Appraisal For A Tax Appeal

[Lonny Hogan]

Hello all,

I've just been contacted by someone wanting an appraisal done for a tax appeal. I've never done one for this purpose before. If anyone knows of any red flags, special procedures, or precautions I should be taking I'd sure appreciate the feedback.

Let me know what you think

Lonny

 

[airphoto]

Not complicated ..

Use same valuation date as the municipality (in NY it's January 1st.) If possible, stay within the municipality for comparable sales, or at the very least within the school system. Most important: be paid 'up front' regardless of the results!

 

[Terrel L. Shields]

My best advice is to not appraise it but rather to seek the flaws in the assessor's appraisal. Since most assessment appraisals are cost approach (even when they claim they are sales), the argument generally involves condition and effective age as well as an analysis of the grade (quality). I have actually got assessments lowered that were in line with Market Value by pointing out the errs that favored my client and neglecting to point out the errors that favored the assessor.

Ask them to provide the sales they use to support the value and prove them superior to your subject; and / or pick them apart. A FOI request generally gets all their info and it will be sparse unless a large subdivision.

Boards of Equalization view appraisals prepared for the property owner for tax appeals to be inheriently skewed in favor of the tax payer and they give them little weight. I have defended a number of parties before the board and have appraised none of them per se. If you have an appraisal prepared in the past 3 years from someone else that supports your position, by all means use it, but your appraisal will not sway many BOE members. And at worse, (i.e.- you do skewer it) you might be turned into the board.

 

[yvonne dill]

I believe that Terrell's way of sayin- do so at your peril.

I know my limitations, I wouldn't touch it. Unless you have clear background and training in an area, why would a person venture off to an obviously specialized area that could have serious ramifications?

If you decide to go ahead, reread the Competency Rule in USPAP. There are three steps. If you are unfamiliar with the subject, you must say so, take steps to get familiar, and state in the report how you got familiar, include all those authorities that helped with the process.

Good Luck.

 

[walt kirk]

Preparing an appraisal for a tax appeal is not difficult but you have to know the local tax assessment rules. In most cases you will be preparing a retrospective appraisal. Remember that you are not bound by mortgage underwriting guidelines, if you feel that large adjustments or older sales are necessary use them.

Since you haven't done a tax appeal you may want to have a conversation with the assessor before you take the assignment, most assessors are very professional and will give you good advice.

 

[Restrain]

You want to do two things. First is a straight-forward appraisal of the subject with all its warts, etc. as of the date of assessment, usually January 1. Document your sales, etc.. Second, check the tax assessments of the sales you use. If the home sold for $100,000 and the tax assessment is running 85% of value, your client then can say, O.K., my value is $95,000 but it should be assessed at 85% of that to conform with other assessed values in the market.

Conversely, if you are seeing the $100,000 home assessed at $120,000, that gives the client a lever that the properties are consistantly over assessed for the market.

I don't know about your market, but I am consistently seeing properties over-assessed by 10-30%.

Roger

 

[Eminent Domain]

First thing is to decide what type of problem the client thinks they have.

First, is it over assessed based on the fair market value? (Which by the way is the simplest to address since an appraisal rendering an opinion of fair market value would probabley settle the issue), or;

Secondly, does the client consider the property to be over assessed based on what other similar properties are assessed at? This becomes a bit more complicated since at this point a detailed ratio analysis (or equalization analysis) will be required to determine at what rate the assesment has been applied (ie. 80% of FMV, 85% of FMV, etc) and if the subject property is within an acceptable range. Basically, you have to look at past sales and determine at what rate they were taxed at based on sales price.

Charge accordingly. It can become time consuming if your in an area that does not have computerized county records which can be analyzed as you may determine is necessary.

BF

 

[Mike Garrett RAA]

I have served as a referee on the Board of Equalization for several terms. Totally disagree with the statement the Board looks at appraisals as biased. Only thing to remember is you must use comparable sales during the assessment period so it is a retrospective appraisal.

Go for it...it's a good business to develop. I would also say..."never attack the assessor or their valuations." Remember they are operating under mass appraisal techniques and there are inherent deficiencies in that technique. Just do a creditable appraisal and if it appears the property was over valued you should win.

 

[Terry Russell]

From what I have seen lately,

To successfully win an appeal in a property tax dispute, one has to prove the property in question is overvalued from an equalization standpoint. If the comps you use are assessed equally to the subject, you lose. More than one taxpayer has seen their assessment increase due to an overzealous appeal process.

