What is Market when there is no market?
November 18th, 2011
Minnesota assessors are currently dealing with near-record numbers of tax petitions challenging the annual assessments made in the state. Assessors value property as of January 2, for taxes payable the following year. In stable markets, those that are flat or gently appreciating, with many sale transactions to study, it is easier for assessors to hit the mark on value.
Dynamic, distressed markets, like those in place right now, are more difficult to track. As sales dry up, market value proxies are harder to find. In-place rents might not reflect market leasing, requiring a judgment about what a space might command if renting on the valuation date. Cap rate analysis, once grounded in study of actual sale transaction data, becomes more anecdotal, relying on investor surveys and appraiser opinions. And, assessors, more historians than forecasters, are often a year or more behind the market.
And this is why assessors are facing near-record numbers of tax petitions in Minnesota.