The real estate market has yet to rebound from its historic crash—here’s why.

Four years after the housing bubble popped, the American real estate market has yet to launch a sustainable recovery. Although U.S. home prices have improved modestly since the spring of 2009-and certain regional markets have performed even better-sales and values will face renewed downward pressure later this year in the wake of the expiration of the federal home buyer tax credit. Indeed, some analysts expect the bloated inventory and sputtering demand to trigger a “double dip” housing recession, with prices possibly even slipping back below their April 2009 lows.

This disconcerting outlook has materialized despite some optimistic developments within the market. The 30-percent drop in prices has helped restore affordability to a once wildly-overvalued market, putting additional consumers in position to become homeowners. Meanwhile, mortgage financing has grown downright cheap-with rates falling to 50-year lows. “So what’s the problem then?” asks Timothy Dwyer, the chief executive officer of Entitle Direct. “What’s causing this stagnation in the housing recovery?” Here are six reasons why the housing market hasn’t recovered:

1. Labor market: The labor market holds the key to a recovery in housing. “We need more job growth in this country for a housing recovery to take hold,” Dwyer says. That’s because a steady income stream is the first step to home ownership. And with the national unemployment rate sitting at an uncomfortably high 9.5 percent, a great deal of potential buyers are either out of work or worried about losing their jobs. And until jobs and confidence return, the market won’t have enough demand to support a sustainable recovery, says Mike Larson of Weiss Research. “This is truly a jobless recovery to end all jobless recoveries,” Larson says. “And that’s why I think the housing market is still struggling.”

2. Household formation:The weak labor market is undercutting a housing recovery in another way as well. As jobs become scarce, unemployed workers tend to move in with friends or family members, says Patrick Newport, a US economist for IHS Global Insight. This development works to constrict the creation of new households, which typically serve as a key driver of real estate demand. Only 398,000 new households were formed between March of 2008 and March of 2009, compared to roughly 1.2 million in a normal year, according to Newport. “That was the second smallest increase since 1947,” he says. Although figures for the most recent year have not yet been released, Newport expects they will show another period of sluggish household formation. “That is the key reason why the housing market is still down…and the reason that household formation is down is because the economy is so weak,” Newport says. “Job growth is what will get people moving back out on their own.” Newport expects the economy to add jobs going forward, but only at a modest pace. He forecasts roughly 800,000 additional jobs added this year, 2.7 million in 2011, and 3.5 million in 2012.

3. Foreclosures: Despite a sharp pullback in new home construction, the housing market remains significantly oversupplied. The market had an 8.3-month supply of unsold existing homes in May; that’s above the 6-month supply associated with a balanced market. At the same time, a mountain of distressed properties will ensure that additional inventory continues hitting the market in the form of foreclosures. Foreclosure filings were reported on nearly 1.7 million homes in the first six months of the year, an increase of eight percent over the same period a year earlier, according to RealtyTrac. “The midyear numbers put us on pace to exceed 3 million properties with foreclosure filings by the end of the year, and more than 1 million bank repossessions,” James Saccacio, the chief executive officer of RealtyTrac, said in a statement. And with large numbers of Americans still struggling to pay their mortgage bills, even more foreclosures are on the way. Ten percent of all mortgage loans were delinquent at the end of the first quarter, according to the Mortgage Bankers Association. It could take two years or longer for the market to work through this excess inventory, experts say. And it will be difficult for home prices to rise appreciably until balance is restored.

