I have been appealing property tax assessments for ten years now. One thing I am sure of about a property tax appeal is you never know what you are going to get. Market value is in the eye of the beholder, and every beholder has an opinion.
An appraisal is an opinion of value. Hire two licensed appraisers to value your real estate and they will both inspect your property inside and out. They will scour the market for the most recent, comparable sales. They will agonize over the reconciliation of the data to select the most likely price you property will bring in the open market. You will most likely get two different value opinions.
The tax assessor has many thousands of properties to value. The work that they do is called mass appraisal. The assessment office is not able to inspect every property. The county appraisers have probably never seen the interior of the building. The county appraisers don’t select the most comparable sales. The county appraisers use statistics to test their level of assessment and the confidence in their values.
When filing a property tax appeal you must be aware of the distinctions between these two disciplines. They are not the same. After working as a real estate appraiser many years ago I went to work as a county appraiser in the Prince William County, VA assessor’s office. After a couple of years the assessor told me that he was initially hesitant to hire me, because in the past they had no luck when trying to transition a new hire from real estate appraisal to real estate assessment.
Typically the tax assessor establishes values for all properties by the cost approach to value. The cost approach to value estimates the cost to replace your buildings using today’s technology and construction standards at today’s cost. Then (typically) a lump sum is deducted from the replacement cost new to reflect the total accrued depreciation on your building. The resulting figure is called depreciated replacement cost new. To this an estimate of land value is added to obtain a total value estimate.
The tax assessors typically use a computer assisted mass appraisal (CAMA) software package that has the cost approach already built-in. Property descriptions are put into the system and the CAMA automatically produces a cost approach value for every property. For your neighborhood, or your market area, the assessors then compare the sale prices of the properties that have sold to their CAMA generated cost approach values. Based on how the cost approach values compare to the sale prices of the sold properties, the assessors will adjust all of the properties in the neighborhood or market area up or down.
This mass appraisal method is used often for residential property and some commercial property types. Always check with the assessor or county appraiser to verify which approach to value they are using, or get a copy of your property record card from the assessor and it should be obvious from that how you are being valued. You should get a copy of your property record card regardless, to verify that the tax assessor’s description of your property is correct.
When filing a property tax appeal you should focus your attention on the method the assessor is using to value your property. Because they value many properties the same way they often claim that their values are “uniform” or “equitable”. You should go through the value approach they are using on your property line-by-line to be certain it is reasonable, and equitable as compared to similar or competitive properties in the area.
