Appraisals: What They Are, and Why We Love Them

All property owners wonder at some point, “what is my property worth?” The most accurate way to determine a commercial or residential property’s fair market value is by commissioning an appraisal on the real estate. Appraisals are particularly useful for property owners applying for property tax abatements when the appraised value of the property is lower than the municipality’s tax assessed value, because the appraisal itself can be used as evidence of disproportional or over-assessment.

What are Appraisals?

Real estate appraisals are objective analyses and valuation of certain tracts of land, buildings, and/or other property for the purpose of ascertaining a value estimate amount. Property appraisals are performed by appraisers, who are valuation professionals regulated by state and national boards. In preparing an appraisal, appraisers investigate and compile information on the subject property- which may include property characteristics and conditions, income-stream (if a commercial income-producing property), and/or replacement cost- and consider those factors together with local market data to form an overall opinion of value. Real estate appraisals can be performed for a number of purposes, including loan financing, tax abatements, or investment purposes.

How are Appraisals Related to Tax Abatements?

Tax abatements are generally only granted on the basis of disproportionality or over-assessment when there is convincing evidence that the municipality’s tax assessed value exceeds the actual fair market value. An appraisal performed by a qualified appraiser is one of the clearest and strongest opinions of value on a piece of real estate; and therefore an appraiser’s opinion of value is excellent evidence of over-assessment for property tax abatement purposes. Appraisals are especially useful for commercial properties that are income-producing or special use, where valuation methods are more complex and consider a vast range of financial and property information in calculating an opinion of value.

So Why Do We Love Them?

We love appraisals because they are an easy way for property owners to know and demonstrate the accurate fair market value of their property. Property owners seeking a tax abatement should accompany their application with a full copy of any commissioned appraisals as evidence to the municipality of their opinion of value. Basically, appraisals are an objective, efficient, and accurate way for property owners to show how much their property is really worth to themselves and their taxing authorities.

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