Does anyone really know how much land is worth these days?
Steve Goodsell, an Atlanta-based developer, answers that question with a resounding “No.” And for the last few years, he’s been proving this point by appealing tax assessments of residential lots in an effort to bring those assessments closer in line with significantly lower current fair market value.
For the 2011 tax year, his company, GDC Property Tax Services, appealed the tax assessments on about 4,800 parcels (some of which were raw land and commercial buildings), which resulted in an estimated $80 million in valuation reductions.
While there are plenty of companies out there that appeal tax assessments, Goodsell says no one before GDC had been doing it for real estate lots “because there was no need to,” especially when land values were going through the roof during the last decade.
Goodsell, who has been developing residential lots to sell to builders for 27 years, remembers those heady days back in 2002 through 2006, when Atlanta’s real estate market “was on fire.” In retrospect, much of that demand turned out to be artificial, and Atlanta found itself with an inventory of 150,000 unsold lots.
With so much unsold inventory, “development was out of the question,” says Goodsell. So he and a group of investors started purchasing REO property from banks at discounted prices. When he received a $900 tax bill on a parcel for which he paid only $4,000—typically the tax on that land should have been closer to 1.5% of the current land value—Goodsell realized how out of whack property tax assessments had become.
“Assessors’ models weren’t built to handle such a quick decline in the market,” he explains. “Assessors were only visiting lots every three years when lot prices at the time were dropping by 20% to 30% a year.” When his company started looking closer at this issue, it found that lots were being assessed by as much as five to 10 times what they were currently trading for.
It’s not that builders, banks, and developers weren’t aware they were being overtaxed; it’s just that “everyone was in crisis mode” during the housing recession’s darkest days, says Goodsell, and had more pressing priorities. GDC, on the other hand, works on a contingency basis, so it behooves the company to negotiate the most tax savings possible for its clients.
GDC has filed appeals on properties in 30 Georgia counties and in Florida. Last year, 93.5% of settled appeals received reduced valuations, and the average amount reduced was 44.5% of the original valuation. “We didn’t get everything we wanted every time, but we did get at least some reductions most of the time,” Goodsell tells Builder. GDC’s website points specifically to one case involving a 200-plus-acre property in suburban Atlanta that received a 2011 notice value of $8,032,270. The county defended its valuation by using past land deals, but GDC’s investigation showed that the county’s evidence “included non-arm’s length transactions.” As a result, GDC settled the value of the land at $2,435,010, saving the owners $59,608 in taxes.
Goodsell recently hired more interns from his alma mater, the University of Georgia, to work for GDC. He doesn’t know how long this window of opportunity will stay open for his company, but he’s already seeing the gap between assessments and land values narrowing. The state of Georgia last year changed its tax code to bring future real estate tax assessments more in line with market conditions.
Before Goodsell returns to developing land full time, however, he believes he might need to reinvent himself once more. That evolution could include helping first-time owners of subdivision lots “make good decisions” about their investments. He’s also consulting with banks and builders.
John Caulfield is senior editor for Builder magazine.
Learn more about markets featured in this article: Atlanta, GA.