ASK MARK: Is the Assessed Value of a Recently-Sold Home Necessarily One-Third the Sale Price?
- Mark D. Armstrong, CIAO, Kane County’s supervisor of assessments since 2006, has nearly 30 years’ experience in property valuation. Click here for more about Mark. To Ask Mark a question, email it to KaneSOA@co.kane.il.us or mail it to: Mark at 719 South Batavia Avenue, Geneva, IL 60134.
Q: If a property has recently sold, should the assessed value of the property simply be one-third of the sale price?
A: Not necessarily.
While recent sales are very helpful, they are not conclusive. The Illinois Supreme Court has ruled that using recent sales prices to determine the fair cash value and tax assessments of only certain parcels of property, while not considering the same sales in valuing other property, violates the uniformity clause of the Illinois Constitution.
In the case the use of subject property sale prices in assessment complaints and appeals, the Illinois Supreme Court has held that “fair cash value” means “what the property would bring at a voluntary sale where the owner is ready, willing and able to sell but not compelled to do so, and the buyer is ready, willing and able to buy but not forced so to do . . .” Also, Illinois courts have consistently held that “a contemporaneous sale between parties dealing at arm’s length is not only relevant to the question of fair cash market value but would be practically conclusive on the issue of whether an assessment was at full value.”
However, the courts have also acknowledged that the sale price of property does not necessarily establish its value without further information on the relationship of the buyer and seller and other circumstances.
When presenting a subject property sale to the Board of Review, it is helpful to present information that:
- The sale was voluntary (neither the buyer nor the seller had undue pressure to buy or sell).
- The property was exposed to the market (such as through a real estate broker, a “for sale” sign, an internet listing, or other comparable advertising).
- The buyer and seller were both reasonably well informed in their decision (even in bad markets, an out-of-area buyer who is not familiar with a local market can overpay).
Finally, the state property tax code requires that “Maintenance and repairs to residential property owned and used exclusively for a residential purpose shall not increase the assessed valuation of the property.” Thus, a property with a brand new roof should not be valued at a higher amount for that condition, even though a buyer will usually pay more for a home with a new roof. Conversely, a property with a roof nearing the end of its useful life should not be valued at a lower amount for that condition, even though a buyer will typically pay less for an older roof.
Therefore, a recent sale price is very helpful information, but is not always the only factor that can be considered in property assessments.
