Ohio Property Tax Valuation Complaint Basics
Learn the basics of the Ohio property tax system, what rights property owners have, and the process property owners can use to challenge an unfair, over valuation of their real estate.
Have You Challenged Your Property Valuation Lately?If you have not challenged your real estate valuation for several years, you might be missing out on an opportunity to cut operating costs and improve your return on investment. Ohio auditor’s value each parcel of land in its respective county. In Cuyahoga County and Summit County, there is a Fiscal Office, but the task remains the same. After the State of Ohio approves each county’s proposed values, the treasurer issues a tax bill that assesses the real estate by a certain percentage, which is called the effective tax rate. Every one of Ohio’s counties has dozens of individual taxing authorities that can each set their tax rate. There are approximately 600 school districts in the State of Ohio. Schools receive approximately 60-70% of real estate taxes. The various tax levies that go before voters from time-to-time are an example or explanation of how one community’s tax rate might differ from a neighboring community. And the county’s tax residential real estate differently than commercial real estate. Farm or agriculture real estate are also taxed differently.
How is Your Tax Liability Determined?Time for some math: Taxable Value (TV) × Property Tax Rate (PTR) = Annual Property Tax Bill (APTB)
How do you get the taxable value? The taxable value is 35% of the real estate’s “fair market value” (i.e., its “true value in money”). Conceptually, the “fair market value” is what the real estate would sell for in an open-market transaction, where both buyer and seller act freely, and after the real estate has been appropriately marketed to the public. Incidentally, this is also a working definition of what Ohio law considers an “arm’s-length transaction.” As mentioned above, the tax rate changes from community to community. Check your County Auditor’s website for the appropriate property tax rate.
Who Can File a Tax Valuation Challenge?The long answer is set out in Ohio’s law, specifically Revised Code 5715.19. The short answer is that the people who are most often interested in filing real estate tax valuation complaints are (1) property owners, (2) a trustee of land held in a trust, (3) a court-appointed receiver, or (4) property managers.
Additionally, other professionals should inform their clients that this process is available. For instance, an accountant might ask a client if they believe their real estate is properly valued and properly taxed. Alerting your clients to other potential savings will make you look good. For the same reasons, a real estate agent or broker might let their client know that this option exists and should be considered.
If you are selling real estate, your listing may look more attractive if its taxes were properly adjusted. If you are buying real estate, knowing you might be able to lower the “fair market value” of the real estate you are looking to buy might make that monthly mortgage payment easier to handle. Estate planners and fiduciaries should also talk to their clients about this issue. This situation might arise when an appraisal of an estate asset is necessary. Appraisers and mortgage brokers are other professionals that come to mind. This is a chance to give your clients “added value.”
How Do You Know if Your Property is Overvalued?This is an easy question if you have either recently purchased the property, or have obtained a recent appraisal. If the sale price or the appraised value is lower than the County’s 100% fair market value, you have a good indication that you should consider filing a valuation complaint at your Board of Revision. If you have not recently purchased your real estate, and you do not have a recent appraisal, then look at the County’s website. What is your knee-jerk reaction?
Whether you feel strongly that the value is high or low or about right, it is probably a good idea to ask a real estate professional. No one should pay more than their fair share of taxes. As with most things, it’s best to consult an expert. Who can you ask for assistance? Talk to anyone knowledgeable about real estate. Contact a broker or an appraiser. Ask a broker to provide you with an informal opinion of value. Ask an appraiser if they feel the value falls within a range of reasonableness. Compensate them for their time and expertise! And do not hold them to an informational estimation of value.
If you are looking at residential property, then consider other recent, arm’s-length sales of similar homes in your area. If the real estate is commercial, then you have three methods to consider: (1) the cost approach, (2) the sales comparison approach, and the (3) income capitalization approach.
The first two methods are relatively straightforward. The Cost Approach estimates what it would cost to build the property today and then deducts the obsolescence and/or depreciation from that amount to get to an estimate or opinion of value. The Sales Comparison Approach looks at other comparable sales in the same market place and makes adjustments to arrive at an opinion of value. The last approach is the Income Capitalization Approach, which considers actual income and expenses against what one should expect from the “market.” After considering market rents, vacancies, and other costs, this method arrives at a net operating income. This approach develops a value after applying a market-based capitalization rate.
