SetPoint Says: Falling assessments could be real estate bright spot

REGION – Veteran appraisers Bob Reamer and Juan Carbonell want to find the silver lining in today's dismal real estate market – and perhaps a little green lining for taxpayers' wallets as well.

The two teamed up last spring to establish SetPoint Property Tax Consultants, taking off their appraiser hats and becoming out-and-out advocates for residential and commercial property owners.

Their business plan? To tackle one of the biggest contradictions in today's real estate market: Why aren't property tax assessments falling more today, given the most precipitous decline in real estate prices in memory over the past few years?

Carbonell and Reamer expect to take up their clients' causes in assessors' offices in coming months and during appeals before boards of review next winter-all the while taking on a system that sometimes seems as complex as particle physics.

In the past, consultants of this type haven't exactly enjoyed a sterling reputation at the local government level. That's because they often misunderstood the very processes they were trying to influence, assessors say.

"There have been people over the years trying to make a living as property tax consultants, but they didn't really have the background for it," agrees Carbonell.

As Reamer and Carbonell see it, those perceptions won't apply to SetPoint. Reamer has worked as a real estate broker and an appraiser for more than two decades; Carbonell has worked in the field over roughly the same period, as an appraiser and as deputy assessor in Garfield Township.

The pair could indeed have their hands full this winter. Tax bills go out to property owners in mid-February, and the deadline for appeals is less than two weeks later. Carbonell expects a rush of business by then, even predicting that Setpoint could be accepting clients on a first-come, first-served basis.

The contrast between falling property values and more or less stable assessments is the reason. "Generally the market has been trending downward since 2005," Carbonell says. But the last five years, assessments are up 1 percent in the five-county region, although there were declines of 3 percent in 2009 and 9 percent in 2010, according to state records.

At the start of that period, assessments were rising at 5 to 7 percent even as the residential real estate market was collapsing. Meanwhile, Traverse Area Association of Realtors has recorded a 23 percent loss in residential property values for the five-county region.

Carbonell and Reamer don't blame assessors for this. "It's the way the system is designed," says Reamer. "Assessments are a lagging indicator – they are slow to react." In similar fashion, they didn't keep up with rising property values at the start of the decade.

Assessors also tend to look at property values and trends across a community or county- not at a property individually – when they settle on an assessment for a home or business. So it's no surprise that appraisers looking at a specific property may well come up with a different value.

In many cases, the difference might be negligible. In those instances, Carbonell and Reamer might advise their clients to leave well enough alone. In others, the difference will be big enough to add hundreds or thousands of dollars onto the property owner's tax bill.

"The system also has a mechanism in place for righting the wrong, so to speak," Reamer says. It involves appeals to the assessor and the board of review, and, more rarely, to the Michigan Tax Tribunal.

Owners or their representatives can challenge an assessment based on the property's current, actual value- and they aren't required to use the complex formula that assessors employed in the first place. Instead, they can look at the property as an individual case.

If they win a re-assessment for a client next year, Reamer and Carbonell plan to charge him or her 50 percent of the savings. They will also look at the assessments for previous years to see if mistakes were made in those assessments.

They haven't been through an appeal cycle yet, so they don't have successes they can point to. But before becoming a property tax advocate, Carbonell sometimes provided appraisals for successful appeals.

In one case, Vicky Oltersdorf of Oltersdorf Realty in Suttons Bay turned to Carbonell for an appraisal when one of her clients wanted to reduce the property assessment on his Lake Michigan property. Carbonell's analysis provided the justification for a reduction in its official value from $1.2 million to $1 million.

"The assessor merely lowered the assessment before the assessment notices went out, and the property-owner never even had to appear before the board of review," Carbonell says.

At SetPoint, Reamer and Carbonell's approach will be somewhat different. They won't do appraisals themselves — largely because appraisers are duty-bound to be impartial. They plan to be full-fledged advocates for their clients. When they need an appraiser, they will hire one.

Property owners, of course, can still try to take on the system by themselves. They can greatly increase their chances of success by knowing the rules of the game, Oltersdorf says.

Property comparisons and a fresh appraisal are crucial. And it doesn't hurt to get the information to an assessor well before the next round of assessments.

It won't do much good to simply complain about high property taxes, she says. Nor does it help to flood an assessor or board of review with tons of mostly irrelevant information.

"Some people just walk in and assume that they can assert that their property is over-assessed without providing information," she says. "I am sure this is difficult for people in the system as well."

In the end, property owners may need to fight fire with fire – by using their own or a consultant's figures to combat an assessment that could cost them dearly in coming years. BN