At the end of the last article I called equity the other approach to value. Ideally it should be called the other approach to assessment, because it isn't an approach to market value estimates at all. Equity is all about fairness. Specifically that your property tax burden is fair when compared to your neighbor, or your competition. Most states that I have worked in require that tax jurisdictions must assess based on equity, or "uniformity." This is to ensure that the tax burden is distributed fairly. The exception that I know of is Florida, where equity isn't a valid reason to appeal.
I have discussed equity in other articles I have written without explicitly stating that what I was saying related to equity. When you compare the assessment record on your warehouse to the competing warehouses in your market area, is the assessor using the same rental rate, expense ratio, and capitalization rate in the income approach? That's equity. Is the assessor using the same sales to value your office building as the other office buildings in your market area? That's equity. Is the assessor using the same replacement cost per foot of building for your property and comparable competing properties? That's equity.
It pays to be certain that your tax assessment is uniform because often it is not. It may take some work identifying competing properties, getting the assessor records for each, and comparing all of the information, but it can be worth the time. If your property is more than ten years old there is a good chance that multiple county appraisers have worked revaluations and appeals in your market area and they have changed rental rates, quality codes, and other data points that affect values in your area.
You might start with the assessor's online property records. Look through the assessed values of properties in your neighborhood. Find a handful or ten or twenty properties that have lower assessments than your property does. Dig in, either online or at the assessor?s office. Why are these properties valued lower than yours? Are they smaller, with fewer amenities? Or has your property been given a higher quality rating for no apparent reason? Is your property newer? Or has your property been given a higher condition rating than the competition for no apparent reason?
Perhaps your local assessor has a great website with detailed property information. This will save you a trip to their offices. Dig into the information and starting asking yourself if the differences between your property and the competition (neighbors) makes sense.
The equity argument can be very time consuming. Often the tax assessor or review board doesn't want to see equity alone. Make sure you have a valid cost, sales, or income argument before you spend a lot of time on equity. Equity can be a great complementary argument.
I have discussed equity in other articles I have written without explicitly stating that what I was saying related to equity. When you compare the assessment record on your warehouse to the competing warehouses in your market area, is the assessor using the same rental rate, expense ratio, and capitalization rate in the income approach? That's equity. Is the assessor using the same sales to value your office building as the other office buildings in your market area? That's equity. Is the assessor using the same replacement cost per foot of building for your property and comparable competing properties? That's equity.
It pays to be certain that your tax assessment is uniform because often it is not. It may take some work identifying competing properties, getting the assessor records for each, and comparing all of the information, but it can be worth the time. If your property is more than ten years old there is a good chance that multiple county appraisers have worked revaluations and appeals in your market area and they have changed rental rates, quality codes, and other data points that affect values in your area.
You might start with the assessor's online property records. Look through the assessed values of properties in your neighborhood. Find a handful or ten or twenty properties that have lower assessments than your property does. Dig in, either online or at the assessor?s office. Why are these properties valued lower than yours? Are they smaller, with fewer amenities? Or has your property been given a higher quality rating for no apparent reason? Is your property newer? Or has your property been given a higher condition rating than the competition for no apparent reason?
Perhaps your local assessor has a great website with detailed property information. This will save you a trip to their offices. Dig into the information and starting asking yourself if the differences between your property and the competition (neighbors) makes sense.
The equity argument can be very time consuming. Often the tax assessor or review board doesn't want to see equity alone. Make sure you have a valid cost, sales, or income argument before you spend a lot of time on equity. Equity can be a great complementary argument.
About the Author:
Daniel Jones has been successfully appealing tax assessments for seven years. Prior to that he was a assessor for two different counties. His practical guide to appealing your tax assessment is available free of charge. He is also available to assist with your North Carolina property tax appeal.