Unless your property is five to seven years old or less or very unique, the Cost Approach probably will not be very reliable. No one buys a thirty-year-old warehouse building based on what it would cost to construct a new version of the building.
The two other approaches require data, familiarity with the property type, familiarity with the market, and an understanding of the valuation techniques. Again, consider consulting a professional who is both knowledgeable with your market area and your property type.
So, You Have Decided to Look Into Filing a Valuation Complaint. What’s the Next Step?Research your options. There are a lot of resources available to the public. Not surprisingly, I suggest contacting an attorney. The process seems straightforward your clients, but the devil is in the details and county governments are not in the business of giving away money. The Board of Revision who will hear your complaint is made up of the County Commissioner, the County Treasurer, and County Auditor—or a representative of those offices. So, make sure you dot your I’s and cross your T’s when filing your complaint and presenting your case at the hearing.
In Ohio, you can only file once on a piece of real estate within a single, three-year period. Ohio’s 88 Counties have staggered three-year periods. The following link sets out the State’s calendar: https://goo.gl/zsXxF2 There are exceptions to this rule. Consult an expert if you have recently filed, but you can refile if your property lost 15% or more of its tenants or rental income, the property was purchased, there has been a casualty loss at the property, or the County has changed the value at some time other than its designated reappraisal or update year.
If you file a complaint, use the county complaint form, which is available online. Fill the complaint out completely and accurately. Make sure Ohio law authorizes you to file the complaint. Sign the complaint in the presence of a notary. Ideally, hand deliver the complaint to the appropriate Board of Revision by March 31st.
When Can You File a Tax Valuation Challenge?Generally speaking, in Ohio, you can file a complaint between January 1st and March 31. If you file a complaint in this time period, you would be challenging the real estate value for the prior calendar year because real estate taxes are paid in arears in Ohio.
After filing, wait for your hearing at the County Board of Revision. These hearings are informal. Some counties are more informal than others. But be prepared to be put under oath, present relevant evidence, and answer questions. I have another post on what you can expect at a hearing and a post on what evidence you should consider submitting. Once the hearing is over, you wait for a decision. The County Board of Revision can decrease the County’s value, leave the County’s value alone, or increase the County’s value if it finds that the real estate is undervalued.
If you do not agree with the Board of Revision’s decision or its opinion of value, you can appeal the decision to either the local court of common pleas, or the Board of Tax Appeals ("BTA") in Columbus. Our office almost always files with the BTA. First, there is no filing fee at the BTA. Second, the BTA is a specialized state agency and, generally speaking, has more expertise on property valuation and Ohio's laws regarding that subject. And, the BTA is typically less formal, less time consuming and less expensive than going to the common pleas court. Additionally, if you have a residential property, you can opt for a "small claims" telephone hearing at the BTA, which can save hours of travel time and a lot of money. There are some drawbacks to the small claims process for residential properties, but it can be very effective in the right circumstances.
After you appeal to the BTA, then you can expect a hearing. This time, you absolutely need to have a recent, arm’s-length sale or a properly prepared appraisal report. The BTA sets a hearing, which is more formal than a BOR hearing, but less formal than what you would experience in a County Court. If you do not agree with the BTA’s decision and you are still doing this yourself, contact an experienced attorney. At this point in the process, your options are very limited, but an appeal to the local district court of appeals can be considered.
Should You Do It Yourself?Every sophisticated property owner should be able to handle their own valuation challenge just like every sophisticated tax payer should be able to file their own tax returns. That being said, sometimes it is just not worth the time or the risk of doing it yourself. Think about home improvement projects. I have learned (on more than one occasion) not to touch anything that deals with plumbing or electricity. The project may be simple, but the consequences of doing it wrong can be costly. Many times there are great benefits in turning to someone who has the appropriate experience. The valuation process certainly has pitfalls. A good rule of thumb is that the larger, more valuable the real estate, the more sense it makes to hire a professional.