Property Tax Appeals - Using Equity

Posted by Daniel Jones on Dec 26, 2012 9:17:00 PM

Property Tax AppealsEquity is not an approach to value, yet for assessment purposes it can be as important as one. 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 exceptions that I am aware of are Florida and Ohio. (Full disclosure: I have worked property tax appeals in ME, VT, NH, MA, CT, RI, NY, PA, NJ, DE, MD, VA, WV, OH, NC, SC, GA, AL, FL)

I touched on the equity argument while discussing the three approaches to value in previous blog articles. When I talked about having the same quality codes in the CAMA cost approach, or the same depreciation schedule, that’s equity. When everyone’s cost approach value is adjusted up or down based on the same sales from the same market area, that’s equity. When all neighborhood shopping centers in the same market area have the same market rent estimates, the same expense ratios, and the same cap rate, that’s equity.

Often, after many years of different county appraisers, reappraisals, and appeals in your neighborhood, equity gets forgotten or overlooked. Although it is a time-consuming argument to develop, often requiring the purchase of many assessor property record cards, the results can be good. It pays to make certain that your property tax burden is equitable, because it is often not.

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?

This is just a few of examples of assessor data points that could be inequitable. If you can get the assessor property record cards and they show say, a cost approach, you can go through your property and the comparable properties line by line to see what the differences are.

Some assessors view the true measure of equity as the coefficient of dispersion in their sale ratio study. County appraisers use the sold properties in a neighborhood or market area to analyze “sale ratios” or the ratio of tax assessment to sale price. They use the median sale ratio from the market area to make decisions about the level of assessment (value). They use the coefficient of dispersion (COD), or average deviation about the median, to make decisions about equity. The International Association of Assessing Officers says that single-family CODs should be 15.0 or less and for homogenous areas should be 10.0 or less. Commercial property CODs should be 20.0 or less, and in large, urban counties should be 15.0 or less. This COD information should be part of the public record, use it. If the tax assessors COD is high in your market area then their median sale ratio that is impacting your assessment is unreliable.

That’s equity in a nutshell. It can be time-consuming to develop an equity argument and in many states equity alone does not get results. You must have some sales, or a cost approach, or an income approach that supports a lower value and then you can present an equity argument in support of the lower value (whichever approach to value you take).

For more information contact Fair Assessments the property tax appeal company.

Topics: Board of Equalization Georgia, Georgia tax appeals, Commercial tax appeals, real property tax advisors, property tax professionals, real estate tax consultant, Georgia property tax, commercial property tax reduction, appealing property tax assessment

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