Newspapers in California are presenting daily dire and foreboding updates about foreclosures and short sales. Yes, Dorothy and Toto, this doesn’t look like California anymore. Many homeowners are facing Notice of Defaults and Trustee Sales and these are major problems for everyone involved. However, there is another aspect of the market worth discussing for homeowners with equity in their properties. As more Short Sales are recorded and more REO properties are sold by the lenders, comparable prices will be dropping below the prices paid for the properties in the near past. Statisticians and pundits keep saying, “The median prices haven’t dropped much from one year ago.” Try telling that to someone who paid $600,000 for a home eighteen months ago and now finds comparable homes in their tract selling for $500,000. However, there might be a small rainbow in the storm for some. Do you have any ideas for people who have purchased recently in an area where prices have dropped? How about recommending to them that they request a lowering of their Property Tax Assessment and temporarily lowering their tax bill? The best sources for information on this subject is your Local County Assessor. I was so fortunate recently to have a comprehensive interview with Greg Smith, the legendary Assessor, County Recorder and County Clerk of San Diego County who has served his County in different capacities since 1977. Following are excerpts from that session.   Q. If prices have recently fallen in an area, what are a taxpayer’s options? A. There are two methods of reassessments. One is an Informal Request for Review and if no agreement can be reached, then a Formal Appeal can be filed Q. What are the time factors for these options? A. In San Diego County, the Informal Reviews must be filed between January 1st and June 1st, and Formal Assessment Appeals must be filed between July 2nd and November 30th. Be advised that other Counties have different deadlines. Q. What is the policy of your office on these appeals? A. Our goal is to appraise the property at its current fair market value prior to completing our annual assessment roll. If the taxpayer disagrees with this value, they must file an Assessment Appeal within the above mentioned dates. After an Assessment Appeal is filed, our office reviews all the information provided by the taxpayer and attempts to reach an agreed upon value with the taxpayer. Very few of the appeals in our County go to a formal hearing before our Assessment Appeals Board. Q. What is the cost of the filing? A. There is no cost to file an assessment appeal. Q. Who might consider filing either an Informal Review or Formal Appeal? A. Anyone who has recently purchased a property where the comparable resale prices in the area have dropped, or anyone who feels that the current assessed value of their home is higher than the current market value of their home. Q. What is Proposition 8? A. It seems that everyone knows about Proposition 13. Another important State Law (Proposition 8) states, “If the current market value of your property falls below the assessed or taxable value as shown on your tax bill, the Assessor’s Office is required to temporarily lower the assessment.” You can get a copy of an “Application for Review of Assessment Form” by calling the Clerk’s office at 619-531-5777. It is a simple form where the taxpayer indicates their opinion of value and provides supporting documentation such as sales of comparable properties, or a recent appraisal. Q. What does the phrase “temporarily” mean? A. In times of dropping real estate prices, a taxpayer’s property tax assessment must be lowered according to Proposition 8 if the current market value is less than the assessed value as shown on the tax bill. Each year the taxpayer’s assessment will be reviewed until such time that the previously assessed value, plus the compounded annual 2% Consumer Price Index (CPI) factor, as required by Proposition 13, has been fully restored. As the market “turns around” and values increase, the assessment of the property will also be increased. Under no circumstances, however, can this increase in value exceed the original assessed value (plus the annual 2% CPI factor). Once the previous value is fully restored, the annual increase is then limited to the 2% CPI factor as required by Proposition 13. Therefore, taxpayers never lose their Proposition 13 rights under Proposition 8. Q. Does a taxpayer need an attorney or consultant to do this appeal? A. No. Many taxpayers file their own appeals successfully. In fact, our office is required by State law to keep a list of recent home sales for the last two years. Other supporting data can easily be obtained from an appraiser or local realtor. Q. I heard a rumor about an Orange County lawsuit on this subject. A. Someone filed a lawsuit claiming that lowered assessments could not be raised by more than 2% per year. This lawsuit was not successful. Under Proposition 8, the temporary reduction must be reviewed each year, and the property must be valued at the current market value. The maximum 2% annual CPI factor does not apply to properties temporarily lowered under Proposition 8 when their indexed base year values are being reinstated. Q. We have been talking about homes. Can a mobile home owner file a Review Request? A. Yes. Q. Any final thoughts? A. I believe Proposition 8 is very fair. Proposition 8 allows the Assessor’s Office to provide, temporarily, necessary relief to owners whose property values have declined, while still retaining the ability to review and increase those values when market conditions improve. My final thoughts after this discussion. First, I want to thank Greg Smith and Dave Butler of the San Diego Assessor’s Office for their patience and taking the time to educate me. By the way, if you ever get the chance to attend a Greg Smith seminar, run, don’t walk to the session. I’ve had the pleasure of hearing him many times and he makes his bureaucratic subject interesting and his humorous delivery is exemplary. Also, it has been an added pleasure to have his ever-charming wife as a student at my seminars. While it is too late to ask for an Informal Review, people can still file a Formal Appeal. Real estate professionals should recommend immediately that friends, associates, clients, etc. who recently purchased property evaluate their current property assessments and consider an appeal. For example, Orange County and some other Counties have a September 17th deadline for filing a Formal Appeal this year so residents in those counties must move fast. Any tax reduction under Proposition 8 is temporary but temporary means you can save real dollars for a specific period of time, and I strongly believe that is better than doing nothing. Who knows in the overall scheme of things when prices will swing upward again? Do something now; your friendly local Assessors are waiting to hear from you.