New to CRE buying my first property and confused on assessment value
So I’m buying my first commercial property.  It is owner occupied. I am an owner of a small business in which I’d be paying rent to pay off the mortgage. The bank approved the loan 5/20 at 5.9%. However the bank who ordered the appraisal said the property is worth 600k. I bought for 475 couple years ago and it was a seller finance contract until I can get the loan approved. Now bank will give me 450 and I can pay the seller plus the rents/taxes I was past due on (which ends up being the whole amount). 

But I got a call today saying my county redid their tax assessment this year and I checked online and it was reassessed at 850k!! So my property taxes are going up 40%!! Why is the bank appraisal so much lower? Why is the cook county IL market value assessment so high? What’s going on? On the website I see the 2021 board of review certified at 655 and 2022 assessor valuation is 850. 

Can anyone explain to me what/why county assessment is high. Also wouldn’t it be a good thing if they assess high so I can sell it for high? But I know taxes would go up. So what’s the game in CRE? You want to sell high so you get it assessed high and pay higher tax or do a tax appeal and get it assessed lower to pay lower tax but not be able to sell higher? Confused.
[{"id": "iizkjwc", "text": "The way properties are assessed varies by State, so without that info, you won't get much help. Here are 2 thoughts though:\n\n1) reach out to the bank and inform them of the new assessed value if it is a State where they reassess every year or whatever and do not have a CAP on it (such as prop 13 in California). Ask them why their appraised value is so much lower than the assessed value the County did?\n\n2) do the deal you are doing and appeal the assessed value...you will need comparable sales to backup your position at the appeal hearing.", "replies": [{"id": "iizkwco", "text": "I\u2019m in cook county IL", "replies": [{"id": "iizmysl", "text": "Cook County reassesses real property on a triennial basis. This will be the first time it was assessed in three years so that somewhat explains the increase.\n\nWith that said, assessed market value is very rarely in line with market value via an appraisal or a sale price between two knowledgeable parties.  Assessors use a Mass Appraisal approach whereby they use data to extrapolate values to classes and submarkets as appraising each property is cumbersome and not cost or time efficient. Cook County is notorious for high values and high taxes, and this is exactly why you have a right to appeal.\n\nI would absolutely appeal the value. You should have a letter confirming the new value including instructions to appeal and a deadline. Don't miss it.... You can certainly do it yourself and leverage the appraisal to try and get it reduced but you may need to get help from an attorney for Cook County. \n\nAs an owner, in general you want low taxes to reduce fixed expenses. When you go to sell the property, the buyer will be interested in the assessed value, but they will pay market value and not hinge a decision on the assessed value aside from its impact on margins.", "replies": [{"id": "iizoj3b", "text": "I didn\u2019t know they did it triennial. Why does it say on the cook county assessor website the 2022 assessment value and the next Column is the 2021 board of review certified? Did they reassess in 2021?? \n\nI don\u2019t understand the last part\u2026the buyer will be interested in the assessed value (850k) but pay market value (600k?). Isn\u2019t the assessed value technically market value. Or the market value is the bank appraisal which was lower. So the county assessed value doesn\u2019t mean anything..? \n\nI will have to check the deadline, I don\u2019t think it\u2019s confirmed yet I think they proposed it so it needs to get approved by the county still?", "replies": [{"id": "iizpyur", "text": "For the 2021 value, the board of review just certified the value for that year, meaning that is the value. Based upon the info you gave on the proposed value for 2022 that may not be certified (yet).  The reassessments actually happen on the Township level, so you can Google your townships name plus \"assessor's office\" and give them a call. They can answer more detailed and jurisdiction-specific questions.\n\nThe buyer would be interested in the assessed value as that dictates RE taxes, but ultimately if it's a commercial property they will most likely buy based upon comparable sales and income potential. The RE taxes directly impact the income potential. And yes, the assessed value should reflect market value, but again this is a broad brush approach they take within Mass Appraisal, and they don't look at your properties actual income and expenses (typically) versus looking at sales of other similar properties. So they seem to think it's worth $850k. But again, that's why the appeal process is in place because they hardly get it exactly right, and sometimes they are high and you can appeal, and sometimes they are low and you get lucky and keep quiet. \n\nFrom the banks perspective they want an independent appraisal done on your property based upon its market value, and for financing that matters way more than assessed value. Assessed value is just a guesstimate that the assessor's made based upon trends in the market, and the bank loan out money on guesswork. \n\nHope it helps, and definitely