Increase Returns With Property Tax Appeals

Generally the payoff in property tax liens is in interest earned and paid on redemption, or profit on the sale or use of the liened property after foreclosure.

In the latter case, though, the investor is likely to have to hold the property for some period of time before realizing the economic benefit on its disposition. And -- surprise -- the ultimate return on investment can be substantially impacted by the property’s carrying costs, particularly the property taxes that inevitably accrue against it.

Our sources have advised us that the Maricopa County Assessor implemented a new vacant land valuation model this year, that in many cases resulted in drastically increased assessed valuations.

We recently appealed the valuation on two properties acquired by a client through tax lien foreclosure. On one, the appeal resulted in lowering the estimated tax liability for the 2001 tax year from $16,000 to $4,000; the other went from $15,000 to $4,000.

While such reductions may not be representative of every case, they dramatically illustrate what is sometimes possible when new computer valuation systems are applied without any human consideration. And mis-classified property can result in the Assessor using incorrect assessment ratios, that might increase the assessed valuation and, ultimately, the property tax. For example, residential property is assessed at 10% of property value, land is assessed at 16%, and commercial property is assessed at 25%.