Property Tax Appeal Settlements

June 11th, 2009
Property Tax Appeal Settlements

For me, researching and writing appraisal reports is like reading a good
book: I don't want to go bed until I know how it ends. And those late nights
are paying off!

A vacant property in the path of residential development had a 2010 assessed
value of $2,760,400. The property owner went through the board of review
process and the assessment was lowered to $1,866,000, a 32% reduction. Then
the property owner engaged me to help.

Though a beautiful piece of lakefront land, there were many physical
features and regulations that limit the development potential. After I
submitted my analysis the 2010 was dropped to $1,178,900! This represents an
ADDITIONAL 37% reduction from the board of review. Makes my late night
writing sessions all worthwhile!

Two other properties had a preliminary plat for single family lots. But
excess inventory in the market indicated they would be growing corn for a
long time instead of houses. Like many markets, especially on the outer
edges of the metro, there were no development parcels to use as comparative
sales. Lacking SALES data, I did a complete analysis using MARKET data. The
corn versus houses got a reclassification from Residential to Agriculture, a
drop from 1.25 to 1.0% in tax rates on valuations above $500,000. And my
data driven analysis inspired the assessor to drop the values by 43%.

A 50 acre parcel is platted for residential development in a market that is
doing OK. Still has 10 years of inventory, but hasn't been hit hard by
foreclosure and new homes are selling. There are so few sales of development
land that the assessor got really excited when he found 3 sales to support
his value. Here they are:

Sale #1, 35 acres, sale just closed in May 2009, no phone number to verify.
I know this property and my hunches were correct. The "developer" that
purchased it was an LLC entity of the lender who had bought it a Sheriff
Sale. I passed the lenders phone number on to the assessor and tossed out
the sale.

Sale #2, 9 acres purchased on a contract for deed. After only a year the
buyer walked and the property goes back to the Seller.

My first issue is the size. Saying a 9 acre parcel is like a 50 acre parcel
is saying my rabbits are the same species as my cats. My second issue, that
I would like your opinion on, is this a valid sale when it went back to the
seller so quickly?

Sale #3, a 40 acre residential development parcel similar in character to
the subject property was purchased by Developer Dan. Dan, an experienced
developer who has found, like most, that the banks didn't want to touch a
land purchase. So Developer Dan goes to Farmer Fred, who doesn't have much
debt on the land, and they work this deal: $600,000 cash down payment and a
purchase money mortgage that Farmer Fred carries at 3%.

I agree with the assessor that if Developer Dan bought the 40 acres from
Farmer Fred he might have, instead, bought the 50 acres from my client-IF my
client could have done the same seller financing deal. However, my client, a
developer, like most developers, has all his land cross collateralized to
support his bank loans. My guy could NOT have done the Seller Financing
deal.

Question for you: would you accept the Developer Dan seller financed sale as
a valid comparative sale for a property owner that cannot do seller
financing? I'm anxious to hear what you think!