That Value May Be Less Shocking Than You Think

Like many of you, I was shocked when I opened my letter from Cuyahoga County and saw how drastically the value of my home will increase for the upcoming property tax cycle. I thought there was no way the real estate market in Cleveland Heights increased by 25% over the past three years. My wife and I keep a fairly close eye on houses that have sold on our street, and those that have sold recently typically sat for quite a while and sold well below their asking price. It made me wonder what the folks at the Fiscal Office were smoking, and why they were not sharing.

Some background. I was a Real Estate Valuation professional for over 20 years, including 10 years as a member of the Appraisal Institute. I argued on behalf of property owners before several counties in Northeast Ohio, with a general record of success. So I thought it would be a simple exercise to get a property value reduction more commensurate with what I was seeing on my street.

The Cuyahoga County Fiscal Office website includes a map of property value increases entitled Revaluation Impact on Residential Property Values. For Cleveland Heights, the map shows a 7.9% increase in value. So, if that is the case, why did my value increase by 25%?

Cuyahoga County does not appraise homes individually. The time and cost to do this task would be astronomical. They use a technique called Mass Appraisal, which considers a larger surrounding market that has enough sales and close-enough proximity to make it statistically relevant. The Mass Appraisal technique has been adopted by the Uniform Standards of Professional Appraisal Practice for several years and is considered appropriate for this type of valuation.

While I am sure the methodology used by the Cuyahoga County Fiscal Office is more sophisticated, the quick and dirty way to see how much a market has changed over time would be to examine median sale prices within a particular market. Cleveland.com today (August 8th, 2018) posted an article entitled “See How Much Home Prices Are Up or Down…”, which details median sale prices by community from 2014 to 2018. I live in Cleveland Heights, so I will use that as an example. In 2014, the median sale price was $90,000. This decreased to $83,000 in 2015, then increased to $100,000 in 2016. From there, the median sale price increased slightly to $105,000 in 2016, then settled back to $100,000 in 2017.

This next bit is a little confusing, but please persevere. The value date for the upcoming property tax cycle is January 1, 2018 and considers market value increases from the last value update of January 1, 2015. Consequently, we cannot use the raw numbers in the article to develop the market increase, because those numbers span the entire year; however, it would be more prudent to use those numbers as representing median sale prices as of July 1 of that year. The value date as of January 1 would be the mid-point between the two bracketing years, considering increases or decreases from year to year.

For instance, to get a January 1, 2015 estimate, you would take the 2014 and 2015 median sale prices, then find the average. In the case of Cleveland Heights, that would be $86,500. Since median sale prices decreased from 2014 to 2015, there would be some reduction to the average, or $85,000 as of January 1, 2015. Using the same methodology, the median sale price as of January 1, 2018 I estimated would be around $102,000. As a percentage increase between the two points, median sale prices in Cleveland Heights rose by $17,000, or 20%, in the three-year period.

So, the Cuyahoga County Fiscal Office map says the average property value increase was 8%, the data from Cleveland.com indicates a 20% increase, and I got hit with a 25% increase. It seems more confusing now than when I started. Remember, I said earlier that this method was quick-and-dirty, and the Fiscal Office methodology was likely more fine-tuned. It is quite possible that by condensing the universe to value points more closely resembling that of my house that the value increase was greater, which I suspect to be the case. I may not like it, but in this rough estimate, I am likely hard pressed to argue.

Your case may be different than mine. The Fiscal Officer’s value may have increased far greater than the median sale price average of 20%. Your home may not be considered average given any number of physical or locational factors. If you look on the bottom of the notice, the County provides you with choices if you believe the Auditor value more than your belief. Remember, you only have until August 31st to submit your complaint.

The primary remedy is to provide an appraisal of your home. If you attempted a refinance or bought your home in 2017 or more recently, such an appraisal would be considered relevant, and the closer to the January 1, 2018 Auditor value date the better. Should you decide to get your home appraised now, remember to instruct the appraiser that you want a retrospective value as of January 1, 2018. Appraisers typically charge $500 or so for such a report, so take that cost into consideration during your internal deliberation. Other methods of appeal include submitting a purchase agreement for your home if you bought it after January 1, 2015, providing photographs and an estimate of repairs if there are physical damages to the home that would impact the value of your home, or providing a contractor’s estimate of cost to reconstruct your home.

Something you might want to consider is to speak with a real estate agent that works in your market. They have access to the Multiple Listing Service and may be able to provide you with comparable sales that took place in your immediate area prior to January 1, 2018. This is a good, logical first step, provided the agent is willing to do this service, so that you have some expectation of where your home sits within the marketplace.

If you want more information from the County, there will be staff from the Fiscal Office at each of the Cuyahoga Community College campuses throughout the month of August. Go to the Fiscal Office web site for dates and times by location.

If you find yourself unable to provide such evidence by August 31st, you can also file an appeal with the Board of Revision between January 1 and March 31, 2019. This entails filling out a DTE-1 form, which is available at the Fiscal Office or online at bor.cuyahogacounty.us. The form will not be available until later this year. All supporting evidence should be included with the form. Once submitted, you will be scheduled for a hearing, and you will have to appear before a panel assembled by the Board of Revision to plead your case. This sounds more intimidating than it really is; the Board members are usually very patient and understanding during this process. That does not mean you will win, but if you believe you have a solid case, they take your information into account in a non-confrontational manner.

As I said at the beginning, I was very shocked to see how much value increase the County applied to the value of my home. After a little time and number crunching, I came to find that their valuation was within the scope of reasonableness. Your situation may be different, and if it is, I hope this information helps you with a way to work with the County. I wish you the best of luck.