Assessors have thousands of comparable sales at their fingertips. Appraisers normally do not. Talk to the assessors informally before you leap too far.

tr

 

[Terrel L. Shields]

Mike said

Totally disagree with the statement the Board looks at appraisals as biased.

Since when I served on the BOE when the Board Chair stated that explicitly, I will stick to my guns. At least two others on the 9 member board, 1 a retired MAI, said the same thing - they were my group cohorts (our 9 mem. board heard three tax payers at a time with us working in 3 groups of 3.)

Assessors have thousands of comparable sales at their fingertips

Maybe but defending the individual appraised value they often had only 1 or 2 sales anywhere close to what the property was. For instance, if the dwelling sit in Sec. 5 - Twp 18 - 33W, and was appealed. There are only about 40 parcels in that section. Maybe no sales or 1 or 2 sales, but the entire section (square mile) was appraised based upon a neighborhood factor calculated from those 1 or two sales....if it calculated 2.00 and .99 respectively, they might use 1.50 for every other property in the section. Sec. 4 ditto, Sec. 3 ditto, but Sec. 2 has about 10 times that because you are in a small town.

As I pointed out about my girlfriends home, that subdivision is an old mixed neighborhood with small and large homes and being renovated with old vacant lots being built on...There is no consistent pattern that applies to all sales. The 3 comps they used were all new houses built in the Victorian style. NEW, brand NEW comped to a 100+ year old house!!!

Mike also said

..."never attack the assessor or their valuations."

Try that in my county and you will lose every case. I do not make it personal, but I will impeach their estimate of effective age, condition (especially interior), and quality. One thing about sitting on a BOE with 5000 mad taxpayers appealing their taxes. You become very competent at reading tax cards. I am surprised at how few appraisers really understand the numbers rendered or how they got there. With many new internet based property cards, unless you are lucky enough to get the real McCoy, the info supplied does not do justice to what the assessors appraisers actually calculated (grade, condition, etc.)

Further, our Assessor does not even see zoning maps. They are likely to appraise a R-1 lot as commercial if the property next door is C-1. They routinely appraised A-1 zoned areas in flood zones which could never be built upon as R-1...I could go on and on.

In the case of my girlfriend, I challenged why her 100 yr. old house had a grade change...i.e.- after being average grade © why did they change the grade to B - 10% (good grade less 10%)....Did it suddenly get better with age like wine? I also challenged why they did not deduct for the steam heat system (which they knew about) which is totally obsolete and inefficient (like a $600 gas bill last month) and also pointed out (with pictures) the defects of the house interior. The board changed the grade back, increased the effective age, & deducted for the heat system.

I would look at the property, estimate a value, and then decide where the assessor went wrong. Obviously if the property is underappraised, you need to recognize that and eschew doing the appraisal. Meanwhile, I understand fully that in certain states, "Market Value" is a joke in the assessor determination, and the assessor is shooting for something like 85% of market, etc. etc. Of course, in most of those states, when a homeowner challenges a large increase the defense is that is was still below "real" market (which is true, but misleading to the taxpayer). In those cases, use 3 comparables Assessed value to arrive at an assessed value These do not need to be MARKET SALES, but rather need to be as physically IDENTICAL to the subject as possible. You are trying to prove the property is assessed higher than similar dwellings.

In Arkansas, the assessed value is 20% of market appraisal. The assessor appraised value is supposed to be 100% of market value period...no lea way. 1/3rd of all property in a county is reassessed each year to reflect "market value". Agricultural land tracts are appraised in use from soil codes, making valuation of of ag land a proposition of land value excluding 1 ac. + improvements valued seperately- a highly artificial way of determining contribution and having as much to do with correct appraisal procedure as bullfighting has to do with the Dept. of Agriculture.

Further, mistakes can be made. My tax bill estimate came last year and was 30% higher....curiously my valuation was static, almost the same as the previous year. On the tax card, the valuation of the land and the valuation of the improvements added up to $30,000 less than what was stated at the top of the card....gee, I thought, boo-boo, I will just call Bill, the head appraiser and straighten this out.....WRONG....they absolutely could not understand what I was explaining. I went before the board and they picked up on it immediately....Like a little light bulb suddenly Bill said, "Oh! I see what you mean now!" Seems that a commercial land factor had been stuck in the computer which was taking my land values and multiplying a factor before poking it on the top of the valuation section. At $8 an hour you are not getting brain surgeons in the Assessors office.

ter