Important Things Every Real Estate Professional Should Know About a Prospective Property’s Real Estate Assessment
Real estate tax assessments are an important part of a home’s value and can affect a buyer’s decision to purchase a particular property. Among some of the important considerations real estate professionals should have about a property’s real estate tax assessment are:
1. Tax assessment vs. market value: A property’s real estate tax assessment may not necessarily reflect its current market value. Agents should be able to explain the difference to their clients and help them understand the impact on their taxes. Real estate tax assessments are created by local governments to determine the value of a property for real estate tax purposes. It is important to understand how the assessment process works in the area where a home is located to accurately advise clients. The word “assessment” is a descriptive term of that translates into the “fair market value” of a property by doing a simple equation. For example, in Cook County, Illinois, an “assessment” on a residential or multi-family property equates to 10% of the property’s fair market value. Thus, if the assessment on the property is 50,000, that translates to a “fair market value” of the property of $500,000. For commercial property in Cook County, property is assessed at 25% of its fair market value. Thus, if commercial property is assessed at 50,000, it’s fair market value is $200,000. Outside of Cook County, all property is “assessed” at 1/3 of its fair market value. Thus, an assessment of 50,000 on a property outside of Cook County, would indicate a “fair market value” of $150,000, no matter if it is residential or commercial property.
2. The property tax appeal process: Most areas have either an informal or formal appeal process at the Assessor’s Office (the 1st level of the appeal process in Illinois). Conversations with the Assessor can help ascertain how/why an Assessor valued the Subject property at the value they did. Careful however . . . information taken in by the Assessor’s Office can be used to re-value the property in the future. For example, informing the Assessor’s Office about certain facts that are not known by the Assessor’s Office, or that are included in their property record card, can be used to “update” or correct the value of the property upward or downward depending on the information provided. Thus, telling the Assessor the property is 2,500 sq.ft. in size when the Assessor’s records show there are 2,000 sq.ft., may trigger the Assessor to visually inspect, or by satellite imagery confirm a better understanding of the property’s size. If confirmed, a larger property may lead to a greater value being established by the Assessor.
There is a second avenue for appeal at the County’s “Board of Review”. Board’s of Reviews are more “quasi-judicial” than appeals at the Assessor’s Office. Formal appeals must be filed within certain time constraints in order to have your complaint heard by the Board tribunal. Taxpayers can request a formal hearing so they can talk to the Board and advocate based on the evidence in the record as to why the taxpayer believes their property is overvalued. Whereas residential property owners can file appeals without legal assistance, commercial property owners must be represented by a property tax attorney.
In order to proceed to the third and final level of appeal in the State of Illinois, a formal complaint MUST have been filed at the local Board of Review first. The filing of a Board of Review complaint is a pre-requisite to pursue a further appeal at either the State of Illinois Property Tax Appeal Board (PTAB) or in the Circuit Court of the County where the property is located. In both venues, residential property owners can file appeals without legal assistance, however, commercial property owners must be represented by a property tax attorney.
Appeal deadlines for individual townships within a County open and close at different times during the course of the year. Deadlines at the Assessor’s Office open/close first during the year. After the Assessor has “certified” its assessments for each township (there are 38 different townships in Cook County), then the Board of Review opens those same townships for its own filing deadlines to submit and support an appeal. Once an appeal deadline has passed or closed, there is no longer an opportunity to file an appeal at that administrative agency (the Assessor’s Office, the Boards of Review, or the PTAB). The opportunity to file an appeal at a particular agency only occurs once per year.
3. Keeping up with changes: Real estate tax assessments can change over time due to a variety of factors, including home renovations or changes in the local real estate market. Agents should stay up-to-date on changes in their area to better advise their clients. Again, depending on where a particular property is located, that property’s value may be re-assessed as part of the Assessor’s statutory obligation to re-value property within a certain area either triennially (every 3 years) or quadrennially (every 4 years). In Cook County, roughly 1/3 of the County is re-assessed each year. These re-assessment districts include the north and northwest suburban areas of Cook County (last re-assessed in 2022); the City of Chicago triennial (last re-assessed in 2021); and the south and southwest suburban areas of Cook County (last re-assessed in 2023).
4. Don’t be fooled: Real estate tax bills are paid in arrears, meaning that a taxbill paid in the latter part of the year (the 2nd installment tax bill) are reflective of the assessment and fair market valuation of the property for the prior year. For example, a 2nd installment tax bill paid in December, 2022 reflects the assessment of the property from the 2021 tax year, after the 1st and 2nd levels of the appeal process have concluded.
