Market trends have a significant impact on property tax assessments for both homeowners and business owners. For homeowners, the real estate market operates in cycles. If you recall the market crash of 2006 to 2008, entire neighborhoods and municipalities were flooded with distressed sales—foreclosures, short sales, and bank-owned properties dominated transactions. At the time, laws dictated that distressed sales should not be considered in the sales ratio study, an essential analysis used by the government to compare assessed values with market sales. The exclusion of these sales created disparities in property tax assessments, rendering the system ineffective. Recognizing this issue, lawmakers revised the law to ensure distressed sales are now considered in the sales ratio study, albeit with some discretion on the weight assigned to them.
Fast forward to the pandemic years, and the market experienced a dramatic shift. Due to historically low mortgage rates, many homeowners refinanced, reducing housing inventory. Even those considering downsizing or relocating opted to hold onto their properties. The reduced supply led to bidding wars, with buyers overpaying for homes due to necessity rather than value. From a property tax perspective, this created challenges. Homeowners who overpaid during this period are now facing higher assessments based on inflated purchase prices. While the assessor’s office sees these transactions as fair market value, property owners seeking relief must demonstrate broader market trends to justify assessment reductions.
The Commercial and Industrial Sectors: Shifting Trends
Market trends affect the commercial and industrial property sectors differently. Before the pandemic, office spaces were performing well. Now, the landscape has changed. High-end office buildings (Class A properties) in areas like Fulton Market and the West Loop continue to attract tenants, while older buildings in the Loop are struggling with high vacancy rates. Many Class B and C office spaces remain unoccupied, leading to significant declines in property values. Some discussions have revolved around converting outdated office buildings into residential units, including affordable housing. However, the uncertainty surrounding these conversions has further impacted leasing decisions and property values.
Industrial properties, on the other hand, have seen significant growth. Developers are constructing large warehouses and distribution centers, often on speculation, as demand remains strong. In areas near major transportation hubs, such as DuPage County, developers are even acquiring residential properties in unincorporated areas to assemble land for industrial development. While some experts anticipate a market softening, industrial properties continue to command high rents and maintain strong valuation trends.
Addressing Property Tax Assessment Discrepancies
If a homeowner believes their property tax assessment does not reflect current market trends, several steps can be taken. First, homeowners can request their property record card from the assessor’s office to check for errors. Common mistakes include incorrect square footage calculations, misclassified home features (such as unfinished basements being assessed as finished), and other discrepancies that can lead to inflated assessments.
For recent homebuyers who paid less than the assessed market value, presenting a closing statement to the assessor may help. However, assessors often scrutinize these transactions, looking for reasons to discount them, such as short listing times or sales without brokers. In such cases, homeowners may need to escalate their appeal to the Board of Review or, if necessary, to the Illinois Property Tax Appeal Board (PTAB), which provides an independent review process.
For commercial property owners, Cook County offers an additional avenue through specific objection complaints. This formal legal process allows businesses to challenge their assessments in court, provided taxes are timely paid. While complex, this process ensures that commercial property owners have a fair opportunity to contest valuations that do not align with market realities.
The Frequency of Property Reassessments in Illinois
Property reassessments occur on a structured schedule in Illinois. In Cook County, townships undergo a thorough reassessment every three years, while in other counties, reassessments occur every four years. While some argue that assessments should be updated more frequently to reflect real-time market conditions, the existing schedule aims to balance administrative feasibility with market responsiveness.
Illinois property owners benefit from a well-established due process for appealing tax assessments. Unlike some states, where property tax appeals can be prohibitively expensive and difficult, Illinois provides accessible avenues for property owners to seek fair evaluations. This system helps ensure that taxpayers have recourse when their assessments do not accurately reflect market conditions.
Conclusion
The impact of market trends on property tax assessments is undeniable, affecting residential, commercial, and industrial properties in different ways. While the real estate market continues to evolve, property owners in Illinois have options to challenge assessments that do not align with market realities. Whether through self-help methods, administrative appeals, or legal challenges, understanding the property tax system can help ensure fair assessments and equitable taxation.