Double-dipping into
the Bowl of Real Estate Valuation

Volume 1

An unspoken, but well known, culinary no-no at any party is double-dipping into someone’s sour cream and onion or crab dip. One could only wish this same taboo could be applied to the assessment of real estate. Unfortunately, many assessors double-dip into the bowl of real estate valuation. Double-dipping is the taxation of the same assets twice—frequently mixing realty assets with non-realty assets—in the same year. This error most often occurs when the assessor, seeking to find the market value for a piece of real estate, uses comparable sales without removing non-realty items from the sales price. The most common non-realty assets are personal property, business value, franchisee fees, and leasehold improvements. Each of these assets, whether tangible or intangible, should be removed from the purchase price of a comparable property before determining the market value of the actual "sticks and bricks."

The consequences of double-dipping are palpable: a significant overvaluation of the real estate, resulting in greater taxes and, in those states which assesses it, a double taxation on the personal property.

There are five primary reasons why assessors double-dip when applying comparable sales to real estate valuation. First, in ?full disclosure? states, where the total value of a transaction—often including personal property and business value—is reported in the real estate deed, assessors routinely accept this recorded purchase price as representative of the real estate’s market value. Second, assessors are consistently under pressure to generate property tax revenue and pick up non-realty items in their comparables. Third, real estate assessors are often uninformed about what constitutes personal property, leasehold improvements, or going concern, and therefore, fail to remove these assets. Fourth, most assessors are unable or are unwilling to track down the details and delete the non-realty items from comparable sales. Finally, many real estate assessors do not communicate with their personal property counterparts to verify the taxation of personal property or leaseholds.

Though double-dipping is a common mistake, there is a simple solution, but, unfortunately, not always an easy one, to correct it. It is as simple as knowing how your real estate is being assessed and whether you pay personal property taxes. But as difficult as understanding property tax law and having the ability, and time, to negotiation with assessing officials.

Here are some steps you can take to solve the problem of double-dipping.

• Pay careful attention to how your real estate is assessed. The easiest way to discover double-dipping is to request the appraisal card(s) for your property and thoroughly review how the assessor determined your market value. You should also request comparable sales used to value your property and verify the sales as real estate only.
• Be knowledgeable of property tax law in the state(s) where you own or lease real estate. Most, but certainly not all, states assess personal property. States which require a personal property return or rendition will assess and tax the personal property on a piece of real estate and, therefore, should not be included in the real estate value. Some states are considered ?full disclosure,? where tangible and intangible items might be reported to assessing officials. Assessors occasionally, but incorrectly, apply this inflated "total purchase" price to real estate assessments.
• File appeals and negotiate with assessing officials. The requirements and deadlines for filing appeals varies greatly from state to state. Generally, most appeals can be settled informally with the local assessor by simply pointing out the double-dipping mistake. Sometimes, because the deadline to file to the local assessor is past, or because he/she is unwilling to make a change, you must file an appeal to a local board of review or to the state. These appeals are formal, usually requiring your physical presence and often call for more facts than just drawing attention to a double-dipping error. In rare cases, you may need to engage an attorney to file a lawsuit.

For many real estate owners and lessees, correcting the mistake of double-dipping is beyond their expertise and time. The professional real estate staff at Rash & Associates has an extensive understanding of the double-dipping problem and how real estate should be assessed. Representing property in all 50 states, Washington D.C., Canada, and Puerto Rico, demands the individuals in our real estate department to keep abreast of the changing property tax laws, requirements, and deadlines. Our seasoned staff are also proven negotiators with assessing officials.

If you suspect your real estate values are too high through double-dipping, or for any other reason, please visit our website at www.rashtax.com to find out more about Rash’s real estate services. If you would like to discuss your real estate values with someone at Rash, please feel free to contact us.

Please contact Rash & Associates for more information.