call your Township's assessor's office, that's why they are there.", "replies": [{"id": "iizsaj9", "text": "Got it! Thank you so much!! That helps. I\u2019m so nervous now lol. \n\nI looked up my township assessor office. I see two things. I can appeal 2 times one during assessment and one during certification? I don\u2019t understand that? Should I just appeal when it comes to board certification? I saw I can get a property tax lawyer to do that part and the assessment part the township can do for me it looks like. Is that right? When do I do the appeal lol  during which process. Does it matter? \n\nAnd I see the total assessment value at 214 which is what they\u2019ll base the property tax on. The market value assessed is 850k. Can\u2019t they keep the market value that high and lower the assessment value? Prolly not due to math lol but just curious.", "replies": [{"id": "iiztyt1", "text": "I would absolutely recommend a property tax attorney, as it may even be a requirement within Cook County and the Township, but the Township should be able to answer that when you call. Each jurisdiction is drastically different and I'm only going off high-level knowledge from experience nationwide. \n\nI would think you want to appeal the assessment, as that would reset your triennial assessed values for the next three years. Otherwise you may have to appeal the certified value every year which means more money and time. Again, the attorney will be able to answer that. Not sure how compensation is structured but sometimes it's a percentage of tax savings and sometimes a flat fee. You will have to work that out with them. \n\nAnd yes, the assessed value is 25% of the estimate of market value by the assessor. That's just how they have codified how taxes are estimated for the jurisdiction. They do not move independently, so you have to reduce the market value which concurrently reduces the assessed value, as it's always 25% of market value.", "replies": [{"id": "iizykte", "text": "Ooo gotcha ok that makes sense. I\u2019ll contact the tax lawyer. I don\u2019t close on the property yet so hopefully the current owner appeals as I can\u2019t yet. \n\nMan CRE is hard why is everyone saying real estate is the way to go to make money and passive income. Literally getting fucked on property taxes like crazy. I don\u2019t even know if my business will be able to afford higher tax to pay. Unless I lease it out but who would wanna pay 10k rent ha", "replies": [{"id": "ij0097q", "text": "I'm sure the attorney can speak to best practices with the pending appeal and sale too. I would think the seller would be happy to file the appeal in order to preserve the right. If you have a broker on the acquisition ask them, that's what they are there for, to be experts.\n\nSo CRE can be quite profitable for many people over the long term, but it has significant risk and barriers to entry present, and absolutely requires using the right professionals such as brokers, attorneys, appraisers and CPAs to truly be successful. \n\nI believe Notorious B.I.G. put it best when he said, \"Mo' money, mo' problems\".... \n\nGood luck!", "replies": [], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "ij2szjh", "text": "Hey, just to let you know cook county and Illinois in general is one of the worst states when it comes to tax assessments.\n\nOur state legislature is packed full of lawyers who own firms specializing in tax appeals.\n\nLook into Maddigans family business as well as many others\u2026\n\nDon\u2019t worry about what the assessed value is as per the assessors office. I had a condo that I bought for $88k get reassessed to a value of $220k as per cool counties tax assessor office, you\u2019ll want to look into property tax appeal, that\u2019s what I ended up doing.\n\nProcess may be a little different for commercial property.\n\nFeel free to PM me if, I can put you in touch with my guy.", "replies": [], "depth": 3}], "depth": 2}, {"id": "iizl3ce", "text": "What\u2019s the game with the assessments. Do I want it assessed High so I can sell it at a high price? Or do I want it lower so I pay lower tax and sell it at a high price by telling people it was assessed higher?", "replies": [{"id": "ij09kv9", "text": "I think op you are confusing assessed value with sale or market value the two are completely different metrics and may or may not relate to each other - similar to housing your town asses a value on the property to determine how much local tax you pay - it has no bearing on what a buyer would pay as that depends on the market - I.e a house with solid gold toilets will sell for a hella lot more than it's assessed value as no assessor is coming to look at your toilets. Don't confuse the two and it'll make sense.