Property Tax Appeal & Property Tax Protest

In turn, owners are lining up to conduct their own property tax appeals to get a

reduction in their real estate taxes. At the same time cities are fighting hard to

keep their base - the result is shaping up to be an all-out"dog fight".

With the current credit crisis and softening economy, property values have

dropped significantly across all states and with all property types.

For owners, reducing property taxes has an immediate impact to the owner's

bottom line. All property tax savings go right to the NOI (Which in a way, actually

increases the property's value). The savings can be huge and once the new

assessed value is established, the savings are ongoing, year after year. In short, it

is well worth most owner’s time to fight for this, especially those that have

purchased their property in the last 5 years or less.

On the commercial side, we are seeing a drop in value as capitalization rates

continue to rise and as the credit crisis lingers. Longer amortization schedules

and "built in" appreciation models within commercial loans have had an

almost artificial boast in property values. Now as these commercial loans are

gone, this artificial increased value is gone.

Property Tax Appeal

There's a procedure to getting for any property tax appeal and remember your

city, does not want to lessen its tax base (they have those pensions and long

vacations to protect). There is a lot that goes into doing it right, but perhaps the

biggest issue, that most property owners are shocked to learn is how much

control the city has in picking the COMPS (comparable recent sales). Your city will

only want to use comps from transaction that happened under normal, non-

distressed conditions. They often refer to this as "Fair Market Value without

Undue Influences."

What this really boils down to is that your city will not want to use comps from

foreclosed properties sales and or from other "distressed" sellers. They will want

to use comps that support their estimates of value. Which of course support their

point of view and their tax base. A major problem with this is that a lot of

transactions these days occur from foreclosed properties...

The owner considering a property tax appeal will have to know how to deal with

this issue as well as others before they sit in front of their city to appeal. Your city

will do everything in their power to protect their tax base. You will need to

understand the process; otherwise you will just waste your time.