The deadline to file a Complaint against the Valuation of Real Property (“Tax Complaint”) with the Franklin County, Ohio Auditor is April 1, 2013. In Ohio, real estate taxes are assessed in arrears, meaning that property owners will pay the real estate taxes assessed in 2012 during the year 2013. In Franklin County, property owners have until April 1, 2013 to file a Tax Complaint against the real estate taxes assessed in 2012. Property owners who fail to file a Tax Complaint by the deadline lose the ability to challenge the real estate taxes paid for the 2012 tax year. (Every county in Ohio has its own rules regarding postmarking, so make sure you check the local county auditor’s website to confirm the due date).

Filing a Tax Complaint can result in saving thousands of dollars in annual real estate taxes if the value of real property has been significantly affected due to a change in circumstances including:

  • recently purchased/sold real property
  • property values in your neighborhood decreased due to foreclosures or other factors
  • if you own commercial property that has experienced increased vacancies, or other concessions that significantly lowered your property’s income stream

If any of these apply to you, filing a Tax Complaint with your county’s Auditor may be appropriate.

The current assessed value of real property is publicly available on the Auditor’s website in each county. The property taxes assessed to real property each year are based on the Auditor’s determination of the fair market value of that property. Generally speaking, the “fair market value” in this context means the most probable purchase price an interest in real property is likely to bring in a competitive market.  In many instances, the Auditor’s periodic estimation  is higher than the true fair market value of a parcel of real property that has been affected by a change in circumstances such as those mentioned above.  Filing a Tax Complaint provides property owners a mechanism to challenge the Auditor’s estimation of the value of real property, and potentially lower their annual real estate taxes.

The best indication of the fair market value of real property is the recent purchase price paid.   In many cases, (once a Tax Complaint is properly filed) the Auditor will accept the purchase price paid as the fair market value, and revise the assessed value of the property accordingly. This assumes that the purchase price was based on an “arm’s length transaction” between unaffiliated parties of similar bargaining power.  If you believe that the value of your property is not accurately reflected by the Auditor based on a reason other than a recent sale, then you will most likely need to hire a certified real estate appraiser to determine the value of your property.

Appraisers primarily use three methods to determine the value of real property: the Sales Comparison Approach; the Cost Approach; and the Income Capitalization Approach. Under the Sales Comparison Approach, a parcel is compared against recent sales of similarly improved parcels in the same geographic area. An appraiser compares your property to the selling prices of properties of comparable size, location, and with similar improvements. If the properties are dissimilar, the Auditor will not accept the comparison as an indicator of your property’s fair market value. A qualified appraiser will make adjustments based on disparities between properties to arrive at an accurate value under the Sales Comparison Approach.

The Cost Approach estimates the fair market value of the property based upon the cost to replace all buildings and improvements on the property, deducting depreciation or other loss in value, and adding the estimated value of the land on which the building and improvements are located. This approach is best for newer construction, as well as in locations where the Sales Comparison approach is precluded by a lack of comparable properties in the area.

Finally, the Income Capitalization Approach determines the fair market value of real property based upon the property’s ability to produce an income stream. The appraised value is determined by such factors as vacancies, debt service, and the owner’s return on investment. This approach primarily evaluates commercial properties.

Whichever valuation method is appropriate for you, an experienced and qualified appraiser should conduct the appraisal. An appraisal’s cost will vary based upon the property type involved, the appraiser’s experience, among other factors.  However, the county auditor will not accept the opinion of a person that is not a certified appraiser as to any of the forgoing valuation methods.  If your property is not the subject of a recent sale, then an appraiser almost certainly must be retained in order to successfully reduce the valuation of the property.

Furthermore, before firing off a Tax Complaint to the county auditor, property owners should also be aware of a few pitfalls. First, the application must be filled out properly, if not perfectly. Tax Complaints can be dismissed on the slightest technicality. In the past, Tax Complaints have been dismissed for

  • incomplete or incorrect owner’s name
  • incorrect parcel number
  • failing to indicate the dollar amount of reduction sought
  • even forgetting to “check” the correct box

If your Tax Complaint is dismissed, you lose the opportunity to challenge the real estate taxes for the tax year filed, resulting in your taxes remaining at their current assessed value.

Second, strict evidentiary rules govern who is permitted to testify as to the value of the real property. For example, if the person who performed an appraisal is not present at the hearing, hearsay rules may disqualify the written appraisal as evidence.  This especially applies in the case of appraisals prepared in connection with refinancing prepared by your lender (generally not accepted as evidence of value).

Finally, if a corporate entity owns the property, only certain individuals (a licensed attorney being one of them) can file the Tax Complaint and present testimony at a hearing.

Property owners should be aware that in many cases the local school board may file a Counter-Complaint to contest your revised property valuation. In fact, the law requires the Board of Revision to notify the local school board if the property owner seeks a decrease in value of $50,000 or more. An attorney will represent the school board, and you can be sure that they will seek to dismiss your Tax Complaint based on the technicalities addressed above.

Given the various pitfalls it is highly advisable that property owners contact an attorney prior to filing a Tax Complaint on their own. If you have any questions, please call our offices at 614-344-4800.

