A Case Study on the Accuracy of Real Market Values on Tax Statements

Real Estate and Land Use

3/30/2017 by Michael Mangan

A Case Study on the Accuracy of Real Market Values on Tax Statements
In my previous Ear to the Ground post, I discussed real market values and how they can become inaccurate on your tax statement. For this week's post, I wanted to offer a real-life example of how this discrepancy played out for a client of mine and how we resolved the problem in my client's favor.
About five years ago, I received a call from a client upset with his County assessor. He owned an industrial building along the I-5 corridor and building next door – which had been constructed within a few years of his with the exact same architectural plans – had recently sold for $5 million. Yet when my client received his tax statement, his real market value ("RMV") was still assessed at $10 million.
He wanted to know how the assessor could get his building's RMV so wrong.
My client believed that the assessor was doing an appraisal of his property every year – that wasn't actually the case. The assessor had established an RMV for my client's property in 1997; under the formula required by Measure 50 (here is one description of the formula). Each year thereafter, the assessor applied the results of his mass appraisal (a percentage based on trends in the market) to that RMV. Since properties in that class had mostly appreciated, my client's RMV continued to climb year after year. Statistical trending does not capture discrete sales like that of the property next door – even if they are relevant.   
My client spoke to the assessor about the neighboring property's sale, but no change was made. I filed an appeal and hired an appraiser for the client. The assessor then conducted his own appraisal and eventually settled the appeal by reducing my client's RMV.