4. Tight credit: Rates on 30-year fixed mortgages fell to 4.57 percent for the week ending July 15-that’s the lowest level since the 1950s. Not everyone, however, will be able to take advantage of these attractive terms. That’s because banks-who incurred huge losses on bad loans made during the housing boom-have increased their lending standards significantly. “If you don’t have good credit it’s going to be difficult [to get a mortgage],” says John Bancroft, the executive editor of Inside Mortgage Finance. “If you don’t have money for a down payment and you are in a market that is still considered deteriorating, it’s going to be difficult [to get a mortgage].” To get the best rates, today’s borrowers will need a FICO score of 720 or higher, a down payment of around 10 percent, and fully documented income and assets, says Keith Gumbinger of HSH.com. Buyers that can’t meet these requirements could still be eligible for government-backed loans through the Federal Housing Administration. Attractive rates are also available on larger, so-called Jumbo home loans, but the credit bar will be even higher. Today’s Jumbo borrowers generally need a FICO score of at least 740 and should expect to put down anywhere from 20 to 40 percent, Gumbinger says.

5. Falling home prices: With home prices having fallen so dramatically from their 2006 peaks, the real estate market’s weakness has become an obstacle to recovery in and of itself. Although home prices have stabilized recently, they are expected to decline in coming months. Meanwhile, the years-long period of home price deflation has blinded many Americans to the potential benefits of buying a home, Gumbinger says. “The message which has been repeated over and over again in anything from 40-point headlines on down is: ‘People are getting screwed by homeownership.’” As a result, many would-be home buyers are still scared off by concerns that their investment may lose value after they’ve gone to closing. “No one wants to catch the hot falling potato,” Gumbinger says.

6. Selling your other home: While today’s housing market has created some serious deals, not all buyers are in position to take advantage of them. For example, any current homeowner interested changing addresses will first need to sell their home. And with roughly one in four homeowners in negative equity-meaning they owe more on the mortgage than their property is worth-that can be tricky. Homeowners with negative equity may take a loss on their investment if they sell their property. “That’s something that [homeowners] don’t do readily,” says Brad Hunter, the chief economist at Metrostudy. As a result, the 11 million homeowners who have negative equity are less likely help advance a real estate recovery.

Outlook: When considering the trajectory of the real estate recovery, it’s important to bear in mind the magnitude of the boom and bust, Larson says. “We had the biggest housing bubble the country has ever seen,” Larson says. “The reality is that when you get these types of situations that carry so far to the upside, the recovery period takes quite some time.” Newport expects median existing home prices to fall another 8 percent or so before bottoming out in the first quarter of next year. From there, he expects prices to begin a slow and fitful climb.

Posted in: Housing Market
Tags: double dip, home ownership, housing bubble, Housing Market, housing recession, jobless recovery, national unemployment rate, sustainable recovery

Posted in: Stuff and Nonsense

GETTING READY TO put your house on the market? Before you do, you’ll have to decide whether you want to hire a full-service broker, work with a discount broker or sell the place on your own. It’s not an easy decision — there are advantages and disadvantages to each method.

A traditional broker, for example, will present you with a complete marketing plan and expose your home to as many buyers as possible. You could, however, save yourself thousands of dollars by selling your property on your own. But some would argue that the headache isn’t worth it.

Here are some pros and cons to consider before you take the plunge.

Traditional Brokers
The Pros: Great exposure. Traditional real estate agents share their property listings in a database called the Multiple Listing Service. This database contains the vast majority of all properties that are for sale and is used as a standard by agents nationwide. (Manhattan, however, doesn’t have a local Multiple Listing Service.) Through the MLS, the details of your property can be easily accessed by prospective buyers either through their agents or directly by them on the Web. And since the listing broker is willing to split the 6% commission with any real estate agent who finds a buyer, there’s plenty of incentive to show a competitor’s inventory.

A good agent will do all the work for you. He or she will take control of the transaction and do everything from setting an accurate asking price and prescreening prospective buyers to showing your home and negotiating the final price. All you’ll need to do is keep the place tidy. This should free you to spend your weekends looking for your new abode.

The Cons: Brokers are expensive. Most of them charge a commission of as much as 6% for their services. So if your four-bedroom colonial sells for $500,000, you’ll have to cut a check for $30,000 at closing. Keep in mind, however, that all fees are negotiable.

