In Colorado you will be receiving your new tax assessment in the next few weeks (typically the beginning of May) and time is of the essence as you have a limited window if you want to fight your tax value. Your taxes are likely going up even though the market has softened/declined. Why? Looking at properties over the last several years, I’ve seen huge disparities in market value vs the assessed value with some assessments 30%+ overvalued. This is the year to appeal your property taxes (see below for details as to why and how to appeal your taxes).
Look at the chart below on condos, there is a clear inflection point late 22 that was not captured in the last assessment which creates a huge opportunity to appeal your property taxes. Below is a free guide to appeal your Colorado property taxes and win. I’ve followed the same process and won every appeal!
Furthermore there is one fundamental flaw in how assessed values were calculated during the prior assessments that is leading to huge overvaluations on many properties that I’ve seen throughout the state which will provide another opening for an appeal. Why the huge disparity in assessed vs market value? How are property tax values determined in Colorado? What steps must you take to appeal your Colorado property taxes? Note, do not count on the legislature to bail you out of the huge tax increases we have seen over the last 15 years!
I’ve appealed my property taxes in various counties throughout Colorado and the process is the same in each county. I’ve won every single appeal and even won in 23 a 20% reduction on one of my properties assessed values. Can you appeal and win? Absolutely, but you must follow the rules to a T.
Why is this year unique for property taxes in Colorado?
Over the last several years; prices have been on a breakneck pace leading to soaring property taxes. We have had essentially no breaks in the appreciation of residential and commercial properties until now. Furthermore there was a fundamental flaw in how assessed values were estimated. Long and short, you should look into appealing your property taxes especially on the commercial side.
Huge fundamental flaw in how properties have been assessed?
With the market moving so quickly the last several years, in the last assessment assessors had to “bring forward” sales. For example if a house sold in December of the prior assessment year, they would add 6 months of “appreciation” to bring that sale to the market value. Mathematically this makes sense on the whole but for individual properties it can lead to huge disparities. I found this out my appeal in 2023.
Here are more details:
Unfortunately, there is a fundamental flaw in the assessor’s reasoning that will help in the next step of the appeal. The last several assessment years were unique. With such a fast moving market, appreciation was off the charts. Any property that was sold during the assessment period had to be brought to 6/30/22. For example, if a house sold on 1/1/22 the assessor would have to adjust the sales price based on annual appreciation. In the case of my property, the assessor calculated that houses were appreciated at 3.2%/ month, so in the example above if a house sold for 1 million on 1/1/22, the adjusted sales price would be (19.2% higher 6 times 3.2%) leading to an adjusted value of 1, 192,000 to use as a comparable.
On the surface this seems logical, but as I dug into the data there was a fundamental flaw. The assessor was not using “price bands” to accurately calculate the appreciation rate. Unfortunately, the market proves that this assumption is not valid. As we see in the data in the mountains a one-million-dollar house appreciates substantially faster than a 3 million dollar house on a statistical level. We have seen this throughout the market as lower priced houses are appreciating faster than the upper end of the market.
It is no surprise that a 2 million dollar house appreciates substantially slower than an 800 thousand dollar house in a ski town, yet the assessor was averaging them all together to determine an appreciation rate. The number was substantially different, in my case the appreciation rate per month was 50% lower than the assessor’s. I found another house 4 doors down that “double sold” during the time period. Essentially it sold mid 2021 and then again early 2022. There was 8 months difference between the sales so I could take the appreciation and average it over the 8 month period. The number was substantially lower than the one used by the assessor.
If I use the same example above with a 2% appreciation rate the difference is 70k lower, if I took that over a longer period depending when the house sold the number will be even larger. I’ve seen this occur at all price points throughout the state. For example, I looked at a loan on a property in CO springs that was assessed at 450k, the real number should be closer to 350k; this is a huge change in taxes for the owner of the property. The point of the example above is to show that many houses are ripe for appeal as we can now see in actual closed sales that the appreciation rate that was applied was too aggressive and as a result there are tons of properties overvalued that should be appealed
How much are your Colorado Property taxes going up?
Many markets will still see increases as the market really didn’t start cooling until about the last six months or so. Remember, the assessor uses data for this assessment up to 6/30/24. Any sales after that period are not valid. But, as mentioned above there are still a ton of properties that are overvalued and the market has definitely cooled since the peak
I have assembled a free guide on Colorado property taxes and the appeal process
- When are the values determined?
- Why is this year such a big jump?
- What can you do about it?
- Are further increases on the way?
- 5 tips to appeal and win
How are property tax values determined and when are they determined?
In Colorado every county is the same, each odd numbered year is a revaluation year ( 2025 is a revaluation year). During the revaluation period the tax assessor looks at comparables 18 months prior, so for 2025 they would be using 23 and 24 comparables (to be exact you can use a comparable up to 6/24)
Why are property assessments in Colorado still increasing?
Most areas in Colorado continued to increase in value in 23 until the summer of 24. This will lead to increased values depending on your location, property type, etc… I doubt the assessor will be lowering many values without an appeal.
Is assessed value market value?
