Marketing for Property tax Over-Assessment

[Doug in NC]

I worked for the assessor many years ago. The money is in commercial property. I took appeals for a few weeks following one re-assessment. Some consultants would come in with a thick stack of dozens of properties each worth several hundred thousand dollars or more. If the consultant received a 10% reduction on even 5% of those deals, it would amount to a lot of money. Since many of these consultants weren't even appraisers, chances are they were collecting a % of savings. This is where appraisers are at a big disadvantage to those less qualified. We can't charge based on valuation conclusions. I would be willing to bet that a consultant could earn as much as most appraisers in a month of work, as many of us do in six months. Down side of consulting would be the travel. Many of the tax consulting companies do this work full-time, so their reps travel the country to do appeals.

 

[Jim Mallon]

Believe it or not our county has re-assessed and lowered values on all properties sold after Jan. 2004. I fell into this category and got my new assessement a few weeks ago. It is still not as low as it should be but not too far off. Value as of Jan. 08.

Our county pro-actively lowered the assessments on ~12,000 residential properties:

http://www.sanluisobispo.com/news/local/story/421138.html

"Owners of more than 12,000 homes county-wide will see their property taxes reduced - sometimes dramatically - or face no tax increase this year after the county Assessor's Office lowered valuations a total of about $732 million.

All of the properties affected were those bought since January 2005. The lowered tax valuations reflect reductions in market value caused by the real estate downturn."

 

[Pamela Biggers]

Jim,
Very intersting article.

In Pima County - your "Full Cash Value" could go down and your taxes will still go up. Most people think that the assessor determines taxes. They do not, they determine property values that your taxes is based on. Taxes are set by legislation and the assessor may apply state statutes to the value that they come up with - but they do not determine the amount you pay or the statutes - that is up to the jurisdiction, fire district, county, city, etc. The way most tax rates are determined is by dividing the total budget of the jurisdiction by the total full cash value of the jurisdiction. Which means if the full cash value goes down and the budget does not also go down your taxes will go up. Truthfully, unless there is a factual error or your value is majorly over appraised by the assessor - it's just a drop in the bucket and all you may be doing is help raise the tax rate or lower the amount of goverment services.

Also, in my experience, if the homeowner has well documented information such as a professional appraisal, well documented obsolence, etc then all that would need to be presented to the assessor is the report and they would have a very good chance of getting their value lowered at the first stage of the process.

 

[Jim Onderisin]

I do a lot of these...I usually hold a tax appeal seminar about a month before the assessments come out at all the real estate offices, board of realtors, and community recreation houses. Its mainly informative, giving a detailed explanation of the process, laws, cost/benefit....anyhow I got the seminar approved two hours coned with the State for appraisers and agents. They come for the coned, start getting the calls from previous buyers...they say "I have no idea, call this guy".

You really have to be competent in this arena, its more than knowing what form or what form not to use. Its knowing your rules of evidence, report content, process...If any of you want to see on my website I have my tax appeal seminar powerpoint under appraiser downloads...www.kresinc.com

Thanks for your post. I've been doing an increasing number of these types of jobs, I'm not sure why. I appreciate your marketing ideas.

 

[Kali the Boston Terrier]

Thanks for your post. I've been doing an increasing number of these types of jobs, I'm not sure why. I appreciate your marketing ideas.

Anytime, hope it is helpful

 

[Wayne Tomlinson]

In Illinois, the assessment is supposed to be one-third 1/3 of the market value of the property with two large exceptions. This is true for all non-farm property, residentia or commercial

One, Cook County (Chicago) it is a much lower fraction, ( I think about one half of that) .

The other is agricultural property. Ag property, no matter where it is is assessed on a rather complex formula. It is a moving target. It has nothing at all to do with market value or any other value.

The formula is based on a factor arrived at based on the value of a "market basket" of commodities, such as corn, soy beans, etc. This is combined with a second factor which is the average of the last three years of the Land Bank interest rate on 30 year mortgages.