Throughout the State of Illinois, real estate taxes for a property are paid in TWO (2) installments. In Cook County, the dates for payment of the 1st and 2nd Installments can fluctuate, but are generally payable March 1st and August 1st. Outside of Cook County, the two installments are usually payable June 1st and September 1st.
In Cook County, the 1st installment tax bill is configured by taking 55% of the prior year’s total tax bill. The 2nd installment tax bill makes up the remainder of the total taxes for the year, less whatever was paid in the 1st installment. Outside of Cook County, and in every other County in the State of Illinois, the total taxes due and owing for the year are divided up equally into 2 installments of 50% each.
If a property is being re-assessed in the year of a possible closing, looking at a prior tax bill can often times be misleading. Knowing the most current assessment for the CURRENT tax year will lead an agent to a correct determination as to what the property tax obligation will be for their client. If an assessment for the current year is NOT available, and if it IS a re-assessment year, a red-flag should go up and the client and their attorney (if a contract is executed) should be informed and consideration should be given to possibly “re-prorating” the property taxes once the new assessment becomes known.
5. Exemptions: With residential properties, many times homeowners are entitled to certain “exemptions” for being a homeowner as of January 1st of the tax year and making the property the homeowner’s “principal” residence. Additional exemptions can be allotted to a property where the homeowner has attained the age of 65 (a Senior’s Exemption). There are also exemptions tied to one’s age and income. For example, a senior citizen, over 65, who has gross income from all sources of less than $65,000 for a given year, may be eligible for a “Senior Freeze” exemption. There are also exemptions for Veterans both actively on duty, returning from duty, or disabled as a result of service in the military. Since a combination of one or more of these exemptions can dramatically change the property tax bill, an Agent’s understanding that if the tax bill sounds “too good to be true”, it probably is a result of the homeowner/taxpayer receiving the benefit of one or more of these exemptions applicable to their situation.
6. Other Considerations: Comparing the potential purchase price of a piece of real estate to its assessed fair market value as determined by the local County Assessor can offer a glimpse about whether there may be a basis for appeal available to the taxpayer or future home purchaser. Obviously, if a property is being valued by the Assessor at a higher value than the proposed purchase price, an appeal may make some sense. If the situation is reversed, however, which is mainly the case of late where real estate values are increasing, and the current assessed market value is less than that proposed purchase price, than taking action to oppose the current valuation of a property would not be prudent.
Possible means to support an appeal based on an Assessor’s over-valuation of a property could include an opinion of the property’s value by an appraiser. Appraisers look to comparable sales of similar properties within a reasonable distance from the Subject property and make adjustments for differences in size, location, age and other factors and amenities before arriving at an opinion of value as of a certain date.
If a property is demolished, or has sustained fire, wind or flood damage, that can serve as a basis to lower a property’s assessment. Sometimes, new construction can be a basis for appeal but be careful, calculating the purchase price, the demolition costs, the costs for permitting, construction materials and labor as well as some consideration for entrepreneurial profit should all be included in the overall costs to value the project.
On larger multi-family buildings, vacancy or occupancy issues that are abnormally high, or revenues that are depressed can be used as a basis for appeal.
7. Helpful websites:
Cook County Assessor’s Office – www.cookcountyassessor.com
You can find assessment information, exemption information, locate a property’s PIN number by address, find out about the township filing deadlines.
Cook County Treasurer – – www.cookcountytreasurer.com
Get a copy of a tax bill for a property in Cook County, change an address as to where a tax bill should be sent, get a 20-year tax bill history and see exemption information.
Cook County Clerk – – https://crs.cookcountyclerkil.gov/Search
Search for recorded information about a property, including prior Deeds (ownership), mortgage information, liens against the property.
Cook County Property Tax Portal – – https://www.cookcountypropertyinfo.com/default.aspx
Lake County Supervisor of Assessments – – https://www.lakecountyil.gov/154/Chief-County-Assessment-Office
Kane County Supervisor of Assessments – – https://www.kanecountyassessments.org/
DuPage County Supervisor of Assessments – – https://www.dupagecounty.gov/government/departments/supervisor_of_assessments/
McHenry County Chief Assessment Officer – – https://www.mchenrycountyil.gov/county-government/departments-a-i/assessments
Will County Supervisor of Assessments – – https://www.willcountysoa.com/