Are you
confused about your recent property tax assessment? Many homeowners feel that
their assessed value doesn't accurately reflect the current market conditions.
While tax assessments are meant to be precise, they often rely on mass
appraisals and algorithms that can overlook the nuances of individual
properties and the latest market changes. If you believe your assessment is too
high, don't worry! You have the right to appeal it. One of the most effective
strategies for doing this is the comparable sales approach. This method
involves examining recent sales of properties similar to yours to establish a
more accurate fair market value.
In this
blog post, we will guide you through a simple process to challenge your home's
assessed value using the comparable sales approach. We will analyze recent
sales data from the County Assessor's records and demonstrate how to select
suitable comparable properties (“comps”), adjust their sale prices, and
estimate a fair market value for your home. Follow our example using a subject
property located in a Planned Unit Development (PUD), valued as of January 1,
2025, to learn how to build a strong case for your appeal.
Description of the Subject Property
The subject property is a
19-year-old single-family home situated within a desirable PUD. This community
offers residents access to extensive amenities, including a golf course. The
property itself features a land area of 7,405 square feet and a comfortable
living area of 1,647 square feet. Notably, it does not include a golf course
lot or a private swimming pool, making it comparable to properties without
these specific high-value features.
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The Steps
Compiling the Comps List: Although there are 35 assessor-identified
qualified (i.e., arms-length sales) property sales within the PUD during 2024,
we've excluded 10 sales from our analysis because they are situated on golf course
lots or properties with swimming pools, which do not apply to our subject.
Valuation Method: To determine a fair market value, we'll use
a straightforward comparable sales ("comp sales") approach.
Comps
Selection: Out of the available 25 comps,
the five most comparable properties ("final five") will be selected. The
selection criteria are as follows:
1.
Living
Area Proximity: Living areas must be within 15%
of the subject's living area of 1,647 square feet.
o
15% of 1,647 sq ft is 0.15×1647=247.05 sq ft.
o
Minimum acceptable living area: 1647−247.05=1399.95 sq ft.
o
Maximum acceptable living area: 1647+247.05=1894.05 sq ft.
o
Therefore, the living area range
for comps is approximately 1,400 sq ft to 1,894 sq ft.
2.
Proximity
to Valuation Date: If more than five comps meet the
living area criteria, we will prioritize the five properties with sale dates
closest to January 1, 2025, to minimize the need for time adjustments.
Adjustments to Comps: Once we select these final five, we'll
adjust their sale prices based on size and price. For example, the sale prices
of properties with living areas smaller than 1,647 square feet will be adjusted
upward by multiplying the size difference by the average sale price per living
square foot (SP/LA) of $161. Conversely, for properties larger than 1,647
square feet, their sale prices will be adjusted downward based on the size difference multiplied by the SP/LA of $161.
Value Conclusion: The final step will be to determine the
subject property's value by averaging the adjusted sale prices of the final
five.
Rationale: Additionally, we'll provide a detailed explanation of the rationale for selecting the final five that contribute to the valuation of the subject.
Step
1: Identifying Potential Comps Based on Living Area
Let's examine the data and filter
for properties with living areas between 1,400 sq ft and 1,894 sq ft:
Step
2: Selecting the Five Comps Closest to the Valuation Date
We have more than five properties
that meet the living area criteria. Now, we will select the final five with
sale dates closest to January 1, 2025.
The sales closest to the
valuation date of January 1, 2025 (i.e., later in 2024), are:
1.
COMP-25: Sale Date: 12/01/24 (Living Area: 1,869 sq
ft)
2.
COMP-22: Sale Date: 11/01/24 (Living Area: 1,647 sq
ft)
3.
COMP-21: Sale Date: 10/01/24 (Living Area: 1,869 sq
ft)
4.
COMP-20: Sale Date: 10/01/24 (Living Area: 1,647 sq
ft)
5.
COMP-18: Sale Date: 09/01/24 (Living Area: 1,470 sq
ft)
These five comparable sales will
be used as our final five.
Rationale for
Comparable Selection
The selection
of these final five (comparable properties) is based on two key principles
crucial for accurate property valuation:
1.
