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Property Assessment In A Soft Real Estate Market

After years of escalating property values, property values in many areas are either soft or in actual decline.  Property owners who once faced consistent increases in real estate valuations for property tax purposes (associated with the prior strong market) now hope that these valuations will automatically adjust lower.  Unfortunately, the valuation systems employed by many counties are not set up to adjust values downward as readily as those systems adjusted values upward in prior years.

Justification for not automatically (without the need for property owner protest) adjusting values lower may be associated with one or more of the following arguments:

• Any across the board decrease in real estate values would likely be met with a commensurate increase in the tax levy (assessed value x tax levy = property tax paid), so the net effect would be no significant change in the tax paid by the property owner anyway;

• Any decline in real estate values is not universal and/or, if there is any decline, it is merely a temporary condition;

• Values have only stabilized – not decreased; and

• Values for tax purposes have tended to trail actual increases in market value and, even though market values may not be increasing, tax values are still at or below market value (even considering a decline in market value).

While some counties have recognized the impact of the market conditions and have extended tax relief to certain properties, a property owner is best served by being diligent in monitoring the values of both the owner’s property and comparable properties.  This includes  being alert to a notice of change in value for the owner’s property and the price paid in sales of comparable properties.

In Nebraska, on or before June 1, the County Assessor will give notice to the owner of record of the change in the assessed (tax) value of a property in relation to the prior year.  This notice may serve as the trigger for the owner to file a protest with the County Board of Equalization.  In prior years, the trigger has tended to be dissatisfaction with the increase in value.  This year, the trigger would certainly be an increase but may also be the potentially insufficient amount of a decrease.  Protests are required to be filed with the County Clerk on or before June 30.  Protests must be decided by the County Board on or before July 25 (unless, in Douglas, Lancaster or Sarpy Counties, the County elects to extend the protest deadline, in which case the final date would be August 10). The County Clerk is required to mail notice of the County Board’s decision on the protest on or before August 2 (August 18 if the County has extended the protest deadline).  If the property owner is not satisfied with the decision, an appeal can be filed with the Tax Equalization and Review Commission on or before August 24 (September 10 if the County has extended the protest deadline).

Although a notice of change in value may serve as the trigger for a protest, an owner may protest even though no notice of change in value is received.  This would include the situation where the owner believes that market conditions have taken the market value of a property below the assessed value.

In prior years, property owners were well served by using lack of equalization as the basis for protest.  This argument commonly compares the assessed value of the subject property with the assessed value of similar properties.  While this remains a good argument, property owners may be well served by also arguing that the subject property is assessed above its fair market value, as evidenced by the recent sale prices of comparable properties. Given the current market, the fair market value argument may be the stronger of the two approaches.

Let us know if we can be of any assistance in the evaluation of your tax assessment or the preparation and presentation of a protest or subsequent appeal.