Recent turbulence in various market sectors is creating the need to sharpen analyses and understandings of property tax assessment valuations. In evaluating the need for real property tax assessment appeals, it is critical to understand the roles an appraiser can play in the appeal process. Early in the appeal process, an appraiser can help evaluate the tax at issue in a property tax challenge case by evaluating market data and market trends, or by providing an opinion of market value as of the statutory valuation date. Knowing the tax at issue is critical for appeal planning purposes. Why spend $3,000 on an appeal probably only worth $2,000? Perhaps later in the process, an appraiser may assist a property owner by providing an opinion of value in a form appropriate for the circumstances.
Appraisers as Expert Witnesses
Appraisers are routinely engaged as expert witnesses in real property tax assessment contests where property valuations are the primary issue. Knowledgeable and experienced appraisers use appraisal practices and procedures to analyze data and develop and report opinions of value accordingly. Tax authorities or judges receive appraiser testimony and review appraisal reports, often asking appraisers questions about items contained within appraisal reports. An appropriately developed and well-written appraisal report, testified to by a knowledgeable expert, is often an essential part of a successful assessment challenge.
In working with appraisers, it is important to understand that there are different appraisal specialties and, depending on the circumstances, that expertise can play a significant role in the appraisal process. However, an appraiser may not have the necessary level of expertise for a particular appraisal assignment at the time of engagement; in this instance, the appraiser may agree to work to acquire the required level of expertise with the client’s consent. Depending on the type of appraisal, an appraiser may need to seek assistance from other experts, particularly when an in-depth investigation conducted by a specialist would be helpful or necessary to establish items including, but not limited to, capitalization rates, architectural feasibility or construction costs.
Appraisal Methodology Also Matters
Ohio counties are required to reassess property market values every six years, and a separate adjustment is made in the interim three-year period to take into account recent sales of comparable properties and changes in physical characteristics, such as additions or removal of structures, if not previously addressed. Examining market values indicated by sale prices of similar properties in surrounding areas, or the sales comparison approach, is one method for determining current taxable value. Another method is the income approach, where the income producing aspects of a property are analyzed to determine its taxable value. The income approach is often used when reassessing commercial offices and other commonly leased property types. The cost approach is commonly employed for special use properties and is also relevant to consider for other types of recently constructed properties. Your appraiser needs to be skilled in utilizing and understanding all three approaches to value, whether pursuing, or defending, a tax appeal. Another consideration is that certain property types require attention to valuation methodology nuances that are pertinent to Ohio property tax law. Your appraiser must also remain aware of where the property is in the six-year and three-year periods. A skilled appraiser can help you protect your bottom line. It is important to discuss all your available options with your appraiser.
When considering the use of appraisers, it is important to note the protections that are available only when working with appraisers through legal counsel. An attorney’s communications with an appraisal expert are protected in Ohio, which can be critical when dealing with a property in uncertain circumstances, especially given the nuances in Ohio’s legal structure for property tax valuations.
The impact that House Bill 126 (HB 126), passed into law earlier this year, will have on property tax assessment appeals is uncertain. Aside from other considerations, dates of valuation are important factors. It is important to bear in mind that the valuation date for 2022 property taxes was Jan. 1, 2022, and involved a different set of market conditions than what Jan. 1, 2023, will bring.
Property owners and authorized tenants should carefully examine their assessments and obtain second opinions from qualified experts in complex situations.