Property Tax Reduction!!!
Property Tax Reduction Opportunities for Cleveland Investors
Like most states in the USA, Ohio bases property taxes on the current market valuation of the property, which is determined by the county’s own periodic appraisal/valuation process. Every 6 years, a countywide full reappraisal is conducted, whereby a determination of each parcel’s market value is made based on exterior appearances and historical data. However, at the 3-year mark, between the full re-appraisals, the values are revisited as well, and adjusted upward or downward based on the neighborhood value trend. The most recent full re-appraisal was conducted for the 2018 tax year, and the next update (i.e. adjustment by neighborhood) will be in 2021.
To illustrate the concept, the following is a very plausible example situation; at a full re-appraisal, the value of one house might increase from $225,000 to $240,000, whereas the house directly next door to it might decrease in value, from $210,000 to $200,000. This is based entirely on the assigned appraisers expert opinion of the condition of the house (judged by its appearance from the street), and how it
compares to other properties that have sold in the area. At the 3-year mark though, each of these two properties will be adjusted by the same percentage upward or downward — there is no individual assessment, just an assessment of the neighborhood typically. So if in this case, the determination was that this particular area saw an increase in values of 10% over that 3-year period, the value of that first
house would increase from $240,000 to $262,000, and the value of that second house would increase from $200,000 to $220,000.
In addition to these 3- and 6-year adjustments, adjustments can be made in any year if a property transfers for a price that is materially different from its current county-defined marketvalue (e.g. if someone buys a house for $300,000 but its current county-defined market value is only $150,000), or if substantial changes are made to the property (e.g. a small house valued at $120,000 by the county undergoes a major renovation and an addition is built to double its square footage, ultimately increasing its value to $280,000).
Another nuance to be aware of is that the term market value refers to the actual value of a property, whereas the term assessed value refers to 35% of the market value. It’s a concept that really just creates an extra calculation hoop to jump through but does nothing to benefit anyone really… but that is just how it is and must be accepted at face value! 🙂
Once you understand the process of how the valuations are assessed, you can also begin to see how there are actually opportunities to potentially reduce your property tax bill, if you can navigate the system effectively.
Informal Valuation Challenges
At either the full-appraisal (every 6 years), or at the triennial valuation update, each property owner is given the opportunity to challenge the proposed new value. In the applicable years, the county will send a hardcopy of the proposed new valuation to every property owner around the middle of the year. The vast majority of property owners take no action. There is, however, a huge opportunity to get the value adjusted, particularly if you had bought the property for less than the proposed new proposed market value sometime in the past few years.
To contest the valuation, a property owner simply needs to write a statement indicating why the value is being disputed, and provide evidence (e.g. a third party appraisal, or even a sales contract and closing statement). This can be provided via mail, online, or in person; specific instructions will be provided on the mailing from the county. There is no cost to the property owner to file this valuation challenge. In many cases, the county will adjust the valuation downward, resulting in a lower property tax bill than would have otherwise been the case!
Formal Board of Revisions Valuation Complaints
If you missed your window at the 3- or 6-year mark, or if you tried and informal valuation challenge and were unsuccessful in getting your market value lowered, then filing a formal complaint with the Cuyahoga County Board of Revisions is another path that can be taken to ultimately get yourself a lower property tax bill. Each year, between January 1st and March 31st, a formal complaint can be filed regarding your property’s valuation.
To file a complaint, you can simply fill out the valuation complaint form on the Board of Revisions website (note that the link to the form is typically only available on their website during the window in which complaints are accepted each year), and then wait fora hearing to be scheduled.
Depending on how busy the Board of Revisions is in a given year, a hearing could take anywhere from about 6 months to about 18 months to happen. The property owner will be notified of the hearing date by mail, and also typically be email, at least a couple of months in advance.
While it is recommended that complaintants appear in person to make their case, it really is not necessary. It is important to prepare clear and complete materials making the case, and submit them in advance of the hearing date following the instructions that will be provided in the notification of the hearing.
Similar to an informal valuation, you’ll have the best shot at getting your value lowered if you provide more information and data as evidence that the value should be lower than what it the county currently thinks it is… so any appraisal, listing agreement, sales agreement, closing statement, etc. that supports your case should definitely be included! Like the information valuation challenge, there is no cost to the property owner to file a valuation complaint, so if you think you can make a case for a lower valuation, it is definitely worth trying.