Very often I’m asked what it is exactly that we do at Tax Reduction Services. My answer invariably alludes to the fact that we are experts in the valuation of real estate.

According to New York State Real Property Tax Laws (RPTL), real estate is to be taxed proportionally to its value. This means that if your property is worth $200,000 and mine is worth $100,000 then you should be paying twice as much property tax as I do, provided we live in the same taxing districts (school, town, etc).

The key to all this is “worth”. Our mission is to determine and prove that certain properties are over-valued on the tax rolls which results in being over-charged for property taxes. A major hurdle in this process is the actual determination of value. Values can be very elusive at best. Valuation is not an exact science but there are numerous, accepted methodologies that are used to estimate market value.

The most accepted measure of value for property tax purposes is a recent sale. In accordance with NYS RPTL, the courts have determined that a recent arms length sale (a sale where no relationship exists between seller and buyer) is the best indicator of Market value for residential properties. There are other issues that might render a recent sale un-usable such as distress (as in foreclosure), divorce or an estate sale. Distress does not always mean that the recent sale was not market value, but it usually is sufficient for the courts to exclude it.

In the absence of a recent sale the determination of value becomes much more complicated and subjective. Our process requires that an estimate of market value be submitted in the form of an appraisal. There are several different methodologies that can be used to estimate value. For residential properties the courts have established that value be defined as the amount that a willing buyer would pay to a willing, un-distressed seller, in an arms length transaction.

The burden of proof is always on the petitioner. Therefore we must determine and substantiate an estimate of market value to achieve our mission and reduce a property tax. The accepted approach to valuation involves identifying comparable sales (comps) and making adjustments based on the differences between the comps and the subject property to derive an estimate of what a willing buyer might pay a willing seller on the open market.

It is the assessors’ job to produce a fair and equitable tax roll each year by establishing a value for every property so that it may be taxed proportionally. When a grievance is filed the assessor will either acknowledge that the property has been over-valued or more likely attempt to defend the assessment with their own estimate of market value based on recent sales and adjustments.

If you’ve ever tried to sell a property you know that different people will be willing to pay different amounts for the same property. Although there are accepted, empirical methods that are used to establish values there are many additional variables that effect what a buyer might be willing to pay which are not so measurable or predictable. These factors can create much variance between buyers.

The real estate market might be moving up or down. The economy might be on the upswing or down swing. The actual appearance of the exterior of the subject property (curb appeal) or the conditions at the neighbor’s house across the street, which might be temporary (such as an un-kept yard), might affect a buyer. The interior might be furnished or professionally staged as opposed to vacant and empty. How about the old “cookies in the oven” trick. These are a few of the variables that affect sales price which cannot really be factored into an appraisal.

This blog will explore all these kinds of factors that affect the value of real estate. It will deal with the micro-values of individual properties and the psychology of the buyers and sellers. It will dwell into the macro-economic issues that drive a real estate market up or down and the other factors and events relevant to market values and our livelihoods. From time to time there will be guest essays by experts in the field and much analysis of the actual trends, as they develop.

Stay tuned.

Paul Henry
Tax Reduction Services