Remember, property tax value is not market value. Property tax value is derived from prior sales (last summer and earlier). The market was in a much different place then than it is now. The statute in Colorado does not care about current market value. The increase you are seeing this year was for “prior” real estate appreciation that is now just flowing through to your property value which ultimately determines your property taxes
Are further increases on the way?
I think the market will be flat to declining in most areas for the next several years due to high interest rates along with rising inventory.
Should you protest your Colorado Property taxes
Yes, now is the best time in the last 15 years, many properties are substantially overvalued and an appeal could lead to substantial property tax savings.. There is very little downside risk on an appeal other than a few hours of time. The worst I’ve seen assessors say is no and the value remains the same. The process is relatively easy. Below is a 5 step guide for appealing. Ensure you follow this to a T in order to have your appeal considered and increase your probability of winning.
6 tips to appeal your Colorado Property taxes and win
I’ve appealed my property taxes in 3 counties throughout Colorado and won on each one. Below are 6 tips to help you navigate the appeal and increase your odds of winning.
Before starting, it is important to note that the assessor doesn’t care what you “feel” your property tax value should be, what your zestimate says, or what your recent appraisal was for. The property tax value is based on facts during a stated time period. The only way to have a chance at winning an appeal is to follow the directions to a T and leave your feelings behind.
- Dates are important, you have until 6/8/25 to appeal. If you miss these dates you are out of luck. Most counties allow you to appeal online and the process is easy (just google your county + assessor). They typically have a simple online form where you can put in your information and the appeal information.
- Follow the rules: remember for this year the only comparables that can be used are prior to 6/30/24 (typically a two year period), statute says that you cannot go back more than 5 years unless there are extenuating circumstances
- Check your facts: This is low hanging fruit. Ensure the assessor has your info correct, is the property and office building yet classified as mixed use? Is the square footage correct? Is other information accurate. Correcting this info could substantially reduce your tax burden
- On residential, it is a numbers game: How residential appraisals work is the county calculates a neighborhood average and finds sales in close proximity to your house with similar characteristics. The averages can lie. For example in my neighborhood when I appealed in 17, there were a number of lower sales (also some higher one), I was able to make the case that I felt my house was closer to the lower sales (remember you are not talking about market value, nor does this influence the sale price of your home, etc…). I was successful in my appeal and got my property value reduced over 30%
- On Commercial, use both methods: On a commercial property both the sales and income approach are used. If you had a tenant during this time period, the income approach (take net operating income divided by the applicable capitalization rate—the income approach on a commercial property is a separate article I’ll post at a later date) is a very good method to start with. The sales approach is the second method that can be utilized. Commercial is a bit more in depth than the residential appeal since commercial properties are considerably less uniform than residential properties. I would 100% disagree that in Denver county commercial values either stayed flat or increased, this is not possible with rising cap rates! I’ve seen way too many buildings substantially overvalued. There are enormous opportunities for commercial property appeals as cap rates have gone up, lease rates have gone down, and vacancy has increased. Now is definitely time to appeal on your commercial property.
- Use various tools to get your facts straight: To win an appeal, the appeal must be fact based. Saying you “feel your property is overvalued” is a waste of time. Make sure you have your facts straight (at a minimum 3 applicable sales for residential; for commercial address both the income and sales approach). You can get both sales comparables from the county websites for a specific neighborhood (do not use Zillow or Trulia, the square footages can be inaccurate, make sure you use the county data to ensure you compare above grade square footage and you will also have to input the parcel id numbers for each of your comparables). For a commercial property use a tool like loopnet.com or Costar to see what asking rents are , get sales comps, etc… loopnet has many pictures and details on various commercial properties.
- You can appeal yourself on residential. On commercial you can appeal yourself if you have the tools/knowledge of income approach, etc…. but you can also hire somebody to help.
Summary
Long and short, Colorado is a bit unique in that even though real estate prices are falling/softening there will still be some jumps in taxes as the prior increases have not fully factored in. Fortunately, you do have the ability to protest and now is the absolute best time in years to appeal and win especially on the commercial side or if you own a residential condo. If you do appeal, make sure you follow the steps above to the T to increase your odds of winning.
Also note, do not take your frustration of higher taxes out on the assessor as they are just following the law, if you don’t like the higher taxes, the legislature, governor, and ballot box is where you should focus your efforts. Remember one of the key reasons for the huge jump in taxes is the elimination of the Gallagher amendment that balanced commercial with residential assessments which led to huge jumps in residential property taxes.
Furthermore many counties like Denver county continue to vote for higher property taxes for just about anything you can think of; so even if your value goes down, your taxes are still going up in places like Denver due to higher mill levies for everything under the sun.
Additional Reading/Resources:
- https://car-co.stats.showingtime.com/docs/lmu/2020-06/x/DenverCounty?src=page
- https://www.steamboatpilot.com/news/property-taxes-101-owners-should-prepare-for-big-increases-on-may-notice/
- https://coloradohardmoney.com/category/colorado-property-taxes/
- https://coloradohardmoney.com/another-property-tax-compromise-2-tax-ballot-questions-pulled/
- https://www.9news.com/article/news/local/front-range-property-values-assessors/73-15bdf1f7-c228-4c4f-b9b4-3cd588279ea5
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Written by Glen Weinberg, Owner Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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