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Chicago's South Suburban Cities Most Likely To Be Over Assessed

Article:
(This 2014 archived article was published in 2014.  More recent data is found in the articles section of our web site). For some time Chicago Commercial Appraisal Group, Ltd. has been arguing that the higher the real estate tax rate in any particular Chicago community area in Cook County the more likely it is to be substantially over assessed (or over appraised). We recently completed an analysis of industrial building sales in the Chicago south suburban market from 2011 through 2014 and found that there are very few sales in high tax rate cities and the bulk of the sales in lower tax rate cities. The median property tax rate of the buildings sold was only 11.72% and only four sales were found where the tax rate was over 15%. The assessor is often forced to use sales in low tax areas (since that's where the only sales are) but applies them to high tax subject properties without adequately adjusting for the tax rate differentials. We find that Chicago area commercial appraisers also often make the same mistake. As a rule of thumb there should be about a 3% value drop for every 1% increase in real estate taxes.   By doing a loaded capitalization rate adjustment on every comparable we can demonstrate mathematically (see Markham example above) that there should be roughly a 3% value drop for every 1% increase in the real estate tax rate. Lansing's tax rate is 14.222% or 3.56% less than Markham's and would require an 11% downward mathematical adjustment (a rounded 3.10% value drop per 1% tax rate change). An Oak Lawn comparable (10.481% tax rate) has a 7.3% lower tax rate than Markham and would require a 23% downward mathematical adjustment which also reflects a similar percentage decline. If the property tax rate of the subject is 14% or less, it is more likely that Chicago appraisers of the Cook County Assessor would find enough sufficiently comparable transactions in lower tax rate jurisdictions, to lessen the need to wander into high tax rate districts in order to find comparable sales. Provided the comparable sales are selected judiciously then, the need to worry about quantification of an adjustment for tax rate differentials is reduced. If the subject property has a tax rate at 15% or higher, however, a tax rate differential quantitative analysis is virtually mandatory. Property values could be 10-30% lower or more if tax rate differentials are correctly accounted for. Peterson Appraisal Group, Ltd. is the only Chicago area commercial tax appraisal firm we are aware of that can provide detailed quantitative support for such adjustments. Analyzing every comparable is a very time consuming process. PAG has developed computer models to facilitate this analysis. Most Chicago area commercial appraisers are not mathematically adjusting for this factor and thus over appraising these properties.  Below is the scheduled release of townships in the next few months and the tax rates in those communities. We strongly urge you to have a loaded capitalization rate analysis done on any communities with tax rates of 15% or more. The Chicago area communities listed below in bold are the highest tax rate areas with the greatest likelihood of the Cook County Assessor or Chicago area commercial tax appraiser over valuation. Of course even properties with lower tax rates should be reviewed since there is always the chance of over assessment.  
Riverside Township (2/7/2014 mailing)Tax Rate
Brookfield10.410-13.354
Lyons11.396-14.080
North Riverside8.350-9.679
Riverside10.947-10.958




River Forest Township (2/11/2014 mailing)Tax Rate
River Forest10.222


Bremen Township (3/7/2014 mailing)Tax Rate
Oak Forest11.374-13.114
Midlothian12.377-12.452
Robbins13.607-15.227
Posen11.596-15.497
Markham17.783-22.034
Hazel Crest16.411-19.371
Country Club Hills19.802-21.123
Tinley Park10.451-15.775


Cicero Township (3/20/2014 mailing)Tax Rate
Cicero14.038-14.318
Communities in bold are high tax rate areas with the highest risk of over assessment and over appraisal. A quantitative loaded tax rate analysis could often warrant a 10-30% adjustment for this factor alone. This analysis can even be applied to limited appraisals where no income approach is applied. We strongly advise you request a prelim from PAG to make sure you aren't paying more than your fair share of real estate taxes.

J. Chie, Esquire

Our law firm provides legal work for real estate closings for over 30 years… What distinguishes Chicago Commercial Appraisal Group from other appraisers is the level of thoroughness and details.

A. Raila, Senior Tax Analyst

Gary is a hands-on professional always willing to pick up the phone and work with you... His appraisal firm produces one of the best real estate forecasting reports in the state. I highly recommend his work and his opinion is highly recognized by governmental agencies.

J. Norris, Property Tax Attorney

As an attorney, we deal with many appraisal reports used in tax appraisals. Gary's work has proven successful for our clients and I do not hesitate recommending him for tax assessment appeal appraisals.

C. Noone, property owner

I needed an appraisal for settling an estate. Mr. Peterson was very professional, punctual and helpful with the process. I received my report ina timely manner. I would certainly recommend this company, as well as use their services in the future.

J. Tsiaousis

Gary is one of the top commercial appraisers in Chicago. Every time I have a client in need of a commercial appraiser I refer all work to him without hesitation.