County Appraisals Are Largely Irrelevant for Commercial Deals

(And Confusing Them Can Cost You Millions)

One of the most common mistakes I see newer commercial investors make is treating county appraised value as a proxy for market value.

It isn’t.

In residential real estate, county values can sometimes loosely track market pricing.
In commercial real estate, they almost never do.

Commercial assets are not priced based on comparable sales or assessor opinions.

They are priced based on income.

And when you confuse those two valuation frameworks, you either:

• Walk away from perfectly good deals, or

• Think you’re getting a steal when you’re actually overpaying

Let’s break this down using a real deal I underwrote.

The Core Misunderstanding

County appraisals exist for one reason:

To assess taxes — not to determine market value.

County assessors:

• Revalue infrequently

• Use mass-appraisal models

• Often lag real income changes by years

• Do not underwrite NOI, DSCR, or debt capacity

Commercial buyers, lenders, and sophisticated investors care about exactly one thing:

How much income does the asset reliably produce?

Everything else is secondary.

Real Deal Case Study: Texas Retail Portfolio (FM 1102)

I recently underwrote a two-building retail portfolio in Texas structured with a Morby-style seller finance + DSCR stack.

Here’s where most investors would have panicked.

The County Numbers

• Combined county appraised value: ~$945,000

• Contract purchase price: $2,200,000

At a glance, that looks insane.

More than 2× the county value.

If you’re using county data as your truth source, you’d immediately assume:

• The seller is delusional

• The deal is overpriced

• Something fraudulent is happening

None of that was true.

The Income Reality

Here’s what actually mattered:

• Trailing 12-month NOI: $139,477

• Purchase price: $2.2M

• Implied cap rate: ~6.3%

• Market cap for stabilized retail in the area: ~6%–6.75%

From an income perspective, the price was fully supported.

The county valuation simply hadn’t caught up — and never needed to.

Commercial lenders don’t care what the county says.

They care whether:

• NOI supports debt service

• DSCR meets thresholds

• Income is durable

• Tenants are real and paying

Why the Gap Exists (And Why It’s Normal)

County values are often dramatically lower than true market value for commercial assets because:

• Counties don’t mark-to-market annually

• Income increases don’t immediately re-assess

• Many assessors still rely on cost or outdated sales models

• Counties err on the side of conservatism to avoid appeals

In fact, large gaps between county value and purchase price are extremely common in:

• Retail

• Industrial

• Mixed-use

• Mobile home parks

• Hospitality

That gap alone tells you nothing about deal quality.

Where Investors Get Hurt

The danger isn’t ignoring county value.

The danger is misusing it.

I see investors make two fatal mistakes:

Mistake #1: Walking Away from Good Deals

They say:

“I’m not paying double the county value.”

And they pass on assets with:

• Strong NOI

• Solid tenants

• Real debt coverage

Mistake #2: Ignoring County Value Completely

County values still matter for:

• Tax reassessment risk

• Future operating expense increases

• Post-acquisition cash flow modeling

County value doesn’t determine price —
but it does influence future taxes.

Ignoring that is just as dangerous.

The Right Mental Model

Here’s the framework I use:

• Income determines value

• County appraisals influence expenses

• Debt capacity determines survivability

• Structure determines risk

You don’t compare county value to price.

You compare:

• NOI → price

• NOI → debt service

• NOI → refinance viability

Everything else is noise.

Why This Matters for Creative & Structured Deals

This distinction becomes even more important when you’re using:

• Seller financing

• DSCR loans

• Deferred payments

• Morby-style capital stacks

In the FM 1102 deal:

• County value was irrelevant to pricing

• Income supported the deal

• Refinance risk, not county value, was the real concern

That’s where inexperienced investors get distracted by the wrong variable — and miss the actual risk.

Final Thought

County appraisals are not wrong.

They’re just answering a different question.

If you treat tax assessments like market value in commercial real estate, you’ll consistently misprice risk — and misjudge opportunity.

How I Help Investors Avoid This Mistake

A big part of my deal-structure work is helping investors:

• Separate signal from noise

• Underwrite income correctly

• Model tax resets realistically

• Engineer capital stacks that survive reality — not spreadsheets

If you’re evaluating a deal where:

• The price feels “high” relative to county value

• The income story is strong but confusing

• The structure matters more than comps

That’s exactly the type of deal I help analyze and structure.

You can see how I work here:
👉 https://chadchoquette.com/how-i-work

Or explore deal structure support directly here:
👉 https://chadchoquette.com/deal-structure-services