The amount of taxes we must pay varies, but taxes are one of life’s few constants. Valuation amounts are rarely fixed thanks to the property tax appeal process, so you should maximize your opportunity to contest an incorrect assessment.
A straightforward property tax assessment appeal letter is the first step in the property tax appeal procedure, regardless of whether it involves real or personal property. This article covers the information you should know regarding the potential need for an appeal, how to fill out and file the necessary papers, and remember crucial appeal dates. Additionally, we offer a sample property tax appeal letter for your reference.
The Three Methods For Valuing Real Estate
Three main methods are used to value real estate properties: 1. The cost method; 2. The market method; and 3. The income method. Each provides a unique viewpoint and uses various methods to determine the worth of a property. The particulars and conditions of the assessed property determine which method—or combination of methods—is selected.
Cost-based strategy
The “cost approach” focuses on estimating the cost of purchasing the land and improvements (such as buildings) or replacing an existing property with a new one, considering all types of depreciation that affect the property’s worth. Essential elements like ceiling height, age, and square footage can significantly impact the appraisal.
Market strategy
The “market approach,” sometimes known as the sales comparison approach, assesses a property by looking at the prices at which comparable homes have recently sold. Age, location, size, and other pertinent variables are considered. The substitution principle, which states that a buyer will not pay more for a property than the cost of purchasing a similar property, is the foundation of the market method.
Approach to Income
The “income approach” is commonly employed for properties that yield rental income, such as apartment complexes, office buildings, and retail establishments. In order to calculate net operating income, market rental and expense rates must be evaluated along with vacancy rates and operating costs. After that, this net income is capitalized using a “capitalization rate” established by examining previous market activity or computing an AP rate based on financial metrics.
An assessor will use one or more of these methods to establish the real estate’s valuation on a particular day of the year (such as January 1), which will be the foundation for calculating the property’s real estate tax.
Final Note
Real estate owners should be careful to review their property tax bills and values annually. They should consider their appeal rights if they think their property is overvalued and subject to disproportionate property taxes.
The tax experts at Freedom Capital Management can analyze your property assessments to see if an appeal is necessary, and they can also help you with the appeals process nationwide. We serve a broad spectrum of enterprises with our real estate and personal property valuation and tax skills, including manufacturers, agribusinesses, nonprofits, and regulated entities (such as health care providers).
