Lack of Uniformity:
Properties are intended to be valued in an equal fashion per assessment metrics. Thus, they are intended to be assessed ‘uniformly’, by law. Determination of assessment equity is made by first calculating the ‘building assessment value per square foot’ of the subject property and then analyzing the same of its comparable properties. If there are a substantial amount of comparables with a lessor ‘building assessment value per square foot’, that serves as an indication of assessment inequity.
Sales Comparison:
What someone is willing to pay is the best indicator of market price. Thus, assessment values are intended to be in-step with the latest sales activity. There is a clause within the tax code that an assessor cannot ‘sales chase’. In other words, they may not increase a properties assessment to be in align with the most recent sales price that’s higher than the established assessment fair market value. However, there isn’t a regulation negating sales chasing downward. The determination of market equity is made by first calculating the ‘market value per square foot’ of the subject property and then analyzing the same of its comparable properties. If there are a substantial amount of comparables with a lessor ‘market value per square foot’, than that of the subject property it serves as an indication of market sales inequity.
Recent Purchase Price:
What someone is willing to pay for a property is the best indicator of market price. Thus, the recent sale of the subject property, within the last 3 years (and non-compulsory), is the best indication of the market price. If a property is assessed at a higher fair-market-value than the latest sales transaction price of the property, then there’s a sale inequity.
Appraisal:
A licensed appraiser is the best officiator of real estate value. If there has been an ad volerem appraisal performed on the subject property within the last 3 years, and of a lessor fair-market-value, then there is a valid case for tax relief.
Income Capitalization:
Estimating the value of an income-producing property is done by a method called Capitalization. Capitalization is any method used to convert an income stream into value and if it’s less than the fair-market-value of that established by the county assessor, then there’s a valid case for tax relief.
Vacancy:
Vacancy refers to the portion of a property building that is not subject to a lease (or from which the owner/landlord is not receiving rental income). Land assessed value is not adjusted based on vacancy evidence. Vacancy reduces the assessed value of a property, which generally reduces the property’s taxes.
Cook County Assessor Vacancy Formula:
Below is the formula for which the Cook County Assessor grants tax relief based on vacancy:
1/2 of weighted actual vacancy – initial vacancy rate = vacancy reduction rate
Land Av + Building Av * (1 – vacancy reduction rate) = Total Av * (100/Assessment Percentage Rate) = Total Assessment Fair Market Value
Appellant Vacancy Formula for Relief:
The example property below conveys the formula that may be used upon appeal.
Other:
Miscellaneous reasons such as class change, error in characteristics, new construction cost, environmental contamination, and etcetera.
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The Real Estate Tax Newsletter
From the Fortune 500 to boutique law firms, since 2014 I’ve had an intriguing journey within the real estate tax world. My intention with this blog is to share my real estate tax technical expertise in a simplified fashion so to provide you with value.