Realtors! Your clients who have purchased real estate in Ohio since January 1, 2015 need to find out if their real estate is fairly valued. You are in a unique position to help and inform them. But don't wait too long! If your client feels the county’s value is excessive, they must file a complaint on or before March 31, 2018.
HELP YOUR CLIENT FIND MONEY
A story in a local paper prompted this post. The story covered the recent purchase of an underperforming downtown Cleveland office building, but applies equally to residential real estate. The purchase in the article highlights an issue that can have a substantial impact on the valuation of Ohio real estate and, in turn, the taxes your client pay.
After five minutes reviewing public records it seemed to me that the new owner has a good case for a reduction. If so, the new owner may be able to save more than $100,000 in real estate taxes each year. The potential savings in residential cases generally have less zeroes.
Regardless, to realize any savings, the new owner must file a complaint with the appropriate Board of Revision before March 31, 2018 to challenge the county’s valuation.
SALES PRICE AND EVIDENCE
The best evidence of value in these cases is typically a recent, arm’s-length sale price. If there hasn't been a recent sale, then an appraisal report (that conforms with Ohio tax valuation law) is the next best evidence. In some instances, a broker's opinion of value can be enough to obtain a reduction.
Take an opportunity to reach out to your clients and let them know that they should consider whether their tax bill is excessive. This email could help you reconnect with clients and strengthen your relationship. Maybe make them aware of the filing deadline and nudge them to compare their purchase price against the auditor’s value. If the purchase price is lower than the auditor’s value, they should consider filing a complaint against the county’s value and seek the sale price.
WHAT SALES SHOULD BE CONSIDERED?
The Supreme Court of Ohio has held that a sale that occurs within 24-months before the tax lien date (i.e., January 1, 2015 for this article’s purposes) is presumed to be recent. So, if your client purchased Ohio real estate after January 1, 2015, they need to consider how the sale price might impact your real estate tax obligations. Sales that occur after January 1, 2017 also need to be reviewed.
All too often, my firm is asked to review a property's value and we find that the failed to contest the assessor's valuation based on a sale three years ago. Unfortunately, Ohio law states that a sale more than 24 months removed from the tax lien date is too remote to form the basis for a strong and straightforward tax value challenge.
GETTING INTO THE WEEDS A BIT...
As with everything, the sale/county value analysis is not as black and white as we would hope. For instance, the price paid at a sheriff’s sale won’t carry much weight. For investment or commercial properties, it’s important to determine if significant renovation or rehab work was done on the property after the sale?
In Ohio, the sale price must come from an arm’s-length transaction. Oversimplifying the matter, an arm’s-length sale occurs when there was no duress in the sale, the property was advertised on the open market, and the parties acted as typically-motivated buyers and sellers.
This is an area of law that is hotly contested. Sometimes "short sales" can be valid arm’s-length sales—when you might think that’s clearly a distressed sale. Whether the seller is Fannie Mae, HUD, or an REO property a bank took back through the foreclosure process makes a big difference. Sales between relatives have been found to be valid, arm’s-length sales even if the property was never listed for sale or actively marketed.
Review those recent deals where you were the buyer’s agent. Don't miss an opportunity to strengthen your relationship with your client. Your email might save them hundreds or thousands of dollars a year. It gives you an excuse to reach out to your clients! Your insight might take an already-good relationship to the next level.
Good luck and call or write if you have any questions!
Disclaimer: The contents of this article are intended to convey general information only and not to provide legal advice or opinions. The contents of this article should not be construed as, and should not be relied upon for legal advice in any particular circumstance or fact situation. The article is intended to inform the general public of its legal rights. No formal legal action should be taken in reliance on the information contained in this article and I disclaim any and all liability in respect to actions taken or not taken based on any or all of the contents of this site to the fullest extent permitted by law. An attorney--especially in Ohio--should be contacted for advice on a case-by-case basis.