Determine Your True CRE Value Following the Ohio Sextennial Reassessment
In 2017, real estate owners in multiple Ohio counties received a property reassessment (or reappraisal), a process traditionally conducted by county auditors every six years. Last year was one of the more extensive re-evaluation years for Ohio’s 88 counties, with 28 subjected to reassessments. Now, with the start of the new year in our rear-view mirror, many residential and commercial property owners are preparing for higher tax burdens related to increased valuations.
Disagree With Your Property Reassessment Results? Here’s What to Do:
One of the unique features of last year’s reassessment in Franklin County was the use of drone footage to audit commercial properties. This activity followed the law passed in 2016 that permits users to operate drones without a pilot’s license. As such, drone usage increased exponentially in several areas – from event coverage to insurance claims.
While the law ordering sextennial CRE audits is not exactly breaking news, the introduction of new technology into the process is. In 2017 alone, reassessments consisted of nearly 500,000 parcels. Because of the extensive amount of work involved, those appraisals relied heavily on drone footage. While technology can streamline many archaic procedures, the County Auditor’s reliance on devices flying 400 feet in the air has caused general fear among CRE owners. Drones can miss essential parts of a property’s unique value.
Fortunately, property owners should be aware that there are options to counteract any inaccuracies found in state reassessments. Obviously, you can’t go shooting down every drone you see. However, you do have the opportunity to argue the results of your valuation via a formal complaint with the County Board of Revision. The deadline for filing your objection is March 31, 2018. While having a property appraisal is not a requirement, you will have a stronger argument if you accompany your formal complaint with an appraisal report from a reputable appraisal management company. (An appraisal may also prevent you from incurring additional legal fees during the appeal process.)
Challenge Your Reappraisal: Get a CRE Site Visit
Despite the use of drones in this year’s property reassessment, examining your property from above is not the most accurate way to determine its value. A site visit from a certified real estate appraiser will determine the most accurate market value of your real estate. The site visit is part of the formal appraisal process, which ultimately produces a commercial appraisal report.
When conducting a site visit, a commercial property appraiser will look at three key areas to determine valuation:
- The exact size of the property and any zoning regulations. This one may seem like a no-brainer, but commercial real estate appraisers will start with the big picture and work inward.
How many buildings are on the property? What size is the property? Having up-to-date knowledge of any and all zoning restrictions and regulations is necessary. Ensuring the property complies with these restrictions is also pertinent, especially when appraisers ultimately decide on how best to value the real estate.
- The age and condition of the property. While “vintage” might be a polite term for the hideous coffee table that your friend brought home from her grandmother’s 1950’s-era apartment, it doesn’t get you very far in a commercial real estate inspection. Renovations, added features, and regular sprucing up will boost the inspection score of your property. And, any obvious points of deterioration, combined with old age, can affect that value negatively and quickly.
- How your property compares to similar properties in the area and what characteristics are considered attractive. Comparing similar properties in one general area is a critical factor in commercial real estate appraisals. The cost to renovate or fix the property can weigh heavily on value. This is particularly true if those costs outweigh the amount it would take to replace the property. Also, property appraisers might place a higher worth on specific attributes that add long-term value, such as renewable energy, extra insulation, or an updated HVAC system.
Ways Your CRE Site Visit Can Translate to Value
Essentially, the information collected from your commercial real estate inspection will influence the valuation of your property. Though they’re not all applicable to every property, appraisers use one of three approaches (or types) of commercial appraisals to create their final report in order to price real estate:
- The cost approach. This perspective questions the value of a structure based on the cost to replace the structure. Age, upkeep, and deterioration all come into play when using this valuation method.
- The sales comparison/market approach. Using this direction, appraisers take a look at similar properties in the area and compare their values. Many find this to be a fair approach to the commercial real estate appraisal process; this is because the current market value is taken into consideration.
- The income capitalization approach. Much like the cost approach, the income capitalization approach also looks at cost value as it relates to future forecasts or expectations. What kind of net earning power will the property likely generate? Potential investors tend to determine purchase price based on what they predict they’ll earn back.
If you want to dive deeper into commercial real estate appraisal, there are a variety of informative articles available; read our Q&A on commercial real estate appraisals to gain more insight into these approaches.
How The Robert Weiler Company Can Help
While we understand the need for the reassessment, we also recognize that there is the potential for inaccuracies in valuation. Hiring certified real estate appraisers ensure that no detail goes unnoticed and every aspect is heavily scrutinized to provide the most accurate market value of a property.
Our commercial appraisal management team has a long history of assisting commercial real estate owners and investors across Ohio. With the March 31, 2018, deadline for filing complaints looming, now is the time to act. Contact The Robert Weiler Company today at 614-221-4286 to discuss your options with one of our skilled commercial real estate appraisers.