Property taxes: Appeals shoot up in King, Snohomish Counties

Tracy Whitcombe knew the big 1960s-era chalet he purchased along the Stillaguamish River near Granite Falls would be a long-term renovation project. The A-frame building featured dark plywood paneling, fluorescent lights and gaps in the wood siding large enough for insects to fly in and out. Still, he paid $629,000 for the former retreat center and an adjacent caretaker's cabin set on three wooded acres.

What Whitcombe, 43, hadn't bargained on when he bought the property in September 2007 was the project he would take on when he challenged the Snohomish County assessor's valuation of the property: $1.1 million. Seventeen months and about $17,000 in property taxes later, the assessor agreed to lower the value to $729,000 and to refund some, but not all, of the excess taxes he'd paid.

Whitcombe wasn't alone.

Homeowners complained in near-record numbers about high valuations last year. Appeals of property values shot up more than threefold in King County, from 3,767 in 2007 to 13,156 in 2008. The last time there were that many appeals was 1991, when a sluggish real-estate market followed several years of rapidly climbing home values.

Appeals also increased in Snohomish County last year — from 1,688 to 2,347.

Appeals resulted in lowered values about half the time in King County and about a third of the time in Snohomish County, according to the assessors.

With 2009 property assessments mailed in June, homeowners in both King and Snohomish counties may wonder if their homes would really sell for what the new valuations now say they're worth.

Assessors in both counties say the decades-long rise in home values followed by a sudden decline has made it unusually tough to appraise property.

"We're in uncharted territory," said acting King County Assessor Rich Medved. "We're working as hard as we can to figure out the best way to fairly value property."

Sharp drop in values

Snohomish County mailed all of its residential valuations in June. King County will continue to send out its 2009 assessments through September. Based on the notices sent so far, home values have dropped an average of 12 percent in Snohomish County and 18 percent in King County.

But even those reductions may not reflect the extent to which some home values have fallen.

Part of the problem is the lag time built into the process. The new values, by law, were fixed on Jan. 1 and so don't reflect the continued drop in the housing market over the past six months. There also were far fewer sales in 2008 than in previous years on which to establish market value. And because assessors use sales only for comparison purposes, they can't know for how long or at what price a house sat on the market without selling.

Still, assessors say that even the near-record number of appeals last year represents less than 1 percent of all homeowners.

"The vast majority of property owners believe the assessment is fair and equitable," said Cindy Portmann, Snohomish County assessor.

Glenn Crellin, an economist who runs the Washington Center for Real Estate Research at Washington State University, agreed that county assessors generally do a good job of estimating property values. He said audits by the state show that the bulk of home sales are within 5 percent of the assessed value.

"There are always more disgruntled taxpayers in a soft market because people don't understand the lag time built into the system," he said.

When less means more

At stake, of course, are the property taxes that are based on a home's assessed value. Washington's property-tax system is notoriously complicated. It's based on all of the budgets of all the taxing districts where a residence is located. If the value of a $350,000 home falls by 20 percent, that homeowner's taxes may actually rise because every homeowner with a drop in assessed value must pay more to cover all those existing budgets, plus any new measures such as school levies or park bonds. Adding to the difficulty, homeowners won't get their tax bill until January. But they must appeal their new assessments within 60 days of receiving the valuation notice, typically by the end of summer.

"When people get their tax bill next year, they'll be shocked," said Harley Hoppe, a former King County assessor who now makes a living appraising property and helping homeowners challenge their assessments.

Hoppe said the 2009 home valuations also may be high because assessors calculate value based on comparable sales. The slump in sales last year makes the data less reliable, he said.

While most 2009 assessments went down, some home values in Snohomish County rose. Portmann said waterfront and view property continued to increase in value. That's not the case in King County, where high-end view neighborhoods such as Magnolia and Fauntleroy saw home values drop by an average of 18 percent.

What officials don't see

Gregory Kovsky started his business, Fair Tax Assessment, last year, betting that in a falling real-estate market, assessments would continue to be higher than what most homes were worth. The firm charges $250 to challenge an assessment and provides comparable sales data, as well as evidence of similar homes that sat on the market near the appraised value without selling — something, he said, assessors' records can't capture.

That's what happened to Bob Norin. His late mother's Vashon Island waterfront home sat on the market for six months in 2007 without an offer. He had lowered the price several times and was asking $795,000 when the 2008 assessment arrived saying the house was worth $1.1 million.

He appealed, and the county agreed to lower the value to $750,000. The house, a former hunting cabin that had been remodeled over the years, finally sold for $605,000.

"People will probably not complain when the assessment is a little behind the value, but people do take notice when the market is going down," Norin said.

Assessing a chalet

Tracy Whitcombe, who bought the big chalet on the Stillaguamish near the peak of the region's real-estate boom, challenged the 2007 assessment of $1.1 million. He argued that the purchase price of $629,000 should determine its value.

He could document the previous owners' unsuccessful attempts to sell the house for more. And while a waterfront location typically adds to a home's value, Whitcombe noted that on a river, waterfront has a down side: The Stillaguamish had flooded three times in the previous nine years.

The county told him it had used sales of comparable properties to determine his value. The chalet has seven bedrooms, six bathrooms and a small indoor pool in a total of 8,300 square feet. The county also said it had to consider the property's two undeveloped building lots, which the assessor is required to value at its "highest and best use."

Whitcombe said that made it sound like a much grander house than it actually was.

The assessor's office agreed to lower Whitcombe's assessment to $729,000. But because he wasn't the owner in January 2007, when the value for that year was established, he couldn't appeal that year's assessment.

After a continued appeal, the county declined to lower the value any further. He did receive a $4,100 refund on his 2008 taxes.

Over the past two years, Whitcombe and his partner have painted the plywood paneling, framed doorways and added trim. But the remodeling stops about halfway along the second-floor hallway, where the old dark chalet awaits more time and money.

Someday, Whitcombe imagines running a bed-and-breakfast in the A-frame along the river.

But for now, he said, "I still think the assessment is too high."

Lynn Thompson: 206-464-8305 or lthompson@seattletimes.com