Is the Real Market Value on Your Tax Statement Accurate?

Real Estate and Land Use

3/23/2017 by Michael Mangan

Is the Real Market Value on Your Tax Statement Accurate?
One of the most common questions asked about property tax in Oregon is whether the assessor's real market value ("RMV") is accurate. The short answer is, probably not.
There are two reasons for this. First, Measure 50, passed in Oregon in 1997, has taken the focus of assessors away from real market values and turned it toward formula-driven assessed values. I'll be addressing our legislature's efforts to unwind Measure 50 in a future post.
Second, Oregon law requires assessors to value taxable property annually; Multnomah County alone has more than 350,000 property tax accounts to value each year. That's in addition to determining the tax rate for each taxing district, imposing and collecting taxes, identifying properties that are subject to Measure 5 limitations, administering exemption and deferral programs (Oregon has over 100), maintaining websites and updating online maps, fighting property tax appeals, and creating annual reports.
As a result, the RMV listed on a tax statement is not based on an individual analysis of that property, but a statistical analysis of a group of similar properties. The County's annual appraisal process is nothing like the appraisals banks use for financing purposes. Instead, county assessors use mass appraisal methods that analyze properties grouped by similar market influences and characteristics. Mass appraisal is the systemic appraisal of groups of properties on a given date using standardized procedures and statistical testing (check out the Oregon Department of Revenue Property Tax Division’s Appraisal Methods For Real Property handbook if you are interested in learning more about this process).
Assessors are called upon to statistically analyze groups of properties to determine trends in the market for very broad categories of real estate, e.g., commercial, industrial, and residential. Mass appraisal has more to do with statistics than it does appraisal. Assessors create models to represent and compare property characteristics that contribute to value for a group of properties, and then use those models to estimate the value of your property.
Because of this, the RMV is more likely to be accurate if your property is newly constructed and similar to others in its property class, or there is recent leasing or sales activity for its type, e.g., multi-tenant buildings in an industrial park or recently constructed homes in a subdivision. RMV is least likely to be accurate for: those properties that are unique, e.g., a school converted to a restaurant or pub, a regional shopping center, an industrial/flex campus; properties that have a business value component, e.g., hospitals, assisted living facilities, convention centers, health and racquet clubs, auto dealerships, or gas stations; or properties that are older, have gone through renovations, change in use, or have functional issues. In my next post, I'll describe a case I handled that illustrates this last problem.