving it, is a recipe for disaster.  The Value Adjustment Board will only be persuaded by the credible and relevant evidence that is presented.  If circumstances are proven to exist, but their relation to the assessment or value are not shown, the argument is not sound.  As an example, if an argument is made that there is a waste site nearby, but the waste site is too far to have an impact on the property value, the Value Adjustment Board would be hard pressed to buy into the argument that an “economic adjustment” is required because of the waste site’s negative affect on the value of the property.  Another common mistake would be to argue that the property has been on the market for some time, but has not sold.  The Value Adjustment Board would simply not factor this into their decision.

During the hearing, one must conduct themselves in a professional manner at all times. This requires that the property owner dress appropriately – although a business suit is not necessary, it can’t hurt.  Ensure that cell phones are shut off.  Being attentive to other appellants that present their cases beforehand allows one to get more comfortable with the way the Special Master is handling the cases before them and may provide an opportunity, not only to hear what arguments are not working, but also to determine which are.

Since a packet has been provided to the Value Adjustment Board, the property owner can simply provide an overview and direct the Special Master to the evidence in the packet while it is being presented.

The Special Master may ask questions pertaining to the property and the evidence provided in the packet.  While the questions are usually simple and easy to answer, the property owner should feel at ease knowing that most questions can be answered by the evidence or with the knowledge the property owner already possesses regarding the property.  If the evidence is not compelling or the property owner is not prepared, the responses to these questions will reveal it.

Before the hearing and while preparing for the argument (including the preparation of the packet), the property owner should have a clear idea of what to request.  In other words, if the comparables are in the property owner’s favor, the argument should focus clearly on what value would result if this evidence is accepted as credible and relevant.  If there is an inaccuracy in the Property Assessor’s data, the property owner must be prepared to argue what the reduction in the assessment should be and why. 

The property owner must be able to substantiate the request by providing relevant facts, data and evidence that support it.  This also holds true when in informal meetings with the Property Assessor.  “It is, because I say it is” will not be sufficient to convince the Special Master, no matter how willing he or she might be to help the property owner.

Throughout the presentation, the market value reached by the evidence submitted should be tantamount.  The property owner must focus on this value and present the evidence that sheds the most favorable light upon it and substantiates it.  Also, the argument should be made that the assessment should be lowered to coincide with the tax ratio being used by the Property Assessor’s office.

While the comparable sales market value approach may be the most relevant appraisal method, the cost approach and income approach should be used to substantiate the market value as well if it is relevant.  One must not, however, feel compelled to use either one if it would not help the argument being made.  The purpose here is to convincingly argue to the Special Master that the market value derived by the appraisal is overstated.  It is only obvious that one must not be afraid to exclude evidence that does not help the argument, while presenting evidence that does.

The use of maps to show the comparable properties’ location in relation to the subject property and other exhibits are also very helpful in presenting the case.  Exhibits tend to show that preparation and analysis went into crafting the argument and can be compelling if used properly.

Allow the presentation to flow like a story about how the tax bill arrived and how the assessment was analyzed and determined to be inaccurate or unfair.  Conclude with the amount that should have been assessed if all the relevant data, as presented, were taken into account.

And end by the thanking the Value Adjustment Board for the opportunity to be heard.

Our Current Tax System

An ever increasing tax burden is an almost certainty under the current system of assessing properties.  Even when property values drop, the tax burden often increases nonetheless.  The system should be revised to the extent that the method of assessing and taxing is fair and affordable to all property owners.  The municipality should have all properties assessed at 100% thereby taxing based on full market value instead of depending on Department of Revenue ratios being handed down.

Property owners, however, are not innocent either.  Many lack an awareness of the system of property tax assessments and taxation and fail to recognize that the services they request and benefit from come at a cost.  Certainly, the municipality can not provide services, whether fire, school or sanitation, without a budget to do so.

The services provided by the municipalities can improve as well.  Government inefficiencies add to the cost involved while providing less and less services overall. 

As citizens and taxpayers, we need to work with others and the government to find solutions to ever rising property taxes and to find alternative methods of raising revenues in order to lower the tax burden on property owners.

Should a Professional Be Hired?

As previously discussed, a property owner can hire an appraiser to help prepare the information and evidence to be presented at the hearing.  A property owner can also hire a professional to present the information and evidence at the hearing. 

If time is an issue for the property owner, or the particular case is complex, there should be no hesitation to hire an attorney or property tax consultant to both prepare the evidence and present it at the hearing.  Even when the property owner has the time and relative ability to do all of the legwork and present the case at the hearing with the Special Master, seeking the advice of a professional may still prove to be very helpful.