An agent may not always have your best interests in mind. Take, for example, the so-called open house, where buyers are invited to view a home en masse. These events rarely lead to a sale. So why are they popular? Brokers like them, because they’re often used as a means for generating buyer leads.

A broker is in control of your transaction. So be prepared for strangers to traipse through your house for a “viewing” at practically any time of day. More important, your broker will be negotiating on your behalf, and you’ll have to trust that he or she is providing you with all of the information you need to make a final decision. Worst case, you may find your agent encouraging you to reduce your price just to make a quick sale so he can move on to another property.

Discount Brokers
The Pros: Discount brokers are cheaper than traditional brokers. Companies such as Foxtons, eRealty.com and zipRealty.com charge sellers between 2% and 5% for their services. (Typically, the higher the fee, the more service that’s provided.) So the commission for that same four-bedroom colonial could cost you between $10,000 and $25,000, compared with the $30,000 a traditional broker would charge you.

You’ll reach more potential buyers with a discounter than if you sell your home on your own. Discount brokers spend millions of dollars each year on advertising in the U.S. and abroad. A large percentage of homes handled by these low-cost brokers sell without being listed on the Multiple Listing Service.

Some discounters will prescreen for qualified buyers and weed out the riffraff. If you use a discount broker that runs credit checks on potential buyers and makes sure they’re preapproved for a sufficient mortgage, you can have confidence that people looking at your property are serious buyers.

The Cons: You get what you pay for. Some discounters merely list your property on their Web sites. Or they’ll field calls from prospective buyers, but you’ll have to give the official home tour and deliver the hard sell. If this is all the service you’re getting, some industry insiders argue you might as well run an ad yourself.

You’ll have to pay up to get your home in the Multiple Listing Service database. While discounters can offer you this service, you won’t get it for 2%. Many discounters will charge you a higher fee, say 4% to 5%, for the listing.

Don’t expect agents to bang down your door. Even if your home is listed in the Multiple Listing Service database, some agents may refuse to show your property. Why? The discounted commission. Rather than the traditional 3% buyer’s commission, many discounters will offer agents just 2% or 2.5%. While that may seem like splitting hairs to you, the difference can really add up. If an agent can make $10,000 selling one $500,000 home vs. $30,000 on a comparable property, which one do you think he’ll show first?

For Sale by Owner
The Pros: More money in your pocket. That’s right, you get to keep whatever your home sells for. You can put that 6% commission toward the down payment on a larger home or toward more important expenses, such as your child’s education.

No one knows your home better than you do. So doesn’t it make sense that you could point out all of the amenities and sell it better than an agent? Many agents showing a home are walking through it for the first time.

If you want something done right, do it yourself. Selling your own home gives you complete control over the transaction. You set the price, you set up convenient times to show the home, and you get to negotiate with a buyer. This way, you’ll know when it’s time to cave and lower your price or stay firm because your house is attracting a lot of interest.

The Cons: Less exposure. If you try to sell your home without the assistance of a broker, you’ll dramatically limit the number of potential buyers who’ll view your property. First, your house won’t be included in the Multiple Listing Service. Second, buyers feel more comfortable using a broker, since they want to see all of the available homes in a given neighborhood and have a professional on hand to help analyze the properties.

Expect your home to sell for less. According to the National Association of Realtors, homes that sold with a broker went for a higher median price than those sold by an owner. Many buyers believe they can negotiate more vigorously if they’re buying directly from an owner who’s avoiding a hefty broker’s fee.

Selling your own home can be a hassle. You have to set a price, place ads in the paper, field calls from prospective buyers and then put on your best smile and sell that house like a pro. And don’t forget about the negotiations. Some industry insiders even argue that buyers feel more comfortable talking money with a third party. Now try juggling all that’s involved while holding down a full-time job and looking for a new home for your family to move into. Some argue that avoiding the headache is well worth the 6% commission.

