New Jersey Tax Appeal Now

Where to Find Sales, Leases, Vacancy Studies, Expense Data, Cap Rate Data, Zoning, Site Information and more.

Preliminary and Descriptive Data

• You will need to summarize and familiarize yourself with details of zoning, taxes, and site conditions. All of the data you need to obtain is readily found at the municipal building in the taxing district where your property is located. Listed below are additional sources of this data available at your fingertips.
  • Zoning Data – www.ordinance.com Provides zoning ordinance and related maps for all of New Jersey and some neighboring states.
  • Individual municipal websites also often contain zoning data which can be accessed for free.
  • Tax Maps and Flood Maps are available at the assessor’s office and engineering offices respective in the taxing district. You can also access tax maps online from www.njparcelmap.com though this is a pay site.
  • NJDEP IMAP – This site is free to users and can help you locate wetlands data and a host of other site related information. http://www.state.nj.us/dep/gis/depsplash.htm
  • Tax Information, specifically the Tax Rate and Equalization Ratio are available to anyone simply by calling the tax assessor office.

Cautionary Note on Sales

• Usable Sales – You must use ‘Usable Sales’ in your appeal. Effectively a usable sale is one which occurs between willing seller and buyer with ‘Arms Length’ terms. However, in practice, the usable sale is more clearly defined by what it is NOT, rather than what it is.
  • There are 33 “Categories of Non Usable Deed Transactions”, as defined by The State of NJ, Department of the Treasury, Division of Taxation, Property Administration. If you attempt to use any sale which falls under one of these categories, it will immediately be challenged and likely disqualified from your presentation.
  • A detailed list of the categories of non usable sales and related explanations can be found at http://www.state.nj.us/treasury/taxation/pdf/lpt/guidlines33.pdf
  • Abbreviated ‘NU’ Sale List For Review – http://www.njactb.org/Downloads%20New.asp.

Comparable Sales Data Sources

• Depending on the type and class of property you own, some data sources will be more helpful than others. Listed below and on the following page are a host of resources you can utilize.
  • The Assessor’s Office – One of the easiest and most accessible data sources are the SR1A forms located at the assessor’s office. The SR1A summarizes the main points of all real estate transfers within the district. They are public information and are accessible by request at the assessor’s office.
    • SR1A forms will be marked with an ‘NU’ code if they are considered non-usable. If you encounter a non-usable sale, (and you certainly will), move on. It is not worth the effort to argue the point and though a procedure does exist for rehabilitating a disqualified sale, it is typically intense and won’t be likely to yield results through the County Board Level.
  • ‘Local’ Multiple Listing Service – There are numerous MLS services throughout the state. Access to their data is not free or typically accessible by individuals. Appraisers and Realtors are typical subscribers to services of this nature and you will need help from one or the other to utilize the MLS data.
    • The MLS systems work well with residential and smaller to mid sized commercial property searches. They can also be utilized to located leasing data, particularly in current listings of multi tenanted property.
  • Costar – www.costar.com Costar is one of the largest commercial and investment property data sources in the country. They do offer access to sales by subscription, as well as for individual purchase.
  • Loopnet – www.loopnet.com Loopnet is very accessible and can be an invaluable source of comparable data. The price charged for closed sale information is nominal. Excellent source for all sized investment sales data.
  • REIS – www.reis.com REIS is a data provider that does allow point of purchase data. It has excellent access to data for office, apartments, industrial and retail as well as market study and statistical data.
  • NJ Parcel Map – www.njparcelmap.com NJ Parcel Map is a subscription based service providing a host of mapping and property ownership data. It is an excellent resource for all class of property searches to located closed sales.
  • VitalGov – www.vitalgov.net – Vitalgov is an excellent low cost search tool that can be utilized for short periods at a low fee. It reports all closed sales and their vital statistics but has limited physical descriptive data.
  • NJACTB, NJ Association of County Tax Boards, has a records search page that allows for data searches. It is free but not as user friendly as the resources listed above. Copy the following link into your browser and then go to the ‘Record Search’ Page. http://www.njactb.org/index.asp
  • Appraisers & Brokers – The professional brokers and appraisers in your area certainly can help with data but put yourself in their shoes. If you do try this route, be prepared to incur a reasonable fee of some kind.

