How to Appeal Your Florida Property Tax
In the cost approach to value all forms of depreciation are deducted from the replacement cost new to arrive at a value estimate. The cost approach to value is relatively easy to automate and as a result most taxing jurisdictions use this approach to value real estate for tax purposes. Unfortunately, not all assessment personnel have an adequate understanding of external or economic obsolescence, which is a negative influence from outside of the property boundaries.
If a shopping center is constructed near a proposed freeway exit that is never completed the property may suffer from external obsolescence. External influences such as this can cause new construction to be worth less than the cost to build. Recessions can lower demand for all types of real estate, especially if there was overbuilding prior to the recession. An oversupply of neighborhood shopping centers in a suburban area could cause the value of the center to be worth less than its cost to construct.
Most county appraisers know external obsolescence from some classic examples such as a single family dwelling in close proximity to a landfill, with all of the truck traffic and noxious odors. Another example is residential dwellings in the flight path of an airport and the resulting noise issues. Another example is a residential dwelling located on a major thoroughfare with heavy traffic. These are the things that most county appraisers think of when they hear the words external obsolescence.
But there is another component of this form of depreciation that gets overlooked or is misunderstood. It is the fact that the external factors or condition need not be physical but can be economic and still result in external obsolescence. Going back to the example above, an economic recession can produce an atmosphere in which certain properties lose value. During the great recession many properties in many different market areas have been suffering from external obsolescence. Here in Atlanta an oversupply of office and retail properties were built both in-town and in the suburbs. These properties deserve an added depreciation deduction from their cost new values.
The fact is, you may need to remind the county appraiser and review board members that economic factors can cause depreciation of your property's value. You can argue that given the large hangover of residential foreclosure properties your house is suffering from economic obsolescence. The county may be relying on the cost approach due to a lack of "good" sales and other market data. Let them know that if they are going to use a cost approach they need to account for all forms of depreciation.
Fair assessments for all!
Daniel Jones is a property valuation professional and manages the Atlanta based property tax reduction firm Fair Assessments LLC. Dan has been contesting property values since 2004 and you can read more about his property tax appeal experience on LinkedIn.
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