Posted in: Sell Your Home
Tags: asking price, discount broker, full service broker, local multiple listing service, marketing plan, multiple listing service, pros and cons, real estate agent, traditional brokers

EARLIER THIS YEAR 27 STUDENTS at Old Dominion University pressed their foreheads into a padded frame and peered ahead, much like patients at an eye doctor. They scrolled through pictures of 10 on-the-market homes on a computer screen as an ocular tracking program recorded their eye movements. In some of the homes, for some of the students, the living rooms were painted pink.

The question: Would a pink room—a problem you could fix for the price of a few cans of paint—make the students less likely to purchase the homes? The answer, based on preliminary results, is yes.

The study is part of a growing body of research that is putting real estate under the microscope. Scientists are finding that psychology—everything from how a buyer perceives his agent to how a seller prices her home—plays an unexpectedly large role. “When the market was going up, these questions were mildly interesting,” says Michael Seiler, a professor of real estate at Old Dominion University and the coauthor of numerous studies in the field (including the one about the pink room). Today, with the market wobbly, “they’re much more relevant,” and the results of such research, he and other academics say, can offer useful insights to buyers and sellers alike.

Here’s a roundup of some pertinent findings.

Choose Your Words Carefully

For a seller, advertising that you’ve recently painted your house seems like a no-brainer. But in a study that looked at nearly 60,000 residential real estate transactions in Texas, listings that mentioned new paint, new carpet and/or roof work sold, on average, for slightly less than those that did not.

Thomas A. Thomson, the study’s coauthor and the director of the Real Estate Finance and Development Program at the University of Texas at San Antonio, says that buyers aren’t going to be fooled by a problem house simply because it has a fresh coat of paint. “It’s kind of like putting lipstick on a pig,” he says. But even if there’s nothing wrong with the house, an advertisement that touts new features could set off alarm bells. If a seller says everything is new, a buyer might wonder why everything needed to be replaced—and whether there are other defects lurking.

Thomson recommends sellers take the simpler route: Let potential buyers be surprised by the quality of the home instead of disappointed by how average it is compared with its description.

Looks Do Count

Do buyers pay more when sellers’ real estate agents are attractive? Apparently so: Preliminary results of a study from Old Dominion University suggest that, put bluntly, the more attractive a male finds his female agent, the higher the price he’ll probably be willing to pay. Women also seem to be susceptible to attractive female agents, although not to the degree that men are. (Neither women nor men seem to respond much to attractive males.) “I’d like to think I wouldn’t fall prey to it,” says Seiler. “But I think that the people who were in our study would have said the exact same thing.”

Welcome, Out-of-Towners!

Out-of-state buyers tend to pay more than locals for properties of equal value, particularly when they come from states with higher real estate prices, according to a study from Brigham Young University. Researchers looked at apartment sales in the Phoenix metropolitan area—2,854 transactions from 1990 to 2002—and found that, on average, out-of-state buyers paid more than 5 percent more than their in-state counterparts.

BYU’s Grant McQueen says it often makes economic sense for out-of-state buyers to find homes fast, even if it means shelling out more money than if they shopped more or negotiated longer. Otherwise, they can end up paying more in travel costs than they save on the price of the home. The other reason, though, is less rational: In what’s known as “anchoring,” buyers tend to pay more for a home when they’re used to paying a higher price elsewhere.

The Downside of Upbeat

A big part of any decision to sell a house is where a homeowner thinks prices are heading. So how do owners feel after the brutal market of the past few years? Surprisingly—perhaps naively—optimistic. A recent survey of 479 homeowners in 20 U.S. metropolitan areas found that people were about five times more likely to say their own homes would see their prices increase in the next 12 months than they were to say their neighbors’ homes would do better.

Robert Shiller, a professor at Yale University, and Karl Case, a professor at Wellesley College, survey homeowners every year to gauge how confident they are that their homes will increase in value. Only once, when the housing market was at its worst in the recent crash, did the poll results slide into the negative. In general, the average respondent figured his home was bound to jump in value in the near future. “People don’t change their opinions that quickly,” says Shiller.

