A couple of weeks ago I published a guest post on How Property Tax Misconceptions Can Be Costing You Thousands Every Year. In that post there was a passing statement about how the Cook County Assessor uses “ratio studies” to reassess properties. That statement, along with some other points in the article, caught my eye because it seemed to imply that your current assessed property value could affect your future assessed value. That notion ran counter to my long held belief that Chicago property taxes were based upon specific assessments of individual properties.
So I reached out to Chad Rothrock, Director of Operations at Kensington Research & Recovery who had written the article, for further clarification. Here is what he had to say:
The assessment process, as we understand it, is conducted on a mass appraisal basis. Due to the Assessor’s lack of transparency I’m afraid not many people really know exactly how they operate, including us, but it is our understanding that their mass appraisal process breaks the data down by neighborhoods and then maps that data according to housing types and sale prices. When they apply their market adjustments they do so in mass at the neighborhood/predominant housing type level. Based on our experience we believe that they do not review all properties individually, except for those that are appealed. In fact, we find thousands of recent arms-length purchases each year that are not accurately corrected to the true market value (i.e. the purchase price) by the Assessor’s office the following year, or even at the triennial reassessment.
Wow! This was news to me and it explains a lot of the really screwed up property tax assessments we see out there as reported by the Chicago Tribune a while back.
The Park Tower at 800 N Michigan serves as a great example of the problems that result from this flawed process. As I’ve previously posted the top two floors are owned by Ken Griffin and the floor beneath him is owned by George Lucas. Ken paid $15 MM for the 66th floor in late 2012 – pretty much at the bottom of the market – while George Lucas paid $18.75 MM for the 65th floor in mid 2015.
But here is the kicker. Ken’s property taxes on that 66th floor unit is based upon an assessed value of just under $7.9 MM, roughly half of what the property was worth at the bottom of the market! But wait…it gets even better. The 2017 assessed value for George Lucas’ penthouse is only $861,900, corresponding to roughly a $17,000 tax bill! I didn’t know The Force could do that for you.
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider’s view of the seamy underbelly of the real estate industry, or you just think he’s the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.