Taxpayers often experience “sticker shock” after opening their new property tax assessment notices. There’s a good reason why – higher assessments usually mean higher tax bills. One recent study found average U.S. home prices soared by 6.6% in the first quarter of 2024 and that Illinois ranked #8 among the states in home price growth at 9.4%. Taxpayers have a right to challenge an assessment in any given year, but the system operates on a specific timeline set by state law. The time for filing a current year tax appeal generally comes long before the tax bill arrives. Mailed notices of assessment changes provide the date and time for filing an appeal. Some jurisdictions use local newspapers to provide this notice, particularly in non-reassessment years. Thus, if a filing deadline is missed in the current year, the taxpayer is required to pay the inflated tax bill. Some assessors will accept appeals contesting prior year assessments although the initial filing period has passed. Taxpayers should check with their local township or county assessment office for specific details.

One way to contest your assessment is to submit evidence of a recent sale of property. Illinois defines market value or fair cash value as “the amount for which a property can be sold in the due course of business and trade, not under duress, between a willing buyer and a willing seller.” Put differently, it’s 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 to do so. This is commonly referred to as an “arm’s length” transaction. Illinois courts have steadfastly held that a sale of this nature is the best evidence of fair cash value provided the relationship of the parties and the circumstances surrounding the sale have been thoroughly vetted.

What must a taxpayer do to prove that the purchase price is indicative of the property’s true market value? The best defense is often a good offense. The taxpayer should provide written documentation of the sale price, such as a copy of the sales contract, closing statement, or Real Estate Transfer Declaration (PTAX-203), and be prepared to address any concerns local assessing officials may raise about the transaction. Typically, local officials look to see whether the parties had a relationship with one another. Sales between family members or related businesses, such as a parent company and a subsidiary, also known as “arm-in-arm” transactions, are suspect, and often rejected because it is assumed the buyer got a good deal.

Other considerations include the amount of time a property was exposed on the open market, whether brokers were involved in the transaction (i.e., whether commissions were paid), and if creative financing or sales concessions were involved. Sales between parties not represented by brokers are often given little weight unless the taxpayer can provide an explanation as to why brokers were not involved. Similarly, transfers of ownership by other than a warranty deed may require a further explanation. Finally, be aware that foreclosure and short sales will be especially scrutinized. In foreclosure, the lender takes ownership of the property and sells it to cover the debt owed, often at a discounted price. Likewise, in a short sale, the seller is usually facing financial hardship and needs to sell quickly to avoid foreclosure and lessen credit damage. In these situations, the taxpayer is best advised to identify other recent comparable sales to demonstrate that the price paid for the subject reflects what other similar properties are selling for in the same market.

When a recent sale transaction is the basis of a real estate tax appeal, it is incumbent upon the taxpayer to prove that the buyer and seller were (i) acting in their own self-interest, (ii) independent of one another, (iii) seeking the best possible deal for themselves, and (iv) able to access the same information and negotiate freely. If key documentation supporting this claim is submitted, the taxpayer’s appeal will likely be met with success.

Sources:

“Mapped: The Growth in U.S. House Prices by State in 2024” (www.visualcapitalist.com/the-growth-in-us-house-prices-by-state-in-2024).

35 ILCS 200/1-50.

Springfield Marine Bank v. Property Tax Appeal Board, 44 Ill.2d 428 (1970); Walsh v. Property Tax Appeal Board, 181 Ill.2d 228 (1998); Residential Real Estate Co. v. Illinois Property Tax Appeal Board, 188 Ill.App.3d 232 (1989).