Whether they’ll regret those opinions later, only time will tell. If his expectations are out of whack with reality, an overoptimistic seller could wind up waiting for a higher price that will never arrive. But pessimists should tread just as carefully: An overly downbeat seller could wind up dumping a house at a price far below what it could fetch a year or two later.

Posted in: Housing Market
Tags: fresh coat of paint, real estate finance, real estate transactions, residential real estate

Nearly two years after the credit crunch virtually froze mortgage markets, high-end borrowers are seeing some relief: Rates for “jumbo” mortgages on pricier homes are at their lowest since 2003.

Just a year ago, the average rate on a 30-year jumbo mortgage—a loan of more than $729,750 not backed by government-sponsored agencies Fannie Mae or Freddie Mac—was 6.86%, according to Greg McBride, a senior financial analyst at Bankrate.com. Now it is 5.48%—a rate that rivals those available during the height of the credit bonanza.

“In just the past couple of months, jumbo loans have really started to be competitively priced,” says Keith Gumbinger of HSH Associates, a publisher of consumer-loan information.

The lower rates signal relief for homeowners looking to shed an onerous mortgage—and for the high-end housing market itself. More-affordable jumbo loans will likely whet appetites for new home purchases, helping to stabilize prices at the upper end of the market. For consumers, the lower rates will make home purchases more affordable and enable existing homeowners to trim their monthly bills by refinancing.

Applications Up
On Tuesday, Citigroup Inc.’s Citibank unit reported applications for jumbo mortgages at its retail branches were up 30% over the previous 60 days. Brad Dinsmore, who heads Citi’s retail-banking business, called home loans a “top priority.” Bank of America Corp., meanwhile, is now offering “competitive rates” on jumbo loans, starting in the 5% range, says Vijay Lala, product executive for Bank of America Home Loans. “We are very active in that marketplace, and we believe that jumbo loans will help lead the recovery in housing,” he says.

More lenders likely will follow suit and plunge back into the market, says Guy Cecala, publisher of industry publication Inside Mortgage Finance. “It’s a safe and profitable business to get into because jumbo loans are only going to borrowers with pristine credit,” he says.

Competitive pricing has spurred an uptick in activity among borrowers around the country, say mortgage brokers. “In the last couple of months alone, I’ve seen almost a 50% rise in sales of homes that need jumbo mortgages,” says Frederick Wohlfarth, president of Manhattan real-estate broker Wohlfarth & Associates.

After the financial crisis struck, the market for jumbo loans ground to a halt. Instead of selling loans into the secondary market, lenders had to hold them on their balance sheets. With housing prices on a dizzying dive, most lenders weren’t willing to take the risk of keeping potentially risky new loans on their books, which crippled the market for higher-end homes. Investors headed for the safety of government-backed home loans and steered clear of the private-lender variety.

“Now banks have more capital and are beginning to lend,” HSH’s Mr. Gumbinger says. “My ultimate question is: How long will these rates really last?”

Big Savings for Borrowers
A single percentage drop spells big savings for borrowers—and that is good news for the housing market. For example, a homeowner with a 30-year fixed-rate $800,000 mortgage at 6.86% pays $5,247 a month. If he were to refinance at 5%, his monthly payments would be reduced by $952.

While financial experts advise caution, prudent borrowers also can use lower rates to refinance existing mortgages and cash out some of their equity, while still ending up with an affordable mortgage.

David Sandak, a periodontist in Weston, Conn., was saddled with an expensive adjustable-rate mortgage on his $1.3 million colonial-style home, where he lives with his two daughters after his 2008 divorce. Two months ago, with the help of his real-estate lender Luxury Mortgage Corp. in Stamford, Conn., he was able to refinance to a 10-year fixed-rate mortgage at 4.875%. He cashed out roughly $90,000, which he is using to renovate his kitchen.

“I was incredibly impressed with what I was able to get,” Dr. Sandak says. “I thought I was in a desperate strait, and it turns out I wasn’t.”

