Illinois Appellate Court Refines the Role of Comparable Sales in Assessment Disputes

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The Second District Appellate Court recently issued a decision addressing the role of comparable sales when determining a property’s fair market value under Illinois law. The decision, Board of Education of Meridian Community Unit School District No. 223 v. Property Tax Appeal Board, holds that an appraisal which excludes the sales comparison approach can still be sufficient evidence of value under Illinois law if it is found that reliable sales data does not exist. The decision clarifies and interprets a prior decision from the First District Appellate Court (the “Omni Decision”) that held the sales comparison approach to value is the preferred method for valuing property and should be used when market data is available.

Under Illinois law, real property must be valued at its fair cash value, which means the price it would command at a fair, voluntary sale where both buyer and the seller are ready, willing, and able to enter into the transaction and neither is acting under compulsion. The best evidence of fair cash value is a contemporaneous, arm's-length sale of a property. Absent a sale, one must turn to an appraisal. Under standard appraisal practice, there are three approaches to valuing property: sales comparison, income capitalization, and reproduction cost. The sales comparison approach relies on sales of similar properties on the open market. And, under the Omni Decision, it is the preferred method when market data is available.

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