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What to look for in a property tax consultant.

Property Taxes Comments Off on What to look for in a property tax consultant.

I recently assisted a client with finding a property tax consultant in Kansas. After using the CCIM network to identify candidates, we issued a brief RFP and identified the top contenders in a short time.

Experience
Experience should include not only how many protests have they successfully completed, but also the kind training and background in analysis and or appraisal for the given property type. Additionally, they should have other experience in your property classification/type. For instance, if they were involved in selling apartments and had access to all of the comparable sales, because many of were sales they had been involved in, then the power of their testimony in informal or formal hearings carries substantial more weight that someone who collected the sales info third-hand.

Approach
There are many approaches as to how a consultant works the protest, for example, some consultants use their political skills while others use their skills of analysis.

Results
Ask the consultant the following:
What are their results?
What was their toughest case?
What was their easiest case? (and did they charge for it?)
Who is their competition?
Have they had success getting a reduction after following competition?

As you interview property tax agents you should:
 Ask to see copies of their most recent reports – a protestor who doesn’t file a report, is not likely to get you the lowest possible valuation.
 Fully understand how their pricing for their services work – some have little incentive to do a thorough job to protest your taxes because they charge you a low monthly or annual fee to monitor your values.
 Ask for a copy of their contract – make sure you understand how you pay them and when. For example, some tax consultants charge just for the first years savings while other charge you for every year that value remains in place (it would be better to pay a 35% contingency fee on only the first year savings, than pay a 25% contingency fee on two years savings which would effectively cost you 50% of the savings).
 Ask for a summary report of their average track record for clients. Some tax consultant’s average as little as 8% average reductions, and others that are in the double digits. Don’t fall into the trap of being “sold” on their services when they tell you about their “best” case. For example, our firm lowered a valuation from $9M to $1M last year, an 89% reduction, which hardly represents our average of 24%.
 Discuss with them the process and how hands on they are
 Ask them what documentation they will need from you as owner. While it may be a chore to dig up old paperwork, if they don’t ask you for copies of old appraisals, surveys, and phase I environmental audits, then they are not likely to be extremely diligent in obtaining the lowest value.
 Ask what experience the consultant has in your particular property niche – don’t for example, hire someone who specializes in office buildings and has never done a ministorage protest.
 Ask for testimonial letters from former clients and request their contact info to follow-up.
 If the tax consultant demands an upfront fee to analyze your property, move on! There are many other tax consultants who are glad to review your property and tell you if they think you have a case or not.
 Beware of consultants who imply they have a political “in” with an assessor. The state of New Mexico Tax and Revenue department has an auditing process to smoke out cases that were settled without merit.
 Ask for their resume and look for their additional experience in the market – a tax consultant who has been an active in the real estate community is likely to command more respect at a formal hearing, than an tax consultant who is a virtually an unknown entity in the market.
 Remember – the person you hire is your advocate, if you don’t have warm fuzzy feelings with them, move on to the next tax consultant.

Fee models
Annual flat fee
Some firms, particularly national ones, charge a flat fee to review their client’s valuations and, when they deem necessary, protest them. They generally have no built-in incentive to protest and their compensation is not tied to the degree to which they prevail.

This model works well in states where the property tax owner and assessor often agree on the accurate value for the property.

Contingency fee
This arrangement gives the owner’s agent an incentive to protest, if they believe that they can win, and it makes their compensation proportionate to the reduction in value they achieve.

1. Analysis skill set
2. Additional services offered
3. Methodologies used
4. Since they get paid if the reduce the tax bill, will the consultant be willing to pay if they get the taxes raised?

As always, if you ever need assitance in finding a tax consultant, don’t hesitate to email or call me at (505) 440-TODD or tclarke@nmapartment.com

Todd Clarke @ March 24, 2010

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