Wednesday, February 23, 2011

Property Tax and Classification

Property Tax and Classification

Developer owns three one acre lots on a Trunk Highway.

Each of the three parcels are CLASSIFIED as Commercial for Property Taxes and VALUED as Commercial for Property Taxes.

Initial research reveals:

Comp Plan
Tax Classification

Med Density Residential
Med Den Residential

Med Density Residential


Under Minnesota State Statute when there is a conflict between the Zoning and the Comprehensive Plan, like in Parcel B above, the Comprehensive Plan prevails when a development application is submitted.

Quiz: Answers at the end of the quiz

1) Parcel A should be CLASSIFIED for property taxes as:

a) Non Homestead Residential

b) Commercial

c) Don't have enough information

2) Parcel A should be VALUED for Property taxes as:

a) Non Homestead Residential

b) Commercial

c) Don't have enough information

3) Parcel B should be CLASSIFIED for property taxes as:

a) Non Homestead Residential

b) Commercial

c) Don't have enough information

4) Parcel B should be VALUED for Property taxes as:

a) Non Homestead Residential

b) Commercial

c) Don't have enough information

5) Parcel C should be CLASSIFIED for property taxes as:

a) Non Homestead Residential

b) Commercial

c) Don't have enough information

6) Parcel C should be VALUED for Property taxes as:

a) Non Homestead Residential

b) Commercial

c) Don't have enough information

7) If a property is misclassified as Commercial when it should be Residential, the Property TAX may be TRIPLE what it should be at the same Valuation.

a) True

b) False

Answers to the quiz:

1) A 2) C 3) A 4) C 5)B 6) C 7) A

You needed to know these two facts to ace the quiz:

A) For Property Tax Classification of VACANT land where there is no obvious use, its classified how its ZONED. Comp Plan is irrelevant in classification.

B) Property should be VALUED at its highest and best use. Highest and Best Use is based on what is a) Physically Possible; b) Legally Permissible; and c) Financially Feasible.

The Highest and Best Use is the most critical component of any appraisal. And I haven't finished my analysis for these three parcels to make that determination.

Classification is something I've observed most property owners blow off, focusing on the value. But challenging the classification may have even greater impact to your property taxes than challenging the valuation because there is such a huge difference in tax rates.

Are your properties misclassified? For a free evaluation, send me your PIDs, property locations and your contact info to

The deadline to challenge your Pay 2011 property taxes is April 29th, 2011.

Wednesday, February 16, 2011

Ramsey Town Center

Ramsey Town Center
I made my first visit to the Ramsey Town Center today. Its not a location that is typically on the way to anything. I was out there for a tax appeal. And anyone that has property in the Ramsey Town Center needs to consider appealing their property taxes, residential or commercial.

When you visit the struggling commercial area, I find it ironic that this shiny new building is the offices of the Midwest Medical Examiner. As the Ramsey Town Center is strewn with dead developments.

Its sad because there are some lovely homes built there, beautiful architecture on the the townhomes. But the projects have all been mothballed. Not one model home to be seen. And one sad “to be built”, a 2 bedroom, 1 bath single family home on a 55' wide lot advertised at $154,000 is the only active listing I could find on the MLS. As often the case, in addition to the builders, those that are suffering the most are the homeowners that bought into the dream. Unless they are very fond of quiet and don't like having neighbors.

As to solds in the last year--3 partially completed townhomes sold for $45,000 and a water damaged one for $52,000. And a new nice single family home, 2,500 square feet finished with 4 beds and 3 baths sold for $262,000. Lonely, though. It was really quiet out there on this flat open land.

It was a project that never made sense, even when it was conceived in the peak of the hot real estate market by the City of Ramsey, who sought out a developer. Though I doubt the City could have even considered the resulting bank fraud that landed people in jail and contributed to the main appraiser involved committing suicide. Back to the dead body thing again.

Expect for what appears to be a mostly empty commercial building with an event center, and a new Alina Clinic being built, all of the other “Town Center” commercial buildings are this amazing City Hall, the new VA Clinic being built, a large multistory empty parking garage, and the Medical Examiners Office.

Thursday, February 10, 2011

I'm a happy landlord

I'm a Happy Landlord!

As my closing approached for the beautiful townhome in Chanhassen, I placed a for rent ad on Craig's List. When I did my original projections it was based on a rent of $1,300 a month. And there were two other three bedroom townhomes advertised in the area at $1,300.

I knew my townhome was a superior location and floor plan. So I tossed it on Craig's list at $1,475 on a Friday evening. And got two calls right away--though they wanted an April 1st move in and I was looking for March 1st. But I was excited and told my friend who I copied the rental townhome strategy from.

“Laurie,” he told me. “It usually takes 15 showings to get a signed lease.”

Two days later I get a call from a wonderful woman, newly divorced, with three teenage girls who specifically wanted to live in the my Oak Hill townhome neighborhood in Chanhassen. Her marital home was close by and the girls' dad lived just down the road, with his new young honey and baby boy. Same schools for the girls, close to their friends and sports. This townhome is close to EVERYTHING, at the intersection on Highway 5 and Powers Blvd.

My closing was delayed three days due to the Texas storms, as the seller was Freddie Mac from San Antonio.

For some odd reason, Freddie Mac does not pay deed tax when they sell property.

Got the signed papers from Freddic Mac at 4:00. And the lease was signed at 8:00 that evening.

So the seven month search for the perfect townhome was not wasted. I wouldn't have immediately recognized how special this one is. I paid $4,100 over list price because there was another offer. If I hadn't seen all the others first I would have probably bid too low and lost it.

