How to Fight the Property Tax Insanity – and Win
Resistance isn't futile; you can successfully appeal
Did you get your envelope? Is the property tax assessor crazy? Are you ready for your new tax bill?
Real estate sales have slowed drastically and prices have softened, but your property tax value just increased substantially. Adams County assessed values increase 50 percent on commercial and 24 percent residential, Denver is up 20 percent, and Arapahoe 22 percent. How is it possible that assessed values are skyrocketing while the market is flat? What should you do? I’ve created a comprehensive guide with six simple steps to help you fight your assessment and win.
First, some context.
How are property tax values determined and when are they determined?
In Colorado, revaluations are done in odd-numbered years. During the revaluation period, the tax assessor looks at comparable sales in the previous 18 months. So for 2019, they use comparables from 2017 and 2018.
Why is this year such a big jump?
Most areas in Colorado experienced large increases in value in 2017 and 2018. In many areas, values increased by more than 15 percent in each of these two years. These increases were reflected in the sales that ultimately were used in the last revaluation period
How can values be flat/decline, yet property tax values increase and taxes increase?
Remember, property tax value is not market value. Property tax value is derived from prior sales (last summer and earlier). The market was in a much different place then than it is now. The statute in Colorado does not care about current market value. The increase you are seeing this year was for “prior” real estate appreciation that is now just flowing through to your property value, which ultimately determines your property taxes
Are further increases on the way?
Increases are based on increases in value. If the market levels off, then in the next reevaluation cycle, 2021 property tax values should remain constant. Note: Counties are quick to raise property values but very slow to drop them unless you appeal.
Should you protest your taxes?
Yes, if there is any chance you think your property is overvalued based on recent sales in 2017 and 2018. There is very little downside to appealing, other than a few hours of time. The worst that can happen is no change to the new valuation. The process is relatively easy.
Six tips to appeal your Colorado property taxes and win
Although 2019 will be difficult to win a large appeal since values have almost universally gone up throughout the state, you should be able to get at least minor relief if your property is overvalued. I’ve appealed my property taxes in three counties throughout Colorado and won on each one.
It is important to note that the assessor doesn’t care what you “feel” your property tax value should be, what your Zestimate says, or what your recent appraisal was. The property tax value is based on facts. To win an appeal, follow these directions exactly and leave your feelings out of it.
Dates are important: By statute, you have from May 1 to June 1 to appeal. If you miss these dates, you are out of luck. Most counties allow you to appeal online, and the process is pretty easy (just google your county + assessor). They typically have a simple online form where you can put in your information and the appeal information.
Follow the rules: Remember for this year, the only comparables that can be used are prior to June 30, 2018 (typically a two-year period). By law, you cannot go back more than five years unless there are extenuating circumstances.
Check your facts: This is low-hanging fruit. Ensure the assessor has your information correct. Is the property an office building but classified as mixed-use? Is the square footage correct? Correcting this information could substantially reduce your tax burden.
On residential, it is a numbers game: The county calculates a neighborhood average and finds sales in near your house with similar characteristics. The averages can lie. For example, when I appealed in 2017, there were a number of lower sales along with higher ones. I was able to make the case that my house was closer to the lower sales (remember you are not talking about market value, nor does this influence the sale price of your home). I was successful in my appeal and got my property value reduced more than 30 percent.
On commercial property, use both methods: On a commercial property, both the sales and income approach are used. If you had a tenant during this time period, the income approach (take net operating income divided by the applicable capitalization rate) is a very good method to start with. The sales approach is the second method that can be utilized. Commercial is a bit more complicated than the residential appeal since commercial properties are considerably less uniform.
Use various tools to get your facts straight:
To prevail, the appeal must be fact-based. Saying you feel your property is overvalued is a waste of time. Make sure you have your facts straight (at a minimum three applicable sales for residential; for commercial address both the income and sales approach). You can get both sales comparables from the county websites for a specific neighborhood. Don’t use Zillow or Trulia because the square footages can be inaccurate; use the county data to ensure you compare above grade square footage (you will also have to input the parcel ID numbers for each of your comparables). For a commercial property, use a tool like loopnet.com
or Costar to see what asking rents are, get sales comps, etc.
Colorado is a bit unique in that the values we see now are from last summer and prior, so the recent jumps in values have not been fully factored into tax bills yet. Fortunately, you do have the ability to protest, and if done right, you more than likely will win. I’ve protested my taxes many times on both residential and commercial properties and won all the appeals. Ensure you follow the steps above to increase your odds of winning. If you appeal, I’d love to hear how it goes.