Property taxes are on the rise nationwide, even as property values are on the decline.
In this tough economy, increasing property taxes mean more people are in jeopardy of losing their homes.
As many as 60 percent of properties across the country are overassessed, according to the National Taxpayers Union, a nonprofit group that promotes lower taxes.
Property tax bills are arriving in mailboxes across the country, and Mellody Hobson, president of Ariel Investments and "Good Morning America's" personal finance contributor, appeared on today's show to explain how you can determine if your property tax bill is too high.
Q: How are property taxes determined?
A: Property taxes are usually calculated by taking the assessed value of your home and multiplying it by the tax rate that has been determined by your local government. Applicable exemptions are then subtracted from your total bill. The property taxes are used to finance local schools, police and other municipal infrastructure and services.
Property taxes are always controversial, and are even more so now that the economy is so bad and local governments are losing tax revenue. Because of the resulting budget shortfalls, counties and towns are eager to get every possible property tax dollar, so those taxes are rising.
Property values have declined an average of 18 percent each year between 2006 and 2009, Hobson said. Despite the decline, property taxes have increased 7 percent.
Q: Are the property assessments accurate?
A: The National Taxpayers Union estimates that up to 60 percent of properties are overassessed.
If you believe your tax bill appears high, you might be right. To challenge your bill, you should first get a copy of your property's assessment from your municipality's property assessor's office and check to make sure all the reported information about your property is correct.
Municipalities use different ways to determine a property's assessment. Hobson said you should check with the assessor's office about the way it calculates your home's assessed value. It may not always be the full market value of your home.
Q: How can I figure out how much the other homes in my neighborhood are worth? Is that important?
A: In order to determine if your home has been properly assessed, you should know the assessment of comparable homes in your neighborhood, Hobson said.
Because some governments only assess home values every three or four years, you should check the assessments of five comparable homes that have sold in your neighborhood. You can find the information at Web sites such as zillow.com or domania.com, or at your local municipality.
Another way to determine your home's value is by hiring an independent appraiser.
At $250 to $500 per job, it's expensive but more accurate.
Hobson said homeowners who are considering an independent appraiser should verify that the appraiser is licensed by the National Association of Independent Fee Appraisers or by the American Society of Appraisers. Be sure to check first with your municipality's property tax assessment office to make sure it will accept outside appraisals; some jurisdictions won't, Hobson said.
Keep in mind that if you recently financed your home or received a home equity loan, you may already have a professional appraisal available, she said.
Q: How can I lower my tax bill?