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. Ā In that practice area, weĀ occasionally represent real estate developersĀ who hold developed residential and commercial lots, and or condominiums that areĀ have similar characteristics.
One generally accepted appraisal method for such property thatĀ is accepted as a valuation technique generally (by buyers, lenders, etc.) is the “bulk sales” valuation method. Ā Under the “bulk sales” valuation method, the question is if a series of like properties were sold in bulk today, ratherĀ than one-by-one over time, what price would they yield? Ā Typically thatĀ valuation is lower than aĀ parcel-by-parcel sale.
We see this valuation challenge arise where a developer owns many residential lots, or an entire building full of residential condominiumĀ units. Ā 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. Ā The alternative would be to sell the lots of condominium units “in bulk” to a single buyer, and to sell them all at once. Ā In such circumstance, even if individual sales might yield a purchase price of 15% to 25% higher than a “bulk sale,” theĀ “bulk sale” is preferred to avoid the expense and risk of sittingĀ on the inventory.
The Ohio Supreme Court has ruled thatĀ for purposes of valuing property for taxation purposes, it simply will not accept the bulk sales valuation method. Ā Rather, each individual parcelĀ 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,Ā Slip Opinion,Ā 2014-OHIO-1940.
Please let us know how we can make a difference for you with our real estate tax valuation team.