JoAnn Palko has always been proud of her family’s house in Lake County, Ind. And justifiably so: The three-bedroom brick bungalow boasts hardwood floors, a new roof and soothing views of a quaint nearby park. But last summer, Palko gave a guest a tour of the house—and, figuratively speaking, she trashed the place. That stove in the kitchen? It dates to Harry Truman’s presidency. The tile floor? Just as old, and made of asphalt to boot. And as for the upstairs powder room, let’s just say that in terms of space and amenities, it might remind a visitor of pioneer days.

Blame Palko’s residential mood swing on the most recent property assessment; the county raised the house’s value by 25 percent. So Palko has hired an appraiser to help her challenge the ruling by pointing out all the things that make her house look crummy. Bringing him on board cost Palko $300, but it may soon pay off. According to the appraiser, the county has overvalued the home by $50,000. For Palko, it’s ammunition for her fight. “This amounts to big savings,” she says.

This summer, as the buying season is heating up, so is the battle over property taxes. Homeowners across the country are trying to figure out the secrets to a good assessment—and by “good,” we mean “lower.” They’re caught in a pinch that taxpayer advocates describe as an unholy love child of the housing crisis and the recession. Because of the struggling economy, counties and cities are facing some of the biggest budget gaps in history—and since property taxes typically account for almost a third of a county’s budget, many governments are gritting their teeth and raising them. Indeed, property tax revenues rose by 6.2 percent in 2008, compared with 2.2 percent in 2005, according to the National League of Cities. But home prices, of course, have plummeted at the same time, leaving homeowners fuming over what seems like an expensive disconnect from reality. According to the National Taxpayers Union, between 30 and 60 percent of taxable property in the U.S. is overtaxed. “We’re seeing assessments that don’t make any sense,” says Barbara Payne, executive director of Georgia’s Fulton County Taxpayers Foundation.

Granted, Americans have been complaining about these taxes ever since George Washington hurt his property value by cutting down his father’s cherry tree. But this time around, they’re fighting back, appealing their assessments in numbers that local officials say are unprecedented. In Collin County, near Dallas, appeals increased 38 percent from 2006 to 2009, a period when taxes went up even as local home values stayed flat. And in Las Vegas’s Clark County, where home prices have fallen more than 50 percent from their peaks, appeals have skyrocketed 885 percent over the past three years. Even former Bank of America CEO Ken Lewis has gotten into the act, appealing his Aspen, Colo., property taxes last year. Alas, he didn’t get the $33,000 tab on his $19.6 million residence reduced—but 20 percent or more of homeowners do win on appeal, experts say.

Nonetheless, as they jump into the fray, many rookie tax warriors are learning that appealing a tax can be just as quirky as any other facet of local politics. In many communities, assessors have great latitude in deciding a property’s value. In Florida, they can add or subtract worth based on a home’s proximity to a noisy nightclub; homeowners along the Nevada shore of Lake Tahoe are judged, and taxed, on the smoothness of their beaches. The bureaucratic labyrinth is generating business for a new crop of assessment-appeal experts—many of them appraisers and real estate agents looking to make up income they’ve lost in the housing slump. Their reward is typically an up-front fee or a percentage of the reduction, regardless of whether the taxpayer gets $400 axed off his bill—or $4,000.

Some taxpayer advocates question whether these services are doing anything that consumers can’t do for themselves. “The appeal process,” says Pete Sepp, vice president for policy and communications at the National Taxpayers Union, “really is set up with the intention that homeowners can use it without third-party assistance.” But that process also varies widely by state and town, and for homeowners who have watched hours of research turn into months of waiting, the temptation to get help is strong. With or without help, many of those taxpayers are in for a chess match that can feel like it’s at a perpetual stalemate.

Posted in: Housing Market
Tags: national taxpayers union, property assessment, property tax revenues, property taxes