It is no secret that New Jersey citizens pay the highest property taxes in the nation. Property taxes are assessed by local governments and used to pay for local programs and services. Therefore, things that may affect a homeowner’s property taxes include: the local (municipal and county) programs and services, including public schools, local revenues available through other sources, the market value of the homeowner’s property, and the total value of all properties in the municipality. All taxable property is assessed a value by the town tax assessor. “The assessor shall…after examination and inquiry, determine the full and fair value of each parcel situated in the taxing district at such price as, in his judgment, it would sell for at a fair and bona fide sale by private contract on October 1 next preceding the date on which the assessor shall complete his assessments…” N.J.S.A §54:4-23.
Therefore market value should correlate closely with the assessed value. However, it is too labor intensive to have tax assessors reassess every individual property each year. Indeed, New Jersey has 565 municipalities. Nearly every one has its own local tax assessor.
Therefore, generally the tax for each property is simply adjusted slightly each year to meet budget requirements. In that case, the municipality may only do town-wide reassessments once every several years depending on changes to and needs of the municipality, policies, and property sales. This is done to insure “equalization” – insuring that each property is carrying its fair share of the tax burden. For instance, if assessors see that properties are being sold for values that significantly differ from assessed values, then that might be an indicator that a reassessment needs to be done to ensure equalization. This is sometimes referred to as an assessment-sales ratio comparison.
Many people, particularly in New Jersey, believe that their property taxes may be incorrect. In order to determine this, the homeowner first needs to have a basis for what the accurate market price would be. If the home was recently sold – that may be a good indicator. Also, the recent sales prices of other similar properties in the municipality may also be good indicators. (In any case, if a homeowner is looking to challenge her tax assessment, an expert appraisal will most likely be required.)