Similarity in Key Attributes: The
primary filter of living area within 15% of the subject ensures that the chosen
comparables are fundamentally similar in size, a significant driver of property
value. This selection minimizes the need for drastic adjustments. While other
factors like land area and building age are considered in a full appraisal,
focusing on living area first provides a strong initial set of comps. The data
used indicates that most of the chosen comps also have similar land areas and
building ages, further reinforcing their comparability.
2.
Recency of Sale: By
prioritizing the most recent sales (those closest to the January 1, 2025,
valuation date), we minimize the impact of market fluctuations over time,
reducing or eliminating the need for complex time adjustments, which can
introduce subjectivity and potential inaccuracies into the valuation process.
In a dynamic real estate market, recent sales data provides the most relevant
snapshot of current market value.
3.
Exclusion
of Non-Comparable Features:
The comps list already excludes properties with golf course lots or swimming
pools, ensuring the selected comps align with the subject’s characteristics
within the PUD.
4. Age
Consideration: The selected properties have
ages (15–19 years) close to the subject’s 19 years, minimizing the need for
age-related adjustments.
Adjustment
Formula: Difference in Living Area × SP/LA of $161
Value Conclusion:
To determine the subject property's value, we average the adjusted
sale prices of the five comparable properties:
Average Adjusted Sale Price = (249,158+249,400+262,858+275,000+228,497)/5
Average Adjusted Sale Price = 252,983
Based on this comparable sales
analysis, the estimated fair market value for the subject property as of
January 1, 2025, is approximately $253,000.
This analysis provides a clear and justifiable method for
estimating the subject's value, which can be a strong basis for appealing a
high assessment.
Scatter Plot
Scatter Plot: The plot shows sale price vs.
living area for all 25 comparable properties. The final five comps (COMP-18,
COMP-20, COMP-21, COMP-22, COMP-25), used for the subject property’s valuation,
are highlighted in orange, while the other 20 comps are in blue.
Trendline: The blue trendline illustrates
the positive relationship between Living Area and Sale Price.
Graph
Integration: Including this scatter plot in the analysis
section helps visually justify the selection of the final five comps, which
have living areas close to the subject’s 1,647 sq ft.
Conclusion
Appealing your home assessment might seem
daunting, but by diligently applying the comparable sales approach, you can arm
yourself with solid evidence to support your case. We've explored how to
identify relevant sales data, select the most comparable properties based on
key features and sale recency, and make necessary adjustments to arrive at a
well-supported estimate of your property's fair market value. Remember, a thorough
and well-documented analysis is key to a successful appeal. By taking the time
to understand and utilize the comparable sales method, you can confidently
advocate for a more accurate assessment and potentially achieve significant
savings on your property taxes.
Disclaimer:
The information provided in this
blog post is for general informational and educational purposes only, and does
not constitute professional legal, real estate, or tax advice. While we aim to
provide accurate and helpful content, property assessment appeals can be
complex and are subject to specific local laws, regulations, and individual
circumstances. The methods and examples discussed herein are for illustrative
purposes only and may not apply to every situation.
It is highly recommended that you
consult with a qualified real estate professional, appraiser, attorney, or tax
advisor regarding your specific property and any assessment appeal matters.
Relying solely on the information presented here may not be sufficient for a
successful appeal. We do not assume any liability for decisions made based on
the content of this blog post. Always verify information with official sources
and seek professional guidance when necessary.
Upcoming Book on Property Tax Assessment Appeals
My
forthcoming book will provide an in-depth exploration of how to successfully challenge over-assessed property valuations. Packed with practical examples,
the book will cover a wide range of property types, including those in
Homeowners Associations (HOAs), non-HOA communities, beachfront properties, and
more. For tax professionals and mass filers, I’ll include, among others, time-adjusted comps analysis and advanced
regression-based solutions that offer statistically robust methods for crafting compelling appeals. Whether you’re a homeowner or a professional, this book
will equip you with the tools and strategies needed to navigate the appeal
process with confidence. Stay tuned for its release!