A professional will be able to provide the property owner with an opinion as to the value of the property and the likelihood of success at a hearing.  This can be done early in the process to avoid unnecessary expense by the property owner.  The sad truth is that sometimes the property owner must concede and simply (and sometimes reluctantly) pay the property taxes that are due.

An attorney or property tax consultant can be hired to prepare the information (the appraisal, along with all other relevant data) and present it at the hearing.  The property owner need not spend time determining value or investigating procedures and then preparing for the hearing.  In fact, when a professional is hired, the property owner does not even need to appear at the hearing.  Again, the factors that the property owner must evaluate are the time constraints and the relative complexity of their case.

To find an attorney or property tax consultant that is knowledgeable in property taxation, a property owner can start with their own lawyer.  Real estate lawyers, in particular, are able to provide information on property taxes and help refer clients to other attorneys or tax consultants that have experience with property tax appeals.

Most lawyers and tax consultants charge, as a fee, a percentage of the tax savings obtained for the property owner.  These percentages usually range between 10 and 30% of the savings obtained, but may be more.  In other words, if the total savings are $1000, then the fee would be between $100 and $300 depending on the agreement the property owner has with the lawyer or consultant.  If the professional is unable to obtain a reduction of the tax bill, then the property owner owes nothing.  This is a way of the professional guaranteeing a good result – a fee contingent on the reduction of the tax bill.  Bear in mind, however, that each lawyer or tax consultant charges differently.  Sometimes the professional might charge a flat fee or hourly fee regardless of the outcome.  Others might charge a flat fee and a percentage of the savings.  The property owner must review the engagement letter thoroughly and understand what fees will be charged and when they are due.

As discussed previously, the property owner may simply hire an appraiser to prepare the data necessary for the hearing, while the property owner, himself, presents the case and argues the merits at the hearing.  A disadvantage in doing this, though, is that an appraiser must be impartial in determining value.  If the appraiser finds that the Property Assessor’s value and determination of the assessment is correct, the appraiser may not be able to disregard the evidence found.  A lawyer or tax consultant, on the other hand, is an advocate for the property owner and can disregard evidence that hurts the property owner’s argument while presenting evidence most favorable.

Whenever a property owner decides to hire a professional – whether an attorney, tax consultant or appraiser, he or she should interview several and determine the professional’s level of experience and the method of preparing and presenting the case.  If the property owner is comfortable with the professional and is assured of his or her reliability, having obtained and checked all references, the property owner should feel at ease that the process will go smoothly.  While hiring a professional does not guarantee success, it certainly provides the property with the greatest likelihood of having the property tax bill lowered. 

Since professionals are available to appeal a property owner’s taxes, then what is the purpose of our discussion?  Well, first of all, as has been described here, the process of appealing property taxes is not complex or too time consuming.  With some time and effort, a property owner can obtain the same results as a professional.  Also, if the tax bill is not substantial (in Dollar terms) – which is usually the case with residential properties, then a professional might not be willing to do the work on a contingent fee basis since the percentage would not amount to much money and therefore might not be worth his or her time and effort. 

Finally, while I disagree with this, some have argued that a professional puts the Property Assessor and the Special Master on guard and therefore the property owner might have a better chance at obtaining results.  While this may be true in certain instances, I believe that the Property Assessor and the Special Master, themselves being professionals, understand the role of the lawyer or tax consultant and feel that the hired professional is better able to present a concise argument with relevant evidence than an inexperienced property owner. 

All in all, the important factors for property owners to consider is whether they have the time, energy and resources to invest in the appeals process given the opportunity costs involved.  Furthermore, the property owner must determine if the case is too complex to forego a professional whether it be to a small degree or throughout the entire appeals process.

If time and complexity is not an issue, our discussion today provides a good starting to point for the property owner to use and guide them through the appeals process.  As always, it is best to consult an attorney, as each case and the circumstances surrounding it is different before proceeding on your own.

Florida Law Talk hosted by Kevin L. Deeb

This is my first post on my new blog called Real Estate and Business Blog, which is at www.realestateandbusinessblog.com.  I hope you will join us on an adventure as we dive into Florida’s real estate and business world.  We’ll be discussing Florida law, current trends and events and the economics that affect them all.  We’ll also be posting video and audio broadcast shows hosted by Kevin L. Deeb (me!), the managing partner at the Deeb Law Firm.

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