Rental Data Sources

• Some information sources which are excellent for rent data have already been profiled. They include:
  • Costar, REIS, Loopnet and the local MLS in your area.
    • Costar & REIS are excellent sources of lease data and statistics.
    • The MLS and Loopnet can be fantastic data sources for rental information within currently offered properties for sale. Call the listing broker and ask for the pro forma and rent information. (Do this as an interested buyer not as a person appealing their taxes and simply looking for data.)
  • Brokers – The quickest way to find relevant real estate professionals in the right property class as your subject is to Google them. For example, if you own an industrial building in Middlesex County, then Google “industrial real estate”, “Middlesex County”. Find the lease offerings closest to your in size, type and location appeal and call those listing agents. Tell them you own property in their trade area and need help on a tax appeal. Typically they will look to build new relationships and will be willing to help.
    • Of course you can also use the phone book, but then you will have to sort through potentially dozens of broker offices, (without locating the right realtor/broker in the office).
    • Brokers and appraisers will have limitations on the type of data they can share without violating confidentiality rules and putting themselves at risk to lawsuit. Rental data is some of the trickiest to obtain and the most time consuming to verify.
  • Investor Clubs and Websites – There are numerous investor clubs, blogs and websites that can be accessed over the Internet. Surfing them takes time but can be worth it if you are in a bind and need relevant data.
  • Classified Ads from the local papers and even Craig’s list are used heavily to advertise local property for rent.

Vacancy Data

• The standard of ‘stabilized’ vacancy is used for tax appeal.
  • The exact definition of stabilized vacancy is interpreted far differently by taxpayers, (and the market), than it typically is by assessors. Regardless, this section will not conceptually argue the point. Instead, we simply note the available vacancy data locally and caution the user to anticipate resistance from the assessor and the opposition attorney throughout this process.
• Costar and REIS, both discussed earlier, provide substantial and specific vacancy trend data. The data is broken out by submarket and property type and can provide an historic perspective that can reach back several years. This can be invaluable in arguing what ‘stabilized’ is for a given submarket.
• Actual Vacancy for a given submarket or corridor, (for example, a Main Street CBD between one street and another), can be visually accounted for if a local perspective is required.
  • One strong point to bring up here is whether the assessor used the chapter 91 forms they received to study actual vacancy. If they did, what were their findings?
    • The answer almost always is No. As noted, the chapter 91 forms are a barrier tool for the district. By bringing this up at the hearing, you point out that actual vacancy is not something the assessor can define. You presumably CAN with your evidence.

• Broker Studies – There are many major brokers throughout New Jersey, who compile their own statistical data for download. It is often free or available at a reasonable price.
  • The Brunelli Report, Assembled by RJ Brunelli & Co. Inc. provides detailed retail vacancy and rate studies of the primary retail corridors throughout central and Northern New Jersey. Visit their website at www.njretailrealty.com to access this information.
  • CB Richard Ellis, provides excellent quarterly office, industrial and some hotel vacancy studies. http://www.cbre.com/USA/Research/Market+Reports/
  • Cushman Wakefield publishes similar quarterly data for office, industrial and hotels. http://www.cushwake.com/cwglobal/jsp/kcLanding.jsp
  • Colliers-Houston, Jones Lang Lasalle, Weichert Commercial. These are all large brokerages in New Jersey that provide market survey or newsletter data that can assist you with your tax appeal data analysis.

What Do Assessors Rely On?

