How does NYC compute the "ESTIMATED MARKET VALUE" of condo apartments

Question

When the city of New York assesses the value of a condo for property tax purposes, the first line is the ESTIMATED MARKET VALUE. This number may or may not determine the property taxes owned (depending on the "8-30% limitation - AV" kicks in). Nonetheless, my question is how this ESTIMATED MARKET VALUE is computed, not how the whole tax bill is computed.

Here is an example of what an assessment might look like (on an apartment where property taxes depend on the 8-30% limitation - AV):

The city's web site says that for class 2 properties (which includes condos)

The Department of Finance estimates a market value for your property based on its income producing potential. We use statistical modeling and assessor reviews to estimate income and expenses for your property based on rental properties that are similar to yours in size, location, number of units, and age.

- https://www1.nyc.gov/assets/finance/downloads/pdf/brochures/class_2_guide.pdf

Unfortunately, I can't find any more information about this modeling process or even what it is supposed to measure.

This bloomberg article describes the process as follows, however:

1. For every condo building in New York, the city identifies a comparable rental building. A condo-comparable rental building means an apartment building with units of a similar number, size, age, location, and so on.
2. Using this rental building's (real) rent roll, the Department of Finance extrapolates an (imaginary) income statement for the condo building. The condo board decides the portion allocated to individual units.

However, even if true, this still doesn't tell me how to figure out which comparable rental building has been assigned to a particular condo. Nor does it explain how the income is turned into an estimated market value. After all, these estimated market values are much higher than annual income for a building--typically they seem to be around 60-80% of the resale value of a condo.

Any more precise explanation of the process or how to find out more about the calculation on a particular building would be appreciated. In particular, I'm wondering how one can appeal an estimated market value that is too high, since I don't even know what the number is truly supposed to represent.

Answer 1

According to NYC Department of Finance (DoF):

“Residential property with more than 3 units including cooperatives and condominiums. NY State Law mandates that we value all class 2 properties as income producing, based on their income and expenses. We use a statistical model as a tool to find typical income and expenses for similar properties to yours (in terms of size, location, number of units and age). Then we apply a formula to the income data to get to your Market Value. The law requires that we value co-ops and condos as if they were a rental buildings, even though they are not income producing.”

To the best of my knowledge, this assessment is not reproducible. To get an idea if their estimate of MV is correct one, one could proceed as follows. DoF provides estimates of rents for each unit in the building in “YOUR NOTICE OF PROPERTY VALUE (NOPV)”. By summing up rents for all units, one can compute, for example, how many years needed to reach the assessed Market Value based on the total rent collected. For our building, it is about 5.26 years (this excludes any expenses for common charges etc.). By selecting comparable properties and their rents, one could produce an estimate of the total rent for the building and an alternative estimate of the Market Value based on this sample. This should give an idea if you overpaid taxes or not. I guess this is the final goal.

Answer 2

Every local government uses a method of picking comparable properties, and then assigning values based on that comparable.

Every local government also provides a method of appealing the assessed value. You will have to determine when is the appropriate time to appeal, and how to do so. That information is generally found on your local government website, or on one of the mailings from the property tax department in the local government.

For every condo building in New York, the city identifies a comparable rental building. A condo-comparable rental building means an apartment building with units of a similar number, size, age, location, and so on.

Your challenge will hinge on either the choice of building or in how the percentage of your buildings value was assigned to you.

The condo board decides the portion allocated to individual units.

The split information would come from your condo board. They may be able to provide information on how that was done. They may also have been provided the information by the city as to which building(s) were used to determine the value of you building.

After all, these estimated market values are much higher than annual income for a building--typically they seem to be around 60-80% of the resale value of a condo.

Every jurisdiction decides the relationship between recent sales and current value. This is made even more complex when some jurisdictions limit the max percent growth in value from year to year. Strange situations can occur when some place have three year cycles, and then limit growth. This can result in places where the sales price is dropping but taxes are rising because the assessments lagged the true growth in earlier cycles.

Every jurisdiction is different.