Equalization Ratios Are Crucial in Determining the Feasibility of a Tax Appeal

According to some experts, New Jersey’s real estate market reached its peak in the summer of 2006. Since then, real estate values have consistently dropped. The unfortunate result is that New Jersey municipalities that conducted their most recent revaluations or re-assessments at or near the height of the real estate market are now substantially over-assessed. In these instances, filing a Tax Appeal is essential. However, due to the high cost of performing a revaluation or re-assessment, many New Jersey municipalities have not revised their assessments in several years. In some towns, properties are valued at as little as 20% of their true value. The question then becomes determining which of these properties are still good candidates for a Tax Appeal.

Under the remedy commonly known as “Chapter 123,” taxpayers outside of the year of revaluation can still win a tax appeal if they can prove they have been assessed at a higher percentage of value than the rest of the town. In these cases, however, it is important to note that the municipality is afforded a 15% margin of error in their valuations.

To illustrate how this process works, we need to do a few simple steps. The first step in this process is to obtain a list of the Equalization Ratios for each of the towns in your county. The second step is to take your assessment and divide it by the equalization ratio for your property. The number that results is known as the “true value assessment.” If you feel that this number exceeds the actual value of your home, remember that the municipality is also afforded a 15% “cushion.” Therefore, you then need to take your True Value Assessment and multiply it by 0.85. If the resulting number still sounds like it is higher than the actual value of your property, then you probably have a good case for a tax appeal.

Even in a deflationary real estate market, the fact is that most properties are still under-assessed. Therefore, knowing your town’s equalization ratio is an essential component in determining whether your tax appeal case will be worthwhile.