If you own real estate in just about any location in the United States you are very familiar with the taxes you pay for the property. But do you know how or why the value is what it is? The following will help decipher the mystery behind your property value and give you some insight on the options you have to ensure your tax liability makes sense.
What is Real Estate Valuation?
Real Estate Valuation in the simplest of terms is the value a property is “worth”. How you determine “worth” can come from a number of methods and can be subjective. The main methods of valuing a property are Cost Approach, Income Approach and Sale Comparison Approach. The method used depends on the use of the property, the age or other factors that are current to the property.
Does my property value make sense?
An initial conversation with a valuation professional will include the following topics:
- Property Facts – This will include, but is not limited to, the location of the property, usage, property financials (if applicable), rent roll (if applicable), deferred maintenance and if the property is under any incentive or other agreements that may impact the valuation. These facts will help determine the valuation method(s) that will be used to calculate the most accurate value of the property.
- What is it you want to accomplish? – Do you want to ensure the value is accurate, lower your tax liability and/or ensure the property is competitive in the market place? These are a few of the reasons to review the valuation and we want to ensure the approach lines up.
- Process – Once the valuation analysis is complete, we would review it with the taxpayer to determine the plan of action. Included in any plan would be a cost benefit analysis and likelihood of success discussions to enable the taxpayer to make a decision on how to proceed.
What are the basic valuation methods?
In our next few posts, we’ll take a closer look at the three main approaches to valuation, including:
- Cost approach
- Income approach
- Sales Comparison approach
In the meantime, if you have real estate valuation issues or questions about real estate valuation services, please contact Holly Swisher, CMI, Columbus, Ohio CPA firm Clarus Partners at firstname.lastname@example.org or 614-256-3445.