Albert F. Chanese, MAI, R/W-AC, CTA New Jersey Realty Advisory Group, LLC 333 State Street Perth...
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Transcript of Albert F. Chanese, MAI, R/W-AC, CTA New Jersey Realty Advisory Group, LLC 333 State Street Perth...
Property Tax Appeals and Financial Opportunities
Albert F. Chanese, MAI, R/W-AC, CTA
New Jersey Realty Advisory Group, LLC333 State Street
Perth Amboy, NJ 08861(732) 853-0271
Presented byUrban Land Institute North
Jersey
The Appraisal ProcessDate of Value
October 1st of preceding tax yearFee Simple Basis
• Market Rent – existing leases may or may not matter• Market Expenses – unless proof can be introduced as to why a
property operates at levels above or below market parameters• The fee simple estate is defined as follows:
• Absolute ownership unencumbered by any other interest or estate subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.
Detailed Market Analysis Your own work, not national studies
Site DataConfiguration of the site (restrictions,
easements, setbacks, etc.)Wetlands, waterways
Setback requirementsFlood zonesAccess to site, Parking Ratios, Truck Access
and StorageZoning restriction, changes in zoning
Improvement DataType of Property
Office Retail Industrial Apartment
Age, Condition, Current Use Is the building functionally obsolete Is the building economically obsolete
Make sure the size is correctValue what’s there
Highest and Best UseThe Heart and Sole of the AppraisalAs VacantAs Improved
Physically PossibleLegally PermissibleFinancially FeasibleMaximally Productive
The Cost ApproachRarely used in tax courtCould be used for special use propertiesSupport the land valueSupport the cost estimatesSupport the depreciation
Sales Comparison ApproachEasiest Approach to Use (but not always)
Make sure they are similar in locationSimilar in use, age and designRecent Sales as possible
Support for Adjustments Inspect Comps Verify with a good source.
Tax Court does have problems with employing a market approach on income property
Income ApproachMost relied upon in Tax Court
Direct Cap (No discounted cash flows)Stabilized occupancy (Support)Market Rent (Support)Stabilized ExpensesSupport Cap Rate with Market Data
National surveys are not enough Derive from sales when possible Interview investors and bankers
File Chapter 91’s
Overview of the Valuation Philosophy of the Tax Court
• Properties must be valued in a uniform matter – N.J. Const. art. VIII, sec 1 (1947); 2nd-Roc-Jersey Assocs. v. Town of Morristown, 158 N.J. 581 (1999).• Properties must be valued in a manner that is consistent
with market behavior on a stabilized basis.• Properties must be valued on a stabilized basis
• Hyper occupancy or vacancy cannot be considered in the valuation.
• Valuations must comply with the definition of market value
Definition of Market Value• The most probable price which a property should bring in a
competitive and open market under all conditions requisite to fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:• buyer and seller are typically motivated;• both parties are well-informed or well-advised, and acting in what
they consider their best interests;• a reasonable time is allowed for exposure in the open market;• payment is made in terms of cash in United States dollars or in
terms of financial arrangements comparable thereto; and• the price represents the normal consideration for the property
sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Helpful HintsDon’t wait until last minute to hire an
appraiserHire an experienced, knowledgeable
appraiserTell the appraiser everything there is to know
about the property (Good and Bad)Let the appraiser in on the negotiationsConsider County Tax Board
Albert F. Chanese, MAI
New Jersey Realty Advisory Group, LLC
333 State StreetPerth Amboy, NJ 08863
(732) – 853-0271