Appraisal Matters

Key 7 – Determine Your Return on Investment

There’s a limit to what someone can spend to win a tax appeal. It can be difficult to gauge the cost when you do not know whether the case will be settled at the board level, State Court or higher. Further, when you do not know the current market value, you cannot easily relatie savings to cost.

The key to determining your return on investment is to determine the value of the property. For multi-tenanted properties, one of the most cost effective ways to do so is to hire an appraiser to perform a limited scope, restricted use appraisal on the property. If you can provide at least the last year’s income and expense statement along with the most recent rent roll, the appraiser can perform an income approach only appraisal in this format. This requires the least amount of the appraiser’s time, has the lowest appraisal fee cost and frequently has the shortest turnaround time. This assumes that the property has reached stabilized occupancy and the property is typical in physical and financial characteristics to the market. If this is not the case, the property is owner occupied or there is no history of incomes and expenses, the report will cost proportionately more. A favorable side benefit of hiring the appraiser to perform this type of appraisal is that if you need a more detailed report later in the tax appeal process, the appraiser can give you a fixed fee upgrade cost and the turnaround time will also be much less than if he/she were contracted to start the entire appraisal process at that time.

If you know the value of the property, you can easily gauge the tax savings. One rule of thumb we use is to determine the return on investment if the property were successfully appealed to half of the difference between the Assessor’s and appraiser’s market value estimates. You will still need to consider legal costs and one or two times for the appraiser to discuss the appraisal before the board or state court, but if you are satisfied with the return from an intermediate position, you will be much more so should a greater reduction occur.