Getting This Right Can Be The Difference Between Success and Failure
So, you got your latest assessment notice. You’re surprised at the change in the assessment value and immediately start to look for comparable sales (comps) that will surely convince your local assessment office or appeal board how erroneous the new assessment is.
But wait! Make sure you are trying to solve the right problem before you take action. In the 30-plus years that I spent in property tax assessment administration, which included observing appeal board hearings, property owners and their agents who challenged assessments often failed to properly address three key areas before selecting comparable sales.
Effective Date of Valuation
Each assessment has an effective date of valuation. For example a 2015 assessment may have an effective date of valuation of January 1, 2015, or December 31, 2014. It is vitally important to determine the effective date of valuation as this is the date that your comparable sales must focus on. Too many times the assessment review date by the local assessor or appeal board is several months after the effective date of valuation. Property owners and their agents often file appeals by the filing deadline that include comparable sales right up to the filing date, which may be excluded as they are not focused on the correct effective date of valuation.
In developing each assessment the local assessor has studied the real estate market for a period of time before the effective date of valuation in order to determine how market value, or other defined value, has changed since the last reassessment. Most assessors refer to this as the study period for the type or class of property being assessed. For example, before determining how assessed values for residential condominiums should change for the 2015 assessments, with an effective date of valuation of January 1, 2015, all valid sales of such properties during a two year period ending September 30, 2014, may have been considered (October 1, 2012 through September 30, 2014). The assessor may have further considered the trends and indications from this study period to project values to the January 1, 2015, effective date of valuation. Local assessors and appeal board often give considerable weight to the study period because their greatest concern is with fairness or uniformity of assessment than with accuracy.
Validity of Sales Data
Not every sale is an indicator of market value. Many assessors and appeal boards disqualify certain sales as invalid for assessment purposes. Often short sales and bank-owned property sales need to represent “prevailing market conditions” before assessors or appeal boards will consider them. You don’t want to spend a lot of time gathering comparable sales just to have them disqualified.
I hope the above explanation helps you focus on the right comparable sales. Call your local assessor or appeal board representative and ask them about these three important key areas before you take action. Local assessors and appeal boards are charged with the duty of informing you of your right to review or appeal the assessment. But it helps to know the right questions to ask. It saves time for everyone involved in the process.
EXTRA TIP: Don’t overload the assessor or appeal board with too many comps. Three to five well-chosen comps that address the three key areas above will usually be sufficient. 20 comps won’t impress unless you have also performed and shown your statistical analysis of these sales, not just printed them out and attached them to the appeal form.