Along with favorable rates, well-heeled borrowers are finding it easier to qualify for new jumbo loans and refinance existing loans at attractive terms. Underwriting standards are still strict, with most major lenders requiring a credit score in the 700s and down payments of up to 40%, but those with good credit can find good deals.

Mortgage Volume Down, Despite Lowest Rates. Access thousands of business sources not available on the free web. Learn More .Fernando Quinde, of Laguna Beach, Calif., is trading in his 30-year interest-only mortgage for a cheaper one. Four years ago, the 50-year old real-estate developer took out the mortgage, which had a fixed rate for 10 years, to buy his dream home, which has 180-degree views of the Pacific. The $1.5 million loan, which was issued by Countrywide Financial, required him to pay $7,500 a month—causing him more distress than he expected.

With the help of his real-estate broker, Mr. Quinde is now in the process of refinancing into a new 30-year loan with a fixed rate of 4.875% for seven years. “I am working to save some money, and this enables me to do that,” he says. “I am thrilled.”

Posted in: Mortgages
Tags: consumer loan, credit crunch, home purchases, jumbo loans, jumbo mortgage, jumbo mortgages, mortgage markets

“The Second Day of July 1776, will be the most memorable Epocha, in the History of America. I am apt to believe that it will be celebrated, by succeeding Generations, as the great anniversary Festival. It ought to be commemorated, as the Day of Deliverance by solemn Acts of Devotion to God Almighty. It ought to be solemnized with Pomp and Parade, with Shews, Games, Sports, Guns, Bells, Bonfires and illuminations from one End of this Continent to the other from this Time forward forever more. You will think me transported with Enthusiasm but I am not. I am well aware of the Toil and Blood and Treasure that it will cost Us to maintain this Declaration and support and defend these States. Yet through all the Gloom I can see the Rays of ravishing Light and Glory. I can see the End is more than worth all the Means. And that Posterity will tryump in that Days Transaction, even altho We should rue it, which I trust in God We shall not.” - John Adams in a letter to his wife, Abigail

Posted in: Holidays
Tags: 1776, history of america, independence day

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

Though appealing a home assessment might seem daunting, in most towns at least 20 percent of homeowners who go through the process end up with a reduction. Below, tips for boosting your odds.

Check the math
Property taxes are based on a percentage of a property’s value multiplied by a tax rate set by the local government. But math mistakes aren’t unheard of, so consumer advocates recommend recalculating the bill. It’s also worth a phone call to the assessor’s office to make sure the county’s description of the home matches reality.

Finesse a renovation
Renovations are hot ticket items for counties because they automatically increase the value of a home. Assessors may know if a homeowner has upgraded because their computer systems are often linked up to county building-permit offices, says Rich Almy, former executive director of the International Association of Assessing Officers. But even if an addition is on the books, there’s room for negotiation; a new screened-in porch, for example, might not be habitable year-round, so its value should be lower than that of a new room, says Pete Sepp, a vice president at the National Taxpayers Union.

Point out flaws
Every home endures wear and tear—and blemishes can work in a homeowner’s favor. Pointing out flaws, like a leaky roof or even a local nuisance, can strengthen an argument for lowering the tax bill. Seth Lubin, a property tax–reduction lawyer in Fort Lauderdale, Fla., was able to get one client’s home valuation lowered substantially by arguing that the homeowner—who lived next door to Al Capone’s former Florida estate—couldn’t enjoy his backyard because he had to hear the Godfather theme song and recorded machine-gun fire three times a day as a tourist boat sailed past his oceanfront property.

Get help
Some counties require much more research and paperwork than others, and some homeowners prefer to pay someone to handle the hassle. Professional assessment challengers typically charge either an up-front fee or a percentage of the reduction they obtain for the homeowner.

Posted in: Housing Market
Tags: building permit, consumer advocates, home assessment, home valuation, national taxpayers union, property taxes