A property owner in Whitpain Township contacted our office about doing an appraisal of his property for tax assessment appeal. As we do with all of our assessment appeal clients, we ran the public records on the property and searched for any prior MLS data on the house. This gives us a preliminary understanding of the property.
In this case, the house was a 5 year old 1 story rancher. Not very common in this particular market where 2 story colonials are the norm. The public records indicated that the house was over 5,100 square feet…large for a rancher. Digging a little deeper we found that 2,000 square feet of the listed gross living area (GLA) was contained in the finished basement.
Why does that matter you may ask? Well, from an appraisal perspective, below grade living space is generally not valued the same as above grade living space; nor, is below grade living space included in the overall GLA calculations. So, again from an appraisal perspective, the actual above grade GLA for the property is really about 3,100SF with 2,000 of finished basement.
This matters when an appraiser is reporting the Fair Market Value (FMV) of a property. FMV is the basis for a property’s assessment.
While an assessor, for the purpose of assessment, may value below grade living space the same as above grade space, an appraiser does not. The reason being is that when appraising for FMV the appraiser takes into consideration the actions, preferences and trends within a given market. In this case, Buyers within this market will generally not value below grade living space (no matter how nice) the same way they would value above grade living space. For example, Buyers might be willing to pay $125 per square foot for above grade space but only $50 per square foot for finished basement space.
The property we were looking at had an Assessed Market Value of $889,300. They were being taxed as if their home was worth $889,300! Their annual taxes were in excess of $14,000. That’s a lot for a modest rancher.
Our initial search of recent sales showed no sales of 1 story ranchers in the prior 12 and 24 month periods. So, we expanded our search to include any and all sales within the subject’s municipality and school district. What we found was that the average sale in the prior 12 months of all homes in this area was right around $600,000. Keep in mind that these sales are all 2 story colonials, some much larger than our rancher. Without having done an appraisal of the property and only using broad averages of the market we were able to present the following scenario to the property owner.
If the property were to appraise at the market average of $600,000 and this amount was agreed to at the assessment hearing, the homeowner could potentially reduce their assessment by 32.5%. They would save approximately $4,550 per year in taxes! Keep in mind that the average is based on available 2 story colonial sales. Chances are that the actual appraised value of the rancher may be less than the average resulting in a deeper assessment reduction.
So as tax appeal season approaches property owners should take a good look at their assessments and the public data available on their property. They should check for errors in the public records, especially incorrect square footage, room count and exterior features such as pools. These are often incorrect in the public records and, if left unchecked, could greatly affect your assessment and tax burden.
Real estate agents and other professionals that work with property owners, now is a great opportunity for you to offer a value added service to your past, present and potential clients. Offer to conduct a review of their assessment card and public records. If you notice something out of the ordinary you can bring this to their attention and instruct them on how to proceed.
If anyone has any questions about their assessments or how to proceed with a tax assessment appeal, please feel free to contact our office at 215.836.5500 or email appraisals@coyleappraisals.com .
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