Why Do I Need a New Appraisal for My Tax Appeal?

Our clients sometimes ask us whether they will need to order new appraisals for their tax appeals. Very often, the client may have already obtained a recent appraisal from a bank appraiser as the result of a recent purchase or refinance. The prospect of spending additional money to obtain a new appraisal for the purpose of a tax appeal is therefore rather unappealing. Accordingly, the taxpayer must consider a few factors in determining whether a new appraisal should be ordered.

The first factor is whether there are any circumstances upon which an old appraisal can be used in a tax appeal hearing. Unfortunately, the answer to this question is a definitive “no.” Appraisal reports submitted for purposes of a tax appeal must bear a “date of valuation” of October 1 of the pre-tax year. Any other date, no matter how close it is to October 1, will cause an automatic rejection of the appraisal report. Additionally, appraisal reports submitted for purposes of a tax appeal must indicate as such in the report. This may seem like a rather trivial requirement; however, the reason for the requirement is quite important. Bank appraisals, are presumed to indicate a “safe” estimate of value. Put simply, appraisals used for mortgage lending and refinancing will generally indicate a “worst case scenario” value in order to protect the bank from over-lending for a less valuable property. Therefore, tax assessors, commissioners and judges are dubious of bank appraisals, since they very often underestimate value.

Additionally, appraisal reports prepared for purposes of a tax appeal should contain some explanation of the data that is used to substantiate the adjustments. For instance, if an appraiser believes that the subject property is worth $20,000 less than a recently sold identical house, because the recently sold identical house had a swimming pool, the appraiser must be able to show the data supporting that adjustment. Since the appraiser who prepared the report is required to testify at the tax appeal hearing, it is certainly not sufficient for the appraiser to simply state that the adjustment was due to a “hunch based on numerous years of experience.” The appraiser at the tax appeal will therefore, need to be far more prepared than a typical bank appraiser. The appraiser will be required to inspect, measure and thoroughly examine the property.

To further complicate matters, the Tax Board places the burden of proof upon the Taxpayer. Put simply, the current tax assessment is presumed to be correct and the tax assessor need not put forth any proofs in support of his or her assessment. It is solely up to the Taxpayer to prove that the assessment is wrong. Due to the variability of the skills and expertise of the various commissioners who may be hearing your case, you should plan on putting on the best possible case in order to win your tax appeal. This will almost always require the taxpayer to present an appraisal.

Of course, there is always a chance that we can settle a case before the hearing date based on the findings of a non-conforming appraisal. However, the risk of relying on a case to settle based on a non-conforming appraisal is that if it does not settle, there may not be sufficient time to order the appraisal. There is only one instance in which we would not recommend an appraisal report. When our firm is retained to appeal the assessments of several condominiums in a building or development, we very often find that several identical units have recently sold. In these instances, the use of the comparable sales of identical units is so persuasive, that it actually works better than an appraisal.

Due to the additional preparation that is required for a tax appeal appraisal as well as the fact that the appraiser must testify, the appraisers used for tax appeals must charge more for there work than bank appraisers charge. Therefore, the final factor that the taxpayer must consider is whether he or she will realize enough savings in the tax appeal to justify the cost of the appraiser. When time permits, this is an analysis we like to perform before deciding whether to accept a new matter.

While our firm has won reductions in over 80% of the tax appeals we have filed, we have consistently achieved our best results in case in which a proper tax appeal appraisal was submitted. Our firm has been fortunate to have been associated some very excellent appraisers, and they are clearly the reason why our success rate has been so extraordinary.

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