Background:
Property tax is assessed locally and is subject to state laws. The Appraiser’s Office is assigned the task of appraising real estate in its jurisdiction for ad valorem tax purposes. After the County Appraiser has valued all the property in the county, the values are certified and sent to the treasurer for the issuance of a property tax bill.
Normally, property owners accept the assessment value given to them by the county assessor without thinking twice. They assume it is an unavoidable cost of business. However, these assessments do not always accurately reflect the true property value.
Recently, a large corporation turned to MarksNelson for help in securing a fair market value for their corporate headquarters located in Kansas. The headquarters consists of a large office building combined with auxiliary buildings to form the main campus.
Challenge:
We needed to determine the fair market value for the property. Fair market value is the price a property would sell for in an open and competitive market given:
- adequate information of relevant facts,
- reasonable time to complete a deal, under no compulsion,
- buyer and seller are acting in their own interests, and
- buyer and seller mutually agree on the price.
Looking at our client’s situation, there are only a few select companies or tenants who have need for such a large amount of space. The lack of one large tenant would require a conversion to multiple tenancy. However, the subject property’s floor plan poses challenges for multiple tenants. A conversion to multiple tenancy would require significant capital and could render some space not rentable. All of these factors negatively affect the fair market value of the subject property.
In our estimation, the county significantly overvalued the property by over 50%.
The Solution:
After discussing our findings, the client decided to move forward. MarksNelson filed property tax appeals on behalf of the owner to challenge the county assessment values.
We toured the property with the property owner, prepared a valuation report, and presented market data and photographs to the county appraiser’s office.
The data MarksNelson was able to provide to the assessor’s office confirmed that the original calculation of net operating income was significantly overstated and a reduction in the assessed value was warranted.
Result:
With market evidence, MarksNelson was able to demonstrate that the office building was over- assessed. The county appraiser corrected the assessment and the owner saved over $1.25 million in real estate property taxes. The tax appeal equated to substantial tax savings during the years under appeal but also has a significant cumulative impact moving into future years.
The 2021 tax year is a reassessment year for many jurisdictions including Colorado, Kansas, Iowa, Missouri, Nebraska, and Texas. New values will be placed on real estate assets that will result in higher property tax bills next year. The property tax team at MarksNelson is experienced in producing superior tax savings for our clients. If you think your assessment value is not a fair market value, give us a call for a professional consultation.
