2016 sales indicate smaller tax increase

Cover page of our 2016 Q3 Newsletter


by Greg Johnson

The Denver County Tax Assessor’s Office is already at work preparing for next spring’s property assessments. The sales period that is being used for these new valuations ended on June 30, 2016, and it is likely that higher assessments will be coming to most Denver apartment owners next year.

We analyzed the sales data, and found the average price for existing apartment buildings in the central Denver neighborhoods has risen to $156,273/unit. That represents a 22% increase from two years ago.

This average sale price reflects all sales during the first half of 2016 for buildings with 10-100 units, built prior to 2000. Our team uses these parameters because they reflect the majority of buildings owned by our clients.

Due to the rise in sale prices, we expect higher values to be assessed next spring for property taxes on apartment buildings. Fortunately, the increase shouldn’t be as dramatic as what owners experienced in 2015, the last time tax assessments were announced.

Every two years, the Denver County Tax Assessor reappraises all properties, both residential and commercial. The bi-annual assessments, coming next in May 2017, will be based on calculated market values as of June 30, 2016, the “Valuation Date”.

To calculate those values, the Assessor will use comparable sales from the two-year period leading up to the Valuation Date. Therefore; all of the sales that will be used in the next round of tax assessments have already occurred. So, we already have a good indication of what to expect next spring.

We compared sales from the six-month period leading up to the Valuation Date (January – June 2016) to the sales from the similar period two years ago (January – June 2014).

The average price rose 22%, from $127,735 in 2014, to $156,273 in 2016.

By comparison, we saw a 74% increase from 2012 to 2014. Because prices have risen more slowly over the past two years, we expect tax assessments to also rise less dramatically when they are announced in May.

Because each property assessment is based on a subset of three specific sales that the Assessor deems to be most comparable to the subject property, it’s impossible to correctly predict what assessment a given property will receive. Our experience has shown that it is advantageous for owners to ensure the Assessor’s comps used for their property are not unreasonably from the top end of the price range. For example; there have been numerous sales above $200,000/unit that should not be used as comps for average properties.

In past cycles, we have helped our clients review their tax assessments, and expect to do so again in May 2017 when the new assessments are mailed to property owners. Attentive owners have saved thousands of dollars by educating themselves about the process and closely reviewing their new assessments. Continue to read our newsletters for more information that can help save you tax dollars.

On a positive note, due to the timing of the tax cycle, the May 2017 tax assessments will not be reflected on your tax bill until 2018.

Madison & Company Properties
1221 S. Clarkson St. #410, Denver, CO 80210