• Many assessors rely on prior tax court decisions for their benchmarks on stabilized vacancy.
  • It is important to remember that the judges on the court level wield tremendous power.
  • Prior tax court decisions citing stabilized vacancy trickle down to the assessor rationale.
  • Rutgers School of Law Camden maintains a FREE searchable database of all NJ Court decisions including those from Tax Court. http://lawlibrary.rutgers.edu/search.shtml
    • Research of prior or recent Tax Court decisions can help you prepare for the mindset of the court and likely the County Tax Board and Local Tax Assessor.

Operating Expenses

• Lease terms in an income producing property appraisal can take several forms. Some of the more common are listed.
  • ‘Triple Net’ / Net – All expenses except for management fees and reserves are paid by a tenant. (Retail, industrial, medical office, single tenant structures)
    • Under a net lease analysis for tax appeal, tenants pay the expense for taxes and your analysis will not account for them in terms of a ‘loaded cap rate’.
  • Gross+ TE – Used dominantly with office leasing. Modified Gross with tenants paying all utilities is common in older space or with units that have fully separated utilities.
    • Your analysis should assume the landlord would incur a tax cost and you will have to analyze the ‘loaded cap rate’.
  • Modified Net or Modified Gross are variations of expense splits.
    • Depending on the applied terms, if the landlord would incur a tax cost, you must exclude taxes from the analysis and load the cap rate.
  • Base year stops implying a tenant pays increases in expense above a base year are typical and assumed in most property classes under prudent ownership.

Finding Relevant Data

• Actual historic operating data for the subject can be used to illustrate a stabilized expense projection in the analysis year.
  • The prior costs may come under fire if poor management is a concern or if the operating ratio appears skewed versus other property of similar class.
• IREM, Institute of Real Estate Management expense studies. (www.irem.org) Strong data source for office and multi family property.
• ULI, Urban Land Institute, www.uli.org, publishes ‘Dollars and Cents of Shopping Centers’. Retail center costs statistics.
• Smith Travel Research publishes the ‘HOST Study’ annually which profiles the hotel industry from a cost perspective. It is an excellent resource.
• Local MLS Systems – Locally listed property typically will include an estimated expense for the current year. This is current, verifiable data provided you can first access the MLS in your area and can give you a summary operating expense ratio for area data.
  • Very effective for proving mixed use cost ratios and smaller apartment and multi family expenses.
• There are a multitude of specialty cost guides available for everything from Self Storage, to senior housing. Google is a powerful tool when looking for specific costs by property type.

Capitalization Rates

• The best cap rate data is of course extracted from local arms length sales, but let’s be realistic. This type of data is very difficult to come by and fully verify to a standard acceptable for tax appeal.
• Two methods of projecting a cap rate are The Band of Investment and Mortgage Equity Analysis. Both techniques are widely used but each has its strong and weak points.
  • If you are representing yourself in the appeal, your ability to project a rate will be limited using these methods. The math involved is relatively simple, but your lack of an appraisal license will be a hindrance.
  • If you have an appraiser expert, they will be fully able to select the appropriate method of analysis depending on your particular case

Data Sources

• Investor Survey Data – There are numerous surveys of investor returns, capitalization rates, discount rates and other ratios that can be used in your appeal and which are generally acceptable to the Tax Courts.
  • Korpacz Real Estate Investor Survey – This survey is perhaps best known among the appraisal community and is widely used, though it is probably the least defensible data source in a court setting. Korpacz data is based fully on survey of investors with no means of checking data or verifying responses.
  • www.realtyrates.com – Provides rate information for commercial and multi family property.
  • RERC – Real Estate Research Corporation Quarterly Real Estate Report studies cap rates and a host of other investor information.
  • ACLI – www.acli.com provides data on commercial mortgage commitments and financing terms that can be used in cap rate calculations.

Conclusions

• Data is everywhere. The trick is finding how to locate it quickly and to select a source with particular relevance in the tax appeal venue.
• Google is an incredibly powerful tool if you know what you want to find.
• Consider hiring a professional appraiser to assist in the data search, (assuming you do not already have one on your team). They are thoroughly familiar with the sources profiled here and can access them in a cost efficient way.