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March 14, 2023

Retired Appraiser Sounds the Alarm on Purportedly Low Assessment Values #RethinkTheNews

He has been trying his best to sound the alarm. Who’s listening? Is any action being taken? Do his claims have merit, or could other factors be at play? Due to the rapid pace of market dynamics, assessment authorities face an ongoing challenge to keep up with the changes.

Are assessment authorities giving an unfair advantage to owners of commercial real estate? Is this being done at the expense of residential property owners? One retired appraiser thinks so and is sounding the alarm to anyone who will listen.

Disputes over assessed value are at the core of property tax appeals, and they come in all shapes, sizes, and jurisdictions. One recent anecdote from western Canada provides a perfect example.

One retired appraiser in BC is sounding the alarm on commercial property owners who, he believes, are receiving unfair breaks on their property tax obligations. That’s the gist of a recent piece in a local Chilliwack, British Columbia publication, highlighting issues that routinely emerge when two parties disagree on an assessment.

There are many reasons why differing opinions on assessment values are commonplace. First and foremost, assessment and taxes represent an imperfect science. On the one hand, a significant amount of precision work goes into extracting data from comparable properties, making reasoned projections on market movements, and evaluating the economy’s relative health.

When eager buyers follow their emotions and pay prices that completely misalign with assessed or comparable property values, they effectively undermine and skew market analysis. Think of an art collector who covets a particular piece for personal reasons and is willing to pay a premium to secure it. The collector creates a grey area or, more specifically, pricing uncertainty. In the case of real estate, such scenarios can substantially impact tax values.  

The intersection of emotion and logic often lies at the heart of appeals, and the gap can cause some to take issue.

The former BC appraiser claims homeowners are bearing the brunt of what he considers to be chronically low commercial real estate assessments. He has made it his mission to encourage others to act. In a recent blog post, we noted research by Altus Group that suggests BC commercial property owners pay 3.46 times the amount of residential property tax rates. Notably, this is one of the highest ratios in Canada.

He cites compelling statistics that, on the surface, validate his claim. His first example is of an industrial park that maintained a consistent assessment until its sale. Even once the assessed value rose, it failed to reach the sale price. In a second example, he uses a smaller local retail complex that experienced significant value fluctuation in assessed market values over four years.

With examples like this, he suggests that deep-pocketed owners can effectively blunt assessments they may deem too high simply by deploying a team of accountants and lawyers. Given the complexities, including the impact of pricing uncertainty, he may not be considering other factors that could form the basis for an appeal.

Owners and property managers of large portfolios routinely encounter contexts that complicate their decision to appeal. Purpose-built property tax management software, itamlink, may be the appellant’s best tool in mounting an appeal that can withstand scrutiny. By centralizing all the historical and current property tax data within one powerful tool, one can accurately ascertain the actionable insights necessary to optimize portfolio value.

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© 2023 Rethink Solutions. All Rights Reserved
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© 2023 Rethink Solutions. All Rights Reserved