Board of Equalization Looks at Tax Appraisals in Neighborhoods with Plunging Values
INSERT: WANNA GO? The Forsyth County Board of Equalization and Review meets on Thursday at 3 p.m. in the Board of Equalization and Review Room on the first floor of the Forsyth County Government Center, located at 201 N. Chestnut St. in Winston-Salem.
Members of the Forsyth Board of Equalization and Review debated how they should address deep cuts to property valuations in Monticello Park and other predominantly African-American neighborhoods of Winston-Salem last week.
The volunteer citizen board, which is comprised of real-estate professionals appointed by the county commission, is tasked with hearing appeals to property valuations and making mass adjustments if they find systemic problems in the recent reappraisal by the county tax department.
Board member William V. White expressed doubt that the board will uncover any evidence of error sufficient to justify the kinds of mass changes sought by residents of neighborhoods who have seen their home values plunge by as much as 70 percent.
“In aviation there is a concept called ‘slope line’ to where when you slow the air speed down to the point where the controls get kind of dysfunctional and mushy,” he said. “And it sort of likens to a valuation problem with no sales. I think we are victim of general economic conditions and few sales. But I don’t see any compelling reason to do anything different. I think you’ve got to follow the sales. I don’t see significant problems with it. I know it’s not what everybody wants to hear. I do have some concerns about a shoot-the-messenger reaction.”
John Potter, real estate division manager for the tax department, reviewed sets of qualified sales used to set appraisals for properties in Monticello Park, Konnoak Acres, Shalimar/Salem Village and Reynolds Park.
Due to the wild fluctuations in the real estate market between 2010 and 2011, Tax Director John Burgiss told board members that staff relied on sales from 2011 and 2012 to compile qualified sales lists, commonly known as “comps,” for each neighborhood. Neighborhoods with high numbers of foreclosures, which are excluded from consideration, also had low numbers of qualified sales. Narrowing sales to 2011 and 2012 further winnowed the list.
There were only three sales on the comp list that were used to set values in Monticello Park.
In one, a woman represented by a power of attorney sold a brick ranch house under a generous tree canopy that had been previously valued at $114,300 to a couple for $32,900 in September 2011. In November 2011, seven heirs of William Nelson Knight sold a handsome, split-level ranch house previously valued at $184,000 to Carrboro couple for $82,000. And in November 2012, an investor from Maine picked up a house for $27,000 in a second estate sale. The property had previously been appraised at $120,000.
Chair Richard N. Davis challenged the use of estate sales to determine values for the neighborhood, noting that in his professional experience heirs often sell below market value.
“The heirs didn’t put any money into the purchase of the house, so everything they get is gravy,” he said. “And some people want money. And if it’s a $150,000 house, they get an offer for $65,000 or $75,000 and they say, ‘Let’s sell.’ In a case where it’s multiple heirs, you can’t say it’s majority wins. Everyone has to agree. They put pressure on the one who is holding out, and say, ‘We need the money.’ So I don’t personally think an estate sale should be an indication of a market-value sale.”
Burgiss interjected that, in fact, the tax department does consider estate sales in its comps, in accordance with the state law governing tax appraisals.
“I don’t mean to be in conflict with you, but we are in compliance with Department of Revenue standards,” Burgiss said. “I just want to make sure we’re on the same page.”
Vice Chair David Shaw said he doesn’t relish hearing individual appeals from property owners in Monticello Park.
“What disturbs me is we’re going to have to make decisions based on such limited information,” he said. “In that one neighborhood we’ve only got three sales, maybe one or two are questionable as estate sales. It’s going to be real tough to work through this.”
Board members approved a proposal by Burgiss to front-load the individual appeals from Monticello Park and other troubled neighborhoods so that the board can make any mass changes deemed necessary before a June 28 deadline.
Potter said the dearth of qualified sales presented challenges to appraisers in Monticello Park.
“It’s not something that was easily done all the time,” he said. “Our objective is to show you how it’s done. But that’s what an appraiser has. And when he walks away he’s got to match that to a sale that’s out there. So whether it’s up or down, or way down, that’s what the appraiser is charged to do.”
Davis inquired about a number of sales in neighborhoods such as Reynolds Park and Shalimar/Salem Village that had been cited to him by concerned property owners. Potter said that they were bank sales and were appropriately excluded from the comps.
Board members also looked at how close the recent 2013 reappraisal tracked with market sales in several of the neighborhoods flagged for review. Staff presented average sales ratios, which compare appraised values to actual sales, for that purpose.
“Konnoak seems to be right on the money,” Davis said in reference to the sales ratios presented by staff. “It impressed me as being more accurate than any of the others.
“Some of the others I had problems with,” he added.
Davis cited a decision by the Mecklenburg County Commission to bring in an outside firm to review the 2011 tax revaluation and asked Burgiss if he saw the situation in Forsyth County as comparable. In Mecklenburg, some property owners in the Cornelius area complained that their assessments were too high. The outside review commissioned by the county found instances of erroneous data that had “a significant impact on the valuation” of whole neighborhoods, including sales that should have been excluded from comps and misapplication of grades to individual properties.
“Eighty-five percent of the public regarded public relations [by the Mecklenburg County Tax Department] as poor,” Burgiss said. “I can’t speak for the public, but we don’t have that problem here.”
Davis expressed disappointment that staff was unable to report how many informal appeals in the troubled neighborhoods had resulted in valuations being changed.
“In my opinion the whole idea behind this is to find out where we were, how we stood,” he said. “And I would hope one of the objectives of the effort would be to. ‘Okay, we did this. Here’s how we came out. We adjusted some higher.’ I mean, what’s the use of doing this study if you don’t know the outcome? This is the thing that disappoints me: We did this to put our hands on the problem, and yet we don’t know the results of it.”
Shaw and White suggested that the board take a look at sales after Jan. 1, 2013 — the legal cutoff point for the revaluation — to see if they’re relatively aligned with those used to set values, particularly in neighborhoods such as Monticello that are challenged by limited samples. The two board members acknowledged that only sales from 2009 to 2012 can be legally applied for the purpose of setting values.
“I would feel more comfortable in that neighborhood if we knew how many houses are on the market and how many sold in the last six months,” Shaw said. “I think it would certainly be an indication, and it would make me feel good that, hey, these valuations are right.”
Burgiss responded that he can provide any information board members want, but added that the values are assumed to be correct and the burden is on appellants to prove that they are incorrect.
Davis said as he reviews individual appeals he will be mindful that overall values dropped by 11.9 percent across the county, and measure some of the troubled neighborhoods against that metric.
“Some of these homes that dropped 65 or 75 percent just because they happened to be in a neighborhood where there was a problem, we ask ourselves a question: Is it fair to that homeowner because he just happened to live in that neighborhood that their values dropped so drastically?” he asked. “That’s the question, is how we deal with it and treat everybody equitably, treat everybody fairly.”