Last night I was invited by the Master Broker's Forum to speak as part of a panel that included Pedro J. Garcia, the new Miami-Dade County Property Appraiser, and Robert D. Reynolds, of Morrison & Reynolds Insurance. Realtor, Christopher Zoller of EWM was the moderator.
Pedro discussed the new Department of Revenue's (DOR) position on the use of foreclosures in tax appeals, and that in general, that they should not be used. Short sales, he explained, can be used as comparison properties in the tax appeal process before the Value Adjustment Board (VAB).
The reasoning behind not using the foreclosures, according to Mr. Garcia, is that they are often vandalized, and are heavily discounted transactions.
According to the Broward County Tax Assessor's web page, they have interpreted this DOR decision to allow for foreclosures as long as they were marketed on the open market, such as through the multiple listing system (MLS). This is typically done as “real estate owned” or “REO” properties. Broward County mentions that the DOR allows appraisers to "calibrate" property assessments to "adjust" for foreclosures.
According to Lori Parrish’s office, the word "calibrate" is a term, which does not exist in the assessment statutes and/or DOR rules.
Broward County has apparently taken the position that they will possibly consider foreclosure sales which were listed in MLS and sold on the open market, with competition, knowledgeable buyers, and the other requirements of an "arm's length" sale.
Broward County's web site notes that (foreclosure) sales listed on the open market in the MLS are considered arm's length sales under the current economic conditions.
Data shows that approximately 45% of all sales have been short sales and foreclosures. This figure may go down, as the National Association of Realtors (NAR) reports that short sale listings are now only 25% of the market, indicating that they are being absorbed.
Note: The date of value for 2009 tax appeals is January 1st of the tax year. “tax agents” use 2008 sales to comply with the 2009 January 1st value date and the short sales and REO properties from 2009 will typically not qualify. Those sales can be argued as comparables in 2010 (unless a meeting of the minds occurred prior to January 1st).