Smart taxpayers know that buying an appraisal can help them save them thousands of dollars when appealing their property taxes. But getting the right appraisal is critical to maximizing your tax savings. 

Using an appraisal to maximize your tax savings

The Assessor’s job is to value property at market value.[1]

No one today knows what your property will sell for tomorrow. As a result, market value is an opinion rather than a fact. The Assessor is entitled to his opinion, and you (and your appraiser) are entitled to yours. Value opinions often differ, and this creates a big opportunity for you.

You can save tax dollars by proving your building is worth less than the Assessor says it is. You have the burden of proof, meaning that you must provide convincing evidence, and an appraisal is usually that evidence.

If an appraisal is written the right way, it will be believable and have a low value opinion that will maximize your tax savings. So, its not only important to get an appraisal, it is important to get the right appraisal. And, while an appraisal will cost you money, you can usually save many times the appraisal cost in tax savings.

Why do value opinions differ?

A few reasons:

Reason #1 – The Assessor knows little about your property

The Assessor knows where your property is located and what it looks like but little about its condition or financial circumstances. And even if he had your leases and financial statements, he wouldn’t really know what is going on at the property from a financial point of view without talking to you.

That makes it hard for the Assessor to value your property correctly and this gives you an advantage since you and your appraiser will have much better information than the Assessor.

Reason #2 – The Assessor doesn’t spend enough time to develop a good opinion of value.

The Cook County Assessor must value 1.7 million parcels of property with a small staff sitting in an office using computers and big data. You might call this valuing from the cloud. This is not a great way to accurately value property. It’s more of a guesstimate.

Valuing real estate takes hard work and boots on the ground. Smart buyers spend hours doing due diligence. Then, offers are made and prices negotiated before value is finally determined. This process takes time and effort.

Given the limitations the Assessor’s staff works under, it’s not surprising their assessments can be off by so much.

When you hire an appraiser, you will have a clear advantage. Your appraiser will put boots on the ground, inspect your building, study the market and write a report with a believable opinion. This should give you the best evidence of its value and a winning edge in your tax appeal.

 Reason #3 – An appraiser should value your property properly as the law requires and if done properly that can lead to a lower value.

Illinois law dictates how property must be valued for real estate tax purposes.

Assessors often over-value property by using incorrect valuation standards that ignore or contradict the law.

Smart attorneys will identify important valuation issues early and bring them to the appraiser’s attention, so the appraiser can value the property correctly pursuant to the law and often at a lower value.

Here’s one example.

Under Illinois law, property must be valued at “fee-simple” (what it would sell for if rented at market rents today) rather than “leased-fee” (what it would sell for based on cash flow today – which may be based on an old/high leases).

Landlords like to inflate rents so they can sell their property at a high sales price. They often give tenants incentive discounts up front rather than reducing rents over the lease term and often inflate rents to finance high construction costs rather than requiring tenants to pay for those cost up front. As a result, rents paid under leases can exceed market rents.

Assessors like to use high contract rents when valuing real estate rather than lower market rents and that can lead to an inflated valuation.

It’s up to lawyers to spot these issues and make sure the appraiser is aware of them so your property can be valued lower based on the discounted rents effectively achieved.

Smart lawyers know what the law requires, develop valuation arguments that work to your advantage and make sure your appraiser writes a defensible appraisal at the lowest valuation legally possible. That’s how Elliott & Associates – and your appraiser – can add value and get you the lowest taxes possible.

Using an appraisal to win your tax appeal

In a tax appeal, you must prove your case. It’s your evidence against the Assessor’s and your evidence must be stronger than his. The Assessor’s evidence is often weak, and his opinions not well supported.

If you submit a good appraisal, you should meet your burden of proof, gain a winning edge and stand a great chance of winning your case.

You can get a lot of bang for your appraisal buck. You can use it for appeals to the Assessor, Board of Review, the Property Tax Appeal Board and the Courts. And, you can use it each year of your triennial (3-year) assessment period.

The team at Elliott & Associates has helped our clients save over $300 Million in property taxes since 1995.

Please feel free to contact us if we can help you.

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[1] Market value is what property would sell after exposure to the market by a realtor, where none of the parties is related to the other, and no party is forced to buy or sell.