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.