Your Ohio Commercial Property Reassessment Cheat Sheet [2023 Update]
With recent headlines focused on politics, protests, and international disputes, Ohio commercial property owners may have overlooked or forgotten that a statewide property tax reassessment (also referred to as a reappraisal) is underway.
Ohio law stipulates that a comprehensive property reassessment is completed every six years, with an update at the three-year midpoint. Auditors from across the State spend years evaluating a select list of criteria to determine a property’s value and, thus, its new tax rate. As Ohio business owners know, a lot can change in that time. For some, that means they can expect a tax hike. For others, it might mean a decrease. Lastly, some commercial property owners will see a negligible difference, regardless of the appraisal.
The 2020 property reassessment included more than 5.5 million separate parcels in Ohio (and 432,000 parcels in Franklin County, Ohio). The County Auditors are responsible for ensuring that every parcel of land (and any buildings within) are fairly and consistently appraised and assessed for tax purposes. In addition to auditors completing their physical reviews, in recent years, the State also gets a boost from technology. Thanks to the passage of a 2017 law, the State’s property reassessments are based on drone footage, taken from about 400 feet in the air. While this helps expedite the process, the lack of on-the-ground property inspection leaves some Ohio residents nervous. What guarantees will they have that their commercial property has been assessed fairly and accurately? And, how can property owners potentially challenge new property values?
Challenging Your New Commercial Property Value (and Tax Rate) with a Commercial Property Reassessment
During the reassessment year, final property valuations are typically set by the late fall; however, many residential and commercial property owners will receive an initial tentative valuation in the mail. If the property owner disagrees with the appraisal by the county, they have two options for fighting the valuation:
Option #1: Informal Value Review
The first wave of valuations is typically delivered to the property owners in August. Members of the public will have an opportunity to disagree with their property’s assessed value and offer counter documentation. For Franklin County, the county housing Columbus, Ohio and its suburbs, Informal Value Review sessions are often offered as a courtesy to the property owner during the major sexennial review in the fall. Those meetings’ dates, times, and locations can be found on the Franklin County Auditor’s website (franklincountyauditor.com). Before you attend one of these sessions, the Auditor’s Office requires commercial property owners to provide an appraisal from a certified real estate appraiser or appraisal management company.
Option #2: Formal Complaint with the Board of Revision
Commercial property owners are not mandated to attend one of the Informal Value Review sessions; they may, instead, file a formal complaint with the Board of Revision (BOR). Owners should know they have a small window of opportunity to file a complaint. After receiving the formal assessment by the County on or before November 8, the complaint must be filed with the Auditor’s Office between January 1 and March 31.
It is recommended that a property appraisal is performed and submitted with the complaint; however, it is not required for the hearing before the BOR. For the hearing, you will need:
- Rent rolls for the tax year in question
- Income and expense information for the tax year in question, as well as two years prior (which must be prepared by an independent accountant)
Whichever way you decide to proceed, a formal commercial property appraisal is a key factor for winning your case.
A Private Commercial Property Appraisal Makes Dollars and Sense
As briefly stated above, many of the counties in Ohio, like Franklin County, have a robust system in place to allow timely and relevant feedback from residents who disagree with their assessment. But, The Robert Weiler Company, a full-service commercial real estate and appraisal management company with over 80 years in the industry, is also ready to offer its expert assistance. Armed with a professional, private review of your commercial property’s worth will help ensure the most accurate valuation and subsequent tax rate.
The process begins with a formal commercial property appraisal of a property’s interior and exterior with a site visit that takes approximately one hour. Our commercial property appraisers will also determine the condition of the land and any improvements (not just a drone fly-by), and then compare our findings to local neighborhood data.
Typically, commercial property owners who seek our appraisal services fall into two categories:
- Property owners who believe the new assessed value is incorrect and their new property tax rate is too high
- The local school board who believes the taxes on a particular property are too low
The Robert Weiler Company is most often approached by lawyers representing their clients; however, we are also contacted directly by property owners to perform these types of commercial appraisals. If a lawyer contacts us, a Board of Revision (BOR) complaint has likely been filed, which tells us the year and location of the property being contested. Other times, the case may have already gone to the BOR and is being appealed, and they now want a formal appraisal to support their case at the Ohio Board of Tax Appeals (BTA). Our work includes a site visit and the analysis, report, and one expert witness testimony at a BOR or BTA hearing. Additional testimony can be supplied, but it is rarely necessary.
If a property owner contacts us directly or the complaint has not already been filed, we will perform a brief preliminary analysis; this will determine whether we can help someone by executing such an appraisal. We will not charge someone nor prepare an appraisal if we believe that the assessment provided by the State was accurate. Whether apartment buildings and condominiums, office buildings, shopping centers, mixed-use properties, special purpose property, industrial real estate, or land for sale, our CRE firm is fully equipped to take on any commercial property appraisal assignment.
> Related Tip: Are you considering selling the property you’re reappraising? Before listing and showing your property, consider how to increase the ROI when selling commercial real estate.
Commercial Real Estate Appraisals Explained
The basics of a commercial real estate appraisal are very similar, no matter what type of services you seek. Think of it as a science experiment, where the first step is “identifying the problem.” An appraisal may include determining the property’s intended use, its relevant characteristics, and assignment conditions.
The analysis and subsequent report include market area data (general characteristics of the area/neighborhood) and comparable property data (sales, listings, offerings, vacancies, etc.). The analysis also evaluates four factors: scarcity, desire, utility, and effective purchasing power. Afterward, the appraiser estimates the value and creates a commercial appraisal report that can take a few days or several weeks to generate.
How do we determine the value of your property? There are three main approaches for commercial real estate appraisals:
- Cost approach: This technique equates the property value to the cost of constructing a replica. The cost approach also considers depreciation, thus, assuming a fair market value for the commercial property.
- Sales comparison/market approach: This method speculates that an investor will pay only what similar properties have sold for. Important characteristics may include location, size, condition, floor plan, and the surrounding area. Many in the commercial real estate appraisal industry believe this is a more accurate approach because the current market value is considered.
- Income capitalization approach: This tactic involves a rationalization of the income that a property may generate over time. Appraisers often use this method for properties, such as shopping centers, office buildings, and large apartment buildings with a strong earning ability.
To determine a final estimate, the property appraiser must consider the value resulting from one of these three types of commercial appraisals. The methods that are found to be the most reliable and applicable will be significant in determining the final estimate.
Don’t Lose the Chance to Lower Your Taxes via a Commercial Property Reappraisal
Finally, we would be remiss if we didn’t give the State of Ohio the credit it’s due. Property reassessment – with or without drone assistance – is a major undertaking. Contrary to common myths, the State is not arbitrarily doing this just to increase tax revenue.
It’s easy to overlook or forget when a significant property tax reassessment or update is underway. Don’t be eclipsed by this significant property reassessment opportunity. Contact The Robert Weiler Company today at 614-221-4286 to best protect your commercial property values and its reassessed tax rate.