Links:

Property Value Reappraisal and Update Schedule

Franklin County Auditor

April 2, 2012 is the deadline to file a Complaint against the Valuation of Real Property (“Tax Complaint”) with the Franklin County, Ohio Auditor.  Filing a Tax Complaint can save a property owner thousands of dollars in real estate taxes if the value of their property has been affected due to changed circumstances.  Have you recently purchased real property? Have property values in your neighborhood decreased due to foreclosures or other factors?  Do you own commercial property that has experienced increased vacancies, or other concessions that significantly lowered your property’s income stream?  If you answered “yes” to any of these questions, filing a Tax Complaint with your county’s Auditor may be appropriate.

In Ohio, real estate taxes are assessed in arrears, meaning that property owners will pay the real estate taxes assessed in 2011 during the year 2012.  In Franklin County, Property owners have until April 2, 2012 to file a Tax Complaint against the real estate taxes coming due from 2011.  Property owners who fail to file a Tax Complaint prior to April 2, 2012 lose the ability to challenge the real estate taxes paid for the year 2011. (Every County in Ohio has their own rules, so make sure you check your local county auditor’s website to confirm the due date).

Under Ohio law and Department of Taxation rules, real property in all counties is reappraised every six years and property values are updated in the third year following each sexennial reappraisal. In central Ohio, reappraisals occurred in 2011 for Clinton, Delaware, Franklin, Licking, and Putnam counties. For a complete list of the sexennial reappraisals and triennial updates, see the Ohio Department of Taxation’s schedule here.  If you live in any of these counties, it may be in your interest to challenge your property’s reappraised value.

The current assessed value of your real property is publicly available on the Auditor’s website in your respective county.  The property taxes you pay each year are based on the Auditor’s determination of the fair market value of your property. “Fair market value” in this context means the most probable purchase price an interest in real property is likely to bring in a competitive market.  In many instances, the Auditor’s periodic estimation of fair market value is higher than the true fair market value of a parcel of real property that is affected by changed circumstances.  Filing a Tax Complaint provides property owners a mechanism to challenge the Auditor’s estimation of the value of real property, and potentially lower their annual real estate taxes.

If you recently purchased real property, the best indication of the fair market value of your property is the purchase price you paid.  In many cases, the Auditor will accept the purchase price paid as the fair market value, and revise the assessed value of your property accordingly.  This assumes that the purchase price was based on an “arm’s length transaction” between parties of similar bargaining power.  If you believe that the value of your property is not accurately reflected with the Auditor based on a reason other than a recent sale, then you may need to hire an independent Appraiser to determine the value of your property.

Appraisers primarily use three methods to determine the value of real property: the Sales Comparison Approach; the Cost Approach; and the Income Capitalization Approach.  Under the Sales Comparison Approach, a parcel is compared against recent sales of similarly improved parcels in the same geographic area.  The Sales Comparison approach best applies to valuing residential housing with no more than three residential units.  An appraiser compares your property to the selling prices of properties of comparable size, location, and with similar improvements.  If the properties are dissimilar, the Auditor will not accept the comparison as an indicator of your property’s fair market value.  A qualified appraiser will make adjustments based on disparities between properties to arrive at an accurate value under the Sales Comparison Approach.

The Cost Approach estimates the fair market value of the property based upon the cost to replace all buildings and improvements on the property, deducting depreciation or other loss in value, and adding the estimated value of the land on which the building and improvements are located.  This approach is best for newer construction, as well as in locations where the Sales Comparison approach is precluded by a lack of comparable properties in the area.

Finally, the Income Capitalization Approach determines the fair market value of real property based upon the property’s ability to produce an income stream.  The appraised value is determined by such factors as vacancies, debt service, and the owner’s return on investment.  This approach primarily evaluates commercial properties.

Whichever valuation method is appropriate for you, an experienced and qualified appraiser should conduct the appraisal.  An appraisal’s cost will vary based upon the property type involved, the appraiser’s experience, among other factors.

Furthermore, before firing off a tax complaint to the county auditor, property owners should also be aware of a few pitfalls. First, the application must be filled out properly, if not perfectly.  Tax Complaints can be dismissed on the slightest technicality.  Incomplete or incorrect owner’s name? Dismissed!  Fill-in the incorrect parcel number? Dismissed!  Sometimes even forgetting to “check” the correct box on the form can result in dismissal.  If your Tax Complaint is dismissed, you lose the opportunity to challenge the real estate taxes for the year filed, resulting in your taxes remaining at their current assessed value.

Second, strict evidentiary rules govern who is permitted to testify as to the value of the real property.  For example, if the person who performed an appraisal is not present at the hearing, hearsay rules may disqualify the appraisal as evidence.

Finally, in some counties, if a corporate entity owns the property, only certain individuals (a licensed attorney being one of them) can file the Tax Complaint and present testimony at a hearing.

In Franklin County, the Board of Revision has experienced such an increase in the volume of Tax Complaints (up 245% since 2007) that it has not finished hearing all the Tax Complaints filed for the 2009 tax year.  It is better to file early and get an earlier hearing date.  The sooner you obtain a decision, the sooner you can revise budgets accordingly.

Property owners should be aware that in many cases the local school board files a Counter-Complaint to contest your revised property valuation.  In fact, the law requires the Board of Revision to notify the local school board if the property owner seeks a decrease in  value of $50,000 or more.  An attorney will represent the school board, and you can be sure that they will be looking to dismiss your Tax Complaint based on the technicalities addressed above.

Reducing your property taxes to reflect your property’s current market value is certainly a growing trend among property owners in Ohio.  Given the various pitfalls it is highly advisable that property owners contact an attorney prior to filing a Tax Complaint on their own.  If you have any questions, please call our offices at 614-233-6622.