To help you decide if a tax abatement is warranted you should first double check the physical data on the tax assessment card. In many cases the tax card may show items incorrectly. If you need help reading the tax card give me a shout; it can be confusing.
The second thing to look at is market data for the property which shows that the property is over-assessed. This is based on the equalized assessed value of the property as of April 1st. Since most municipalities do not reassess property each year, an equalization ratio for every municipality is established by the state. This ratio is not usually published until the following year.
In order to calculate what the municipality states the property is worth in a given tax year, divide the total assessed value by the equalization ratio. For example, if the tax assessment card indicates an assessed value of $250,000 and the current equalization ratio is 92% then the equalized assessed value of the property calculates to $230,000 ($250,000 ÷ 0.92). The $230,000 amount is what should be used as a basis for determining whether or not the property is over-assessed.
Is the property disproportionately assessed when compared to other properties within the municipality? Municipalities use mass appraisal techniques. Generally speaking, cost and sale data are collected and analyzed. Rates are then established for various property types and adjustments are made for specific property characteristics. Mass appraisal techniques are utilized to assesses thousands of parcels in a municipality. In most cases, the end result of the assessment using mass appraisal techniques should be similar to the result of an appraisal. This would be a problem if your house is the smallest in a neighborhood of McMansions. Your assessment would most likely be overstated due to the market data pulled from the neighboring homes. An appraisal would pull homes from other neighborhoods that are more comparable to the subject, taking into consideration the subject’s overall superior neighborhood.
The appraisal process differs significantly from the assessment process. Rather than collect data and apply it to a large sample of properties in a municipality, the appraisal focuses on one specific property. Cost, sale, and income (if applicable) data are utilized in developing the three approaches to value: cost, sales, and income capitalization. In an appraisal, market data is also analyzed outside the town. These three approaches are developed and then reconciled into a final value conclusion for the subject property.
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