I'm getting about a 12.5% rate of return. Given both the real estate and financial markets, I'm pleased with that. So I'm a happy landlord!

Thursday, February 3, 2011

How To Speed Up Property Tax Appeals

How to Speed Up Property Tax Appeals

If you believe your property tax assessments are too high, there are three roads you can take: 1) “The Road to Nowhere”; 2) “The Toll Road to Tax Court”; 3) “The Express Route to the Board of Review”.

1) “The Road to Nowhere”. Call your assessor and whine that your TAXES are too high. Assessors don't set your taxes. I'm seeing many properties where the VALUES have declined and the TAXES have increased.

Understand that when it comes to property tax assessment, the ASSESSOR is presumed to be correct. Its the TAXPAYER'S Burden of Proof to demonstrate the assessed value should be lower. And this typically takes a well supported appraisal.

Whining doesn't work. And wastes everyone's time, including yours.

2) “The Toll Road to Tax Court”. If you believe your property tax assessment is too high for taxes due this year, TAX COURT is your ONLY option at this point in the game. Filing deadline is the end of APRIL 2011, and its approaching faster than we can imagine spring under the snow piles.

This road has fees that must be paid for each year. And you can be traveling on it for years and never get where you want to be--a reduced property tax assessment. In Hennepin County, for example, ½ the cases are dismissed with no change--but the taxpayer still pays the toll. Of the less than 1% of cases that actually go to court, its become more common for the judge to rule that the assessed value be raised HIGHER THAN THE ORIGINAL ASSESEMENT!

Its been my extensive experience, that when I treat the assessor with respect, don't play games, and provide a very well supported appraisal that omits the fluff that just wastes their time, I've gotten reductions as much as 66% on settlements without going to tax court.

These are some of the detours that can make the Toll Road to Tax Court take years:

a) Cases filed that have no merit. Remember ½ the cases in Hennepin County were dismissed? Those dismissals took a lot of the assessor's time that could have been spent settling the valid cases. If your property tax attorney/consultant files a case without doing even some basic valuation research, find another provider. For example, I may review eight subdivisions and recommend filing on only two or three. Without the up front valuation research, you're likely to pay years of tolls to tax court and land up in the dismissal pile.

b) Reluctance to Hire an Appraiser AND an Attorney. To successfully navigate the road to tax court takes two kinds of vehicles: an attorney and an appraiser. Only engaging one greatly increases the chances of your case being dismissed with no change, but you still paid the toll. Engaging neither will often lead to The Road to Nowhere.

c) Some Assessors are just really slow. I can provide them an appraisal and they sit on it over a year. And I don't think its because they sit around playing video games. They have many statutory responsibilities in addition to tax appeals. And they have to deal with cases that have no merit. Court dates can be extended for years. And they are dealing with older cases. Many tax appeals filed for 2010 still haven't been assigned initial court dates by the Tax Court.

3) “The Express Route to the Board of Review” In a few weeks you'll get your January 2nd, 2011 valuation notices for property taxes due in 2012. As this is the time of year when most of us are focused on completing our INCOME TAX for 2010, who wants to think about 2012 property taxes? So most people glance at this notice and toss it in the drawer.

Bad move. This notice states you can appeal the valuation by attending your local board of review, which is typically held around the first week of April 2011, when you're scrambling to get your income tax done. Note the pay 2012 board of Review is held before the Pay 2011 property tax court filing date.

The board of review is typically the City Council or Town Board, and they typically are not valuation experts and will defer to their assessor. You can appear in person, have a representative or send a letter. I went this route for Pay 09' for a group of clients. It was a total waste of time, got zero reductions, filed in tax court and got reductions as high as 65%.

Last year a client filed in tax court for Pay 2010. She got the notice for the Pay 2011 local Board of Review and asked me to go. After the last experience, I wasn't going to miss my Yoga class so she went by herself. Nominal reduction, but a letter explaining she could appeal to the Hennepin County Board of Review. I like new experiences, so I set the appointment, wrote a well supported appraisal, and presented to the County Board of Review in June of 2010. The County Board of Review in Hennepin County are appointed by each Commissioner. It was primarily Realtors and a developer. They were knowledgeable about the market, listened closely and asked questions. And the Pay 2011 assessment was reduced from $1,300,000 to $600,000.

No tax court. No lawyers and no filing fees. And most importantly, its the express route to tax appeals. But if you miss the entrance ramp, you can't go back.

How to Speed Up Property Tax Appeals

1) Send me the PIDs and basic property information for ALL of your real estate holdings THIS MONTH. I'll do a free evaluation, and for those cases that have merit, I'll work with an attorney to file your Pay 2011 property tax court appeal.

2) Send me those Pay 2012 notices AS SOON AS YOU GET THEM. Since I would have already been familiar with your property, I can do a quick evaluation if you have a case for Pay 2012 Board of Review. If you had a valid case for 2011, its likely you will still have one for 2012.

3) If you've provided me with what I need on a timely bases, I can prepare appraisals for Pay 2011, Pay 2012, and even older tax court cases that haven't settled yet for the same property.

4) As part of the Board of Review, the assessor must review your case. I'll ask them, while they need to get their head wrapped around understanding your property, to review the appraisals for the tax court cases for prior years and settle them altogether.

No guarantees, but I have used this strategy since 2009 with one particular County with really good and fast results. By pushing hard this spring, lets work toward getting your tax court cases settled by June. Then I'll have time to play golf with you all summer!

Don't delay and get stuck on the wrong road. The Board of Review is an express process and I need time to write a well supported appraisal. So get your free evaluation now. TODAY send me your PIDs, property locations, short explanation what the property is, with your contact information to