How to Appeal Your Tax Assessment: Equity
Equity is not an approach to estimating the fair market value of real estate. However, it is often a good reason to appeal your tax assessment. Most states consider equity. The only exception that I know of is Florida, where equity is not a valid reason to appeal your tax assessment. Equity is all about the fairness of the property tax burden. Is your assessment fair when compared to the assessments on your competitors or neighbors? Equity is also called uniformity in some states.
Equity is being treated the same as everyone else. When the assessors use a sale comparison approach to value on your house, do they use sales from your market area, and are the other properties in your “neighborhood” appraised using the same sales? If they are using a cost approach on your gasoline service station, are they using the same cost per foot as comparable, competing service stations? If they are using an income approach on your retail building, are they using the same market rent estimate as your competition, and the same capitalization rate? This is all about equity.
When market areas are being developed and there is a lot of new construction the assessments often start out as equitable. But over time, after many reappraisals and different property owners appealing there assessed values things begin to change. Now the competing property down the street has a lower quality code in the cost approach because the owner appealed two years ago. Or the competition has a higher expense ratio in the income approach because the property owner appealed. These are the types of differences to look for.
Check the local tax assessor’s website and see if you can get at least basic property information there. If you can identify your competition’s property you can begin to look at the various values per foot of building area to see how they compare. If you can find a few that have substantially lower values per foot begin to question it. Is it because they are older buildings? Lesser quality of construction? If not, you may have a valid equity argument.
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.
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.
Daniel Jones has been successfully appealing property 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 tax appeal.