Transcript Property Tax Appeals and Financial Opportunities

Presented by
Urban Land Institute North Jersey
Albert F. Chanese, MAI, R/W-AC, CTA
New Jersey Realty Advisory Group, LLC
333 State Street
Perth Amboy, NJ 08861
(732) 853-0271
The Appraisal Process
 Date of Value
 October 1st of preceding tax year
 Fee Simple Basis
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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
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Your own work, not national studies
Site Data
 Configuration of the site (restrictions, easements,
setbacks, etc.)
 Wetlands, waterways
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Setback requirements
 Flood zones
 Access to site, Parking Ratios, Truck Access and Storage
 Zoning restriction, changes in zoning
Improvement Data
 Type of Property
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Office
Retail
Industrial
Apartment
 Age, Condition, Current Use
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Is the building functionally obsolete
Is the building economically obsolete
 Make sure the size is correct
 Value what’s there
Highest and Best Use
 The Heart and Sole of the Appraisal
 As Vacant
 As Improved
Physically Possible
Legally Permissible
Financially Feasible
Maximally Productive
The Cost Approach
 Rarely used in tax court
 Could be used for special use properties
 Support the land value
 Support the cost estimates
 Support the depreciation
Sales Comparison Approach
 Easiest Approach to Use (but not always)
 Make sure they are similar in location
 Similar in use, age and design
 Recent 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 Approach
 Most relied upon in Tax Court
 Direct Cap (No discounted cash flows)
 Stabilized occupancy (Support)
 Market Rent (Support)
 Stabilized Expenses
 Support Cap Rate with Market Data
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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
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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 Hints
 Don’t wait until last minute to hire an appraiser
 Hire an experienced, knowledgeable appraiser
 Tell the appraiser everything there is to know about
the property (Good and Bad)
 Let the appraiser in on the negotiations
 Consider County Tax Board
Albert F. Chanese, MAI
New Jersey Realty Advisory Group, LLC
333 State Street
Perth Amboy, NJ 08863
(732) – 853-0271