\n\nLower assessments mean lower taxes a buyer might pay a premium for that as they would model less expenses to maintain that property and similarly a higher assessment might mean someone pays less for it as the property taxes of the property make it less profitable in their model/intended use scenario. If you're using the property aim for lowest assessment to minimize your taxes. When selling the market/your broker will help you determine best and highest value for sale", "replies": [], "depth": 3}], "depth": 2}, {"id": "iizlekg", "text": "I can use the appraisal the bank hired and use that at my appeal since it was a 100pagw document showing comparable properties sold nearby", "replies": [{"id": "iizpad5", "text": "No you can\u2019t. Appraisals are for a specific intended use and user. Also the way your cap rate is calculated for an ad valorem appraisal (loading the cap rate) is different than an appraisal for financing.", "replies": [{"id": "iizq5sb", "text": "What can I use to appeal then? Isn\u2019t that bank appraisal my best bet? How do people appeal and win what kind of proof do they show if they can\u2019t show the appraisals that was lower than the assessed value? There\u2019s no way I can sell it on the market for the higher price", "replies": [{"id": "iizqh4m", "text": "You need to hire a property tax attorney. They will order the appraisal from an appraisal firm and handle everything for you.", "replies": [{"id": "iizsk2r", "text": "Got it. I will do that. I looked at my township. And it says I have 30 days to appeal. But I don\u2019t know if my closing will happen within 30 days. And my township said they will find comparable properties and appeal for me? And then the second step is the board certification and I can appeal again? That\u2019s when I need the lawyer?", "replies": [{"id": "iiztzgx", "text": "Yeah the township is not going to do your appeal for you. They\u2019re getting some of your taxes, why would they help you pay less? \n\nTalk to a property tax lawyer now. This is all they do all day every day. Doesn\u2019t sound like you\u2019re an attorney or a CRE professional so trying to do this on your own is just going to be a waste of time and brain cells. It\u2019s annoying and costs mo year but hopefully it\u2019s offset by your lower tax liability. \n\nPeople that do their own commercial appeals generally have a similar success rate as people who represent themselves in criminal cases.", "replies": [{"id": "iizwbtc", "text": "Got it thanks! But my township legit says that\u2019s why they are there. They didn\u2019t do the assessment but they are there to help. Weird.", "replies": [{"id": "ij00k0y", "text": "They\u2019re lying to you. The guy in this thread is correct. The townships collecting millage based off of your county\u2019s taxable value so like he said, why would they want that lower? \n\nNone of this even matters if you go thru w your purchase at $650k. That transaction will be proof enough of an arms length transaction for valuation purposes. \n\nOnce you acquire you can appeal", "replies": [{"id": "ij346ck", "text": "Yea makes sense but that\u2019s what the township website said \ud83d\ude02", "replies": [], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "iizsum2", "text": "There are firms that specialize in this.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ij02o8b", "text": "These are the days of tax appeals. Hire an attorney who will hire a competent (hopefully) appraiser.  Don't skimp on the appraiser.", "replies": [], "depth": 1}, {"id": "ij0c1yt", "text": "In Cook County, the assessment game is a racket. They reassess properties, everyone who knows what they\u2019re doing appeals with one of the connected law firms, and they get their assessment down to below market value. There\u2019s a reason that Madigan, Cullerton, and others have family property tax law firms that make a ton of money\u2026\n\nIf you want, I can recommend some folks on the appraisal side that do this kind of work, but your best bet is to work with a tax appeal firm (whether it\u2019s a lawyer or tax consultant) and go with what they recommend. It\u2019s all a game and it funnels money into the pockets of the guys that run the game.", "replies": [], "depth": 1}, {"id": "ij0gmyx", "text": "Worst county in USA", "replies": [], "depth": 1}, {"id": "ij1k1hm", "text": "The assessor, Fritz Kaegi, has made it a mission to significantly increase assessments on commercial properties, even though commercial already pays 2.5x the residential rate. Get an attorney. You can message me your property PIN and I\u2019ll see if you have a case for free\n\nI\u2019m assuming you\u2019re in Elk Grove township?", "replies": [], "depth": 1}, {"id": "ij2jtwe", "text": "What you need to do is appeal the assessor\u2019s valuation because the assessed value for tax purposes should never be higher than the market (appraised) value of your property.", "replies": [{"id": "ij34b8j", "text": "Yea that\u2019s what I\u2019m doing I hired a lawyer. Said he\u2019ll take 25% of the reduction", "replies": [], "depth": 2}], "depth": 1}, {"id": "ij31yd0", "text": "Send the appraisal to the county and tell them they overvalued the property. They  will probably tell you to make a formal appeal. Make the appeal, you should win.", "replies": [{"id": "ij34ci5", "text": "Yea that\u2019s what I\u2019m doing I hired a lawyer. Said he\u2019ll take 25% of the reduction tho.", "replies": [{"id": "ij34o3v", "text": "I would just try going direct first. It should be a matter of pushing paper. But if you dont want to deal with it and there's no cost unless the atty is successful, then go for it!", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ij3c5q1", "text": "Hire a tax attorney to appeal this. 40% in one year seems high, but I've heard of people having similar issues in IL.", "replies": [], "depth": 1}, {"id": "ijbtjfr", "text": "I file tax grievances on all my properties every single year. Including my personal residences. I just got 1 property from 54k/annual to 42k/annual. Plus they\u2019re going back 10 years on a refund. \n\nFile every single year.", "replies": [], "depth": 1}]