The third factor is the productivity of the soil based on the University of Illinois soils handbook. One would think that this number would be somewhat fixed, but a new book was published in 2000, and was mandated to be used as of last year.

This is all put into a pot and stirred a while to arrive at an assessed value for each soil type.
The state each year sends the local assessor a list of assessments for each soil type.
Since this is a sliding scale, the law provides that it cannot change more than 10% in any year.

One problem with this is that in years when the farmland assessment goes down, then the non-farm taxes go up to satisfy the legal limits that the taxing bodies receive.

Fair and equitable? Not really, but that is what we have in Illinois.

Wayne Tomlinson

 

[Kevin Mc]

Usually done as a team effort.
One appraiser does the appraisal itself - not advocating, just reporting.
2nd appraiser appears @ assessor, or in court, and now tihs person CAN advocate, since he/she did not MAKE the appraisal.

Absolutely. If it isn't done this way you can run into USPAP violation issues and most assessors I know are appraisers and very aware of the USPAP violations if one chooses to step on them in the process. Be careful.

 

[Scott Lanz]

Delete -123

 

[Scott Lanz]

I worked for the assessor many years ago. The money is in commercial property. I took appeals for a few weeks following one re-assessment. Some consultants would come in with a thick stack of dozens of properties each worth several hundred thousand dollars or more. If the consultant received a 10% reduction on even 5% of those deals, it would amount to a lot of money. Since many of these consultants weren't even appraisers, chances are they were collecting a % of savings. This is where appraisers are at a big disadvantage to those less qualified. We can't charge based on valuation conclusions. I would be willing to bet that a consultant could earn as much as most appraisers in a month of work, as many of us do in six months. Down side of consulting would be the travel. Many of the tax consulting companies do this work full-time, so their reps travel the country to do appeals.

You are right on. I know some numbers first hand that would make many drop their license today for some of this pie.

I am not sure about the less qualified statement. Maybe in regards to getting an "accurate" market value. This is the not job of the tax consultant, the real job is to get a reduction.

To the OP, I personally wouldn't' spend much energy going after the residential side of this market. I would spend enough time to be able to offer it as an additional service.

 

[Vernon Martin]

The success of a tax appeal line of business would vary by state or even county, but I remember during the last real estate downturn here in California, many appraisers did well pursuing this line of work.

I think there would be a fortune to be made here in Los Angeles County. Even on the residential side, there are so many million+dollar homes here that are no longer worth a million dollars, one would be able to save such homeowners thousands of dollars per year in taxes.

In terms of absolute dollar depreciation, I would target million+dollar homes in the fringe areas, such as the Antelope Valley and Riverside County, where overbuilding of luxury homes has taken a huge toll on home prices.

An appraiser has to be concerned with the Ethics Rule of USPAP, which prohibits "advocacy appraising". Also, the appraisers practicing tax appeal work in the 1990s based their fee on the taxes they were able to save. This "contingent fee" arrangement was most effective in gaining clients, and also particularly lucrative, but I have my doubts about whether it is compliant with USPAP. Still, regarding the appraisers who charged on a contingent basis, I did not hear of any of them being disciplined by the OREA.

The appeals process can take a long time. When I appealed the overvaluation of my own home, it took me two years to get a hearing with the LA County Assessor. Once I got that far, I was surprised to find the assessor's representative to be too young to shave. He had not even done a field inspection of his comps, and I took them apart, one by one. Each comp either had a lake view or was in a gated community. I was able to reduce my tax bill by about $1400 per year. I never told the "judge" that I was an appraiser.

My point is that if you're going to charge a fee based on the success of the tax appeal, which may be the only arrangement acceptable to most property owners, you may have to wait a couple of years to be compensated and may also find yourself in violation of USPAP.

I certainly don't want to discourage anybody, though, particularly with the residential appraisers hurting so much nowadays. I think a clever appraiser would be able to find a way around the various legal and practical obstacles to tap into this potentially lucrative source of business.