Commercial properties have a wide range of different property uses and with each different use comes a different type of building as well as in many cases a different method of valuation for the property. There are only three specific methods of valuation: the Cost approach, the Income approach and the Market Comparison approach. These three approaches can be used in different ways to produce the assessment value on your property. The important issue is how much market data is available to assist in the determination of the current value.
Investment type properties are usually valued using the income approach. The income approach is generally calculated using the net income of the property. Assessors generally send out income and expense requests to the property owners for this information that they are entitled to under Sections 11-13 of the Assessment Act. Although the property owner should comply with the request, it is important that they only give the assessor the information that is requested. Many times for the sake of expediency they simply photocopy their income statement and send it in. The owner should keep an assessment file with all information going to and from the assessment office.
In the income approach, there are many factors that the assessor must consider when using the owner's income and expense statements. The assessor has to reconstruct these statements in order to arrive at the appropriate net income. If the assessor has not included all the appropriate expenses or considered an allowance for economic conditions in the area, then the market value of the property and the taxes could be too high. Many times, there is additional income attributed to the business and not the property. A consultant can assist you in determining what income and expenses should be sent to the assessment office.
Some property types that could come under this method of property valuation are:
All other commercial properties are generally valued using the cost approach and the assessors manual. Although this approach is rather simplistic, it is not the easiest way to produce the correct value. Many appraisers do not even consider this approach except as a last resort. This approach has the potential for many site-specific errors that the assessor may not considered in the valuation. These specific elements are the basis for many successful property appeals.
Most commercial property owners could benefit from a full time assessment consultant who could review their property assessment and taxes annually.
If you require assistance with your commercial property taxes call 519 351-5405.