disputing fair market value

i had the opportunity to observe a tax assessment appeal and learned a couple things that might be useful to others.

the event was about proving that the fair market value of a condo is less than its assessed value. in this case, assessment was being disputed for a condo purchased in 2008 at a price lower than the 2007 assessed value.

the fellas running the show, lets call them walter and jack, were appointed by the county, and they represented the King County Board of Appeals, which in full has seven members. walter and jack are retired, and their role on the board of appeals is a part time, paid gig.

the assessor representative, lets call her kathy, is a county employee. the board reviews evidence submitted prior to the hearing and then hears oral testimony from both the taxpayer and the assessor's rep about the "true market value" of the property. the board members' role is "to provide an impartial hearing environment that protects each party’s due process rights and results in a fair decision."

walter and jack had obviously been through this process many times, and seemed a bit impatient with the proceedings. the appeal was for 2007 assessments so only 2007 evidence and testimony were permitted. there was a fourth party present, a representative of the property owner. lets call her sharon. sharon knew the appeal process as well, and she made her market-value argument based on MLS sales data. here's where the first important learning moment occurred--MLS data will not be used in deciding this case.

sharon presented the results of her market-value analysis based on comparable 2007 sales derived from MLS data. pretty strait forward stuff, right? wrong. kathy, the assessor's rep blurted out, in the matter-of-fact tone of a seasoned bureaucrat, that the assessor's office does not use the MLS system because MLS does not give them access. in the moment, this banal tidbit did not seem relevant other than to highlight that the assessor's office is, well, frugal.

later, towards the end of the appeal process, walter and jack noted, also in a very matter-of-fact tone, that since neither the assessors office nor the appeals board has access to MLS data (and by access i can only assume they mean FREE access), they instead will use excise tax records to evaluate the arguments.

both the assessor's argument and the board's evaluation of the appeal are based on tax records only! since they don't have access to MLS, they reasoned, the best way to "equalize" the market value data is to only consider data they have access to.

on the one hand, this makes sense if you are looking at an historical trajectory. ultra current sales data are not so important when looking at historical trends. on the other hand, during sharon's testimony, kathy noted on a number of occasions that she had not seen (was not aware of) this or that piece of evidence. in each occasion, she was implicitly stating that because the evidence came from the MLS, it was not relevant. walter (or was it jack?) explained that tax data is sometimes slow to process, so might not have been available for the assessor's analysis.

this logic seems to be that public data is better than private data, and that it is more important to use data that is freely available to everyone than it is to have an accurate analysis. WTF!

here's another troubling observation. to support their assessment, the assessor's market value was based on comparisons that, while in the same building, were categorically mismatched. for example, justifying the assessment of a 1bd/1bath unit, sales data from 2 bd/2 bath units were cited. additionally, the 1bd/1bath unit is in the middle of the building but the majority of comps presented as evidence were corner units.

kathy noted that her comps had differences in square footage, parking stalls, and quality of views, which accounted for their significantly higher sales prices. she indicated that these differences were taken into account and adjusted (apparently by using some secret algorithm) to arrive at comparable "values." the issue of bed/bath configuration, 2 vs 1, and corner vs middle unit locations were completely dismissed.

nevertheless, in summing up her argument, kathy stated that the evidence presented supports the current assessment and therefore the assessor "stands by their assessed market value." these shenanigans give the appearance of simply finding units whose sale prices support the current valuation.

according to the board of appeals website, "when gathering evidence and formulating arguments, it is important to keep in mind that, by law, the Assessor is presumed to be correct. The burden of proof is on you to show that the Assessor’s determination is incorrect." {WAC 458-14-046(4)}.

however, the website says nothing about selective recognition of evidence based on whether or not one has to pay for access. on the contrary, it simply states that "sales of the subject property and/or comparable properties are the foundation of our state’s market value standard. Accordingly, comparable sales typically provide the best indicators of market value. [RCW 84.40.030] This is particularly true for residential properties."

next steps: in consultation with the full board, walter and jack will take a few weeks to evaluate the evidence and arguments presented. if the appeal fails, there is the opportunity for a second round of appeals at the Washington State Board of Tax Appeals.