July 3, 2014
Our legal practice includes a healthy portion of property tax valuation work — challenging excessive valuations of real property by County Auditors to ultimately reduce the tax burdens for our clients. In that practice area, we occasionally represent real estate developers who hold developed residential and commercial lots, and or condominiums that are have similar characteristics.
One generally accepted appraisal method for such property that is accepted as a valuation technique generally (by buyers, lenders, etc.) is the “bulk sales” valuation method. Under the “bulk sales” valuation method, the question is if a series of like properties were sold in bulk today, rather than one-by-one over time, what price would they yield? Typically that valuation is lower than a parcel-by-parcel sale.
We see this valuation challenge arise where a developer owns many residential lots, or an entire building full of residential condominium units. He has a choice of selling each lot and each unit over a period of years, which involves, interest cost, taxes, insurance and maintenance costs until all are liquidated. The alternative would be to sell the lots of condominium units “in bulk” to a single buyer, and to sell them all at once. In such circumstance, even if individual sales might yield a purchase price of 15% to 25% higher than a “bulk sale,” the “bulk sale” is preferred to avoid the expense and risk of sitting on the inventory.
The Ohio Supreme Court has ruled that for purposes of valuing property for taxation purposes, it simply will not accept the bulk sales valuation method. Rather, each individual parcel or condominium unit must be valued separately for tax purposes.
This was recently reaffirmed in Dublin City Schools Board of Education v. East Bank Condominiums, LLC, Slip Opinion, 2014-OHIO-1940.
Please let us know how we can make a difference for you with our real estate tax valuation team.