Fair market value and real estate taxes

Perception not always reality

By Joe Testa
Franklin County, Auditor

What is the reality of the residential real estate market in Franklin County? Those of us who have been around for a while have certainly seen flat markets before this one. The reasons for the current state of affairs may be different than in the past, but potential buyers are adversely affected by repeated bad news stories irrespective of the underlying reasons.

It is often said that "perception is reality" and certainly that has manifested itself in many places throughout the country including Franklin County.

But perception is also driven by expectations based on prior experience. In other words, our residential real estate values have appreciated at a very consistent and dependable rate for many years. This may lead someone to have an unreasonable expectation of their equity position if they go to the market now.

In the words of the CBR President Brad Bennett "Compared to what?" Certainly when you compare the rate of appreciation we have enjoyed in our real estate investments for many years here, the current condition isn't favorable.

Franklin County's residential values have appreciated an average 6.26% per year during the three year period ended December 2004. Those were the data we collected from the actual arms' length sales reaching our office.

For the last three years, 2005 -- 2007, our preliminary data is coming in at a rate of appreciation of 1.12% per year. By comparison that is pretty poor performance, but it's not a loss in value. We have a few small pockets where we see actual depreciation but they are isolated while the aggregate is still appreciating.

In short home values on Franklin County are holding strong.

We do get to read a few publications which delve into regional markets which of course paint a very different picture from the Nationwide Data or highly publicized markets.

Forbes Magazine recently carried an analysis in which they teamed with Moody's Economy.com to rank the 40 largest cities in America in terms of "Stable Housing Markets". We were proud to read that Columbus ranked 3rd in the US only behind Seattle and Pittsburgh. They included local economies, affordability and inventory as well as new construction and foreclosures in their analysis. Their conclusions compare very favorably with our data regarding actual sales presented to us for transfer.

As you know County Auditors adjust values every three years by Ohio law and our next adjustment will be for 2008. By late next summer we will create our "tentative value" mailing to every property owner indicating the value which the sales data tells us to be the fair market value for each property.

We will follow that with the "informal reviews" held throughout the County as we have had every three years for the past 15 years. This provides an opportunity for property owners to sit with our appraisers and review the data and tentative value conclusion that we reached.

Owners should contact us at that time if they would accept less for their property than our value conclusion indicates. If adjustments are warranted we will make them. Of course, as always, if we don't concur with the property owner's view, they can challenge that value through the Board of Revision process which opens the following January. (See article on How to dispute a real estate tax valuation)

Over the coming months as the final data is processed for the residential real estate sales, we will post our ongoing analysis on our website at www.franklincountyauditor.com.

This will give everyone the opportunity to review our data and then see for themselves that, while home ownership value isn't growing as fast right now as it had been in the past in Franklin County, it is still strong, stable and leads most of the U.S.

While we certainly aren't immune from the economic and perceptual forces out there, we certainly continue to enjoy a very enviable real estate market.