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Don’t Let your Vacant Listing Go Third Class

Selling a property that the owner has already vacated? If the property is located in the District of Columbia, you will want to register the property as vacant with the city so that it can be exempt from paying additional property taxes.

The Real Property Classification Clarification Emergency Act of 2002 created a Class 3 property tax rate for vacant commercial and residential properties in the District of Columbia. Vacant property is taxed at $10.00 per $100 of assessed value – by comparison, a Class 1 residential property is taxed at $0.85 per $100 of assessed value!

Sellers who move out of a property before it is sold run the risk of having their property reclassified as vacant. The Department of Consumer and Regulatory Affairs (DCRA) inspects properties regularly to determine whether or not they are vacant. Individuals are also encouraged to report vacant properties to the DCRA. So a property that takes some time to sell and has already been vacated by the owners is particularly vulnerable to being reclassified.

Fortunately, by registering the property with the DCRA, an exemption does apply. A form needs to be completed with exemption category 5 checked and a small fee submitted. Also, supporting attachments must be submitted, such as the listing agreement with the realty agent contact information and documents showing ownership (either the Deed or HUD-1 Settlement Statement will typically suffice). The code allows for an exemption from Class 3 status for up to one year.

Here is the link to the form: (http://dcra.dc.gov/dcra/frames.asp?doc=/dcra/lib/dcra/2009_vacant_property_form_fillable.pdf)

Usually doing something first class costs you money, but in the District of Columbia, you want your property to receive the Class 1 treatment. So when vacating a listing, remember to register to get your Class 1 status – it will save a ton of money!

Taking Advantage of your Tax Appeal

The decrease in home prices does have some advantages, one of which is the opportunity to challenge property tax assessments. Often I find myself seated at closing with a homebuyer who has purchased a property for far less than the county or city assessed value. While challenging a tax assessment after closing may not be the most exciting way to spend your time, it does have the potential to save you thousands of dollars.

In Maryland, if a property is purchased between January 1 and June 30, the new homeowner has 60 days from the settlement date to file an appeal. If the homeowner misses this 60 day window, there are two more options: an appeal within 45 days of receiving an assessment notice (typically every three years) or a “Petition for Review” by January 1 of any year. The initial review will take place at the Supervisor’s Level, which is typically an informal, 15 minute meeting. If the homeowner disagrees with the decision, an appeal can be made to the Property Tax Assessment Appeal Board. If still dissatisfied, a further appeal can be made to the Maryland Tax Court. Here is the link to the Maryland Department of Assessments and Taxation, http://www.dat.state.md.us/.

In the District of Columbia, an appeal must be filed within 30 days of the date of the assessment notice (taxes are assessed annually) and it must be received no later than April 1. A new owner may file a petition for administrative review. The initial appeal can be conducted in person, in writing, or by telephone. If the disputed assessment can not be resolved, the homeowner can appeal for a Board level review, and if the homeowner is still not satisfied, a final appeal can be made to the Superior Court of the District of Columbia. Here is the link to the DC Office of Tax and Revenue appeals page, http://otr.cfo.dc.gov/otr/cwp/view,a,1330,q,594359.asp.

You should be prepared to provide comparables or other data to prove that the property assessment is too high. When appealing after a purchase transaction, a HUD-1 Settlement Statement or an appraisal may be helpful. Every property owner is entitled to obtain, free of charge, their property worksheet and a sales list for the area where the property is located. Most importantly, during the appeal, focus on the points that specifically affect the property value – do not argue about percentage increases, past values, or values of properties in other jurisdictions

Don’t be intimidated by the tax appeal process; typically at the first appeal level you will meet one on one with an appraiser in a non-adversarial setting. Also, most appeals are resolved at the first appeal, especially if you have done your research, therefore appealing to a review board or the tax court is not generally needed. So use your right to Tax Appeal, it’s not as difficult as it seems and the reward will be worth it.