John Simpson, MAI has authored 4 books with the Appraisal Institute and 12 Appraisal Journal articles, but that’s just a part of his monologue. He helps run an appraisal firm, and has been an active day-to-day commercial appraisal for almost 2 decades.
John Simpson, MAI has done an excellent job of identifying many of the key rules of successfully appealing property in his recent 12-part series - Simpson's Keys to Successful Tax Appeals - on his Appraisal Matters blog.
As a commercial appraiser for a township assessment office in Illinois, I can attest to the validity of his remarks! Although his series of articles focus on commercial property appeals . . .the same rules will apply to residential income properties and even single-family homes.
Here's a brief summary of his series:
Keys to Successful Tax Appeals - Part 1 - With the current well-publicized real estate problems, tax appeals have become more viable for commercial property owners. The bottom line is a lower property value, yet real estate tax assessments have not been reduced accordingly.
Keys to Successful Tax Appeals - Part 2 - Key 1 – Know the Rules Before You Play -
Although this may seem cliché, not knowing the jurisdiction’s tax assessment and appeals rules can derail a tax appeal well before it even has a chance to be heard.
Keys to Successful Tax Appeals - Part 3 - Key 2 - Avoid “Protective” Appeals - In the last few years, it has become more common for clients to file protective tax appeals on all owned properties. This is a practice that can severely backfire
Keys to Successful Tax Appeals - Part 4 - Key 3 – Know Your Market and Submarkets - Although you may not be an expert, you can call upon experts to learn about your market. Brokers have their fingers on the pulse of the market and they are often more than happy to provide you with truly comparable properties for comparison . .
Keys to Successful Tax Appeals - Part 5 - Key 4 – Always get the Assessor’s worksheet - The Assessor’s worksheet is a document that shows how the Assessor arrived at the market value a property. Many times, the addresses of the comparable sales are included and sometimes operating expense comparables and capitalization rate comparables are shown.
Keys to Successful Tax Appeals - Part 6 - Key 5 – Know the Opposition - Some jurisdictions use Assessors at the state level, some at the county level, some at the local level, and others hire independent appraisers to defend property values. Your strategy will vary among these four types of Assessors
Keys to Successful Tax Appeals - Part 7 -. Key 6 – Use the Right Tool for the Right Job - Based on the type of opposition you will face above, you need to make sure you have the right professionals on your team. Although property owners can appear in front of local boards, almost all commercial tax appeals have attorneys or tax appeal consultants represent the owners. Corporations are required to be represented by an attorney in court. Their time is expensive, so use them wisely.
Keys to Successful Tax Appeals - Part 8 - Key 7 – Determine Your Return on Investment - There’s a limit to what someone can spend to win a tax appeal. It can be difficult to gauge the cost when you do not know whether the case will be settled at the board level, State Court or higher. Further, when you do not know the current market value, you cannot easily relative savings to cost.
Keys to Successful Tax Appeals - Part 9 - Key 8 – Pre-Trial Preparation - Regardless of what level you will be discussing your case, your team members should, at the very least, know each other and develop a comfort level. Pre-trial preparation is where cases are won or lost. Most pre-trial preparation activities involve an appraiser.
Keys to Successful Tax Appeals - Part 10 Key 9 – The Quality of the Appraisal Report - In some jurisdictions, the appraisal report is not read prior to presenting the case; in others it is always read. Most State Court judges read the appraisal whereas many board level officials do not. If the appraisal is of a high caliber, is easy to read and stresses the key points of the property and the case in the most apparent places, the decision maker(s) that read the report will often go into the hearing with a preconceived notion of the better quality product. It certainly does not hurt when a decision maker has a more favorable opinion of your report over that of the opponent.
Keys to Successful Tax Appeals - Part 11 - Key 10 – The Presentation - When it comes time to argue a case, you will often be faced with a time limit. Other tax appeals are scheduled for that day and if you run over, you may not be permitted to continue. You want to have the key points stressed and presented in an organized manner. Keep in mind that the appraiser can speak about his report, but it is up to the other members of your team (especially the attorney) to pitch the merits of the case.
Keys to Successful Tax Appeals - Part 12 - Conclusion - There are many decisions that need to be made for a successful tax appeal. The tax savings can be substantial. Conversely, the opportunity cost of a tax appeal that is lost due to one or more of the pitfalls outlined in this paper can be just as dramatic. When multiplied by a portfolio of properties in multiple jurisdictions, tax savings can easily run into the millions of dollars and the situation becomes even more magnified. No one likes to pay more than they legally have to. The right team and the right decisions make all the difference.
Click the Appraisal Matters links below for the full articles: