-- BrokerOpinionOfValue.com, a commercial real estate valuation resource and national broker directory, today published a guide to the use of a broker opinion of value (BOV) in commercial property tax appeals.
A broker opinion of value is a written estimate of a commercial property’s current market value prepared by a licensed commercial real estate broker. The guide explains how owners use that document as evidence to challenge an assessed value they believe exceeds what their property would sell for in the current market.
The guide was published as assessment rolls in many jurisdictions continue to carry values set before the commercial real estate repricing of recent years worked through the transaction record. According to the guide, mass appraisal systems frequently value entire property classes at once and often draw on comparable sales one to three years old where market values have changed faster than assessment rolls have been updated. The gap is carried by the owner as a recurring annual expense until it is challenged.
The guide addresses:
• Where assessors get commercial value wrong — stale comparable sales, incorrect income and expense assumptions, misapplied cap rates, ignored property-specific impairments, and lag in recognizing market declines.
• What a BOV prepared for a tax appeal contains — comparable sales analysis, income approach analysis, market commentary, and a signed written value opinion from a licensed commercial real estate broker.
• The six-step appeal process — reviewing the assessment notice, obtaining a BOV before filing, filing within the deadline, the informal hearing with the assessor, the formal board of equalization hearing, and tax court appeal if required.
• The asset classes most often overassessed — office properties in high-vacancy markets, retail with vacancies or below-market leases, industrial in oversupplied submarkets, rent-regulated multifamily, and properties with deferred maintenance or functional obsolescence.
Cap Rate Error is Identified as the Largest Single Variable.
The guide identifies the capitalization rate as the largest lever in income-approach valuation and the point at which assessment error compounds fastest. It illustrates the effect:
Illustration from the guide
$500,000 NOI capitalized at 5.0% = $10.0 million indicated value
$500,000 NOI capitalized at 6.0% = approximately $8.3 million indicated value
A single point of disagreement over the correct market cap rate moves the conclusion by roughly $1.7 million.
An assessor applying a cap rate 50 to 100 basis points below the market rate for a given asset type, the guide states, can produce an assessed value 15% to 25% above actual market value.
The guide also sets out the economics of a successful challenge. On a property assessed at $5 million with a 2% tax rate, a 15% reduction saves $15,000 per year, every year, until the next reassessment. Citing documented studies of appeal outcomes, the guide reports that commercial owners who challenged their assessments won a reduction approximately 62% of the time, with successful appeals typically reducing assessed value by 10% to 15%.
"We published this because we continually hear about how owners keep filing appeals without evidence and then trying to assemble the evidence afterward. The sequence matters. Get the opinion of value first, then decide whether you have a case worth filing" according to Edward Winslow, Co-Founder of BrokerOpinionOfValue.com along with Caroline Vega.
The guide is available at no cost and requires no registration at brokeropinionofvalue.com/bov-for-property-tax-appeal/. It is part of a series of BOV guides published by the platform covering property tax appeal, divorce litigation, expert witness testimony, eminent domain, estate planning, partnership buyout, and related contexts.
Contact Info:
Name: Edward Winslow
Email: Send Email
Organization: Broker Opinion Of Value
Address: 135 West 36th Street, New York, NY 10018, United States
Phone: +1-203-762-1366
Website: https://brokeropinionofvalue.com/
Release ID: 89197690