After years of lax real estate property assessments, Philadelphia, Pennsylvania has decided to take on a comprehensive reassessment of all 579,328 of its properties. The last partial reassessment by the city was in 2004, while many properties haven’t been reassessed since the 1980′s. This has created major disparities between similar situated properties, which have had very different assessments and tax burdens.
According to REBusinessOnline.com, for the current reassessment, the city has employed a traditional definition of market value as developed by the International Association of Assessing Officers, but will primarily rely on the sales approach to value. This is raising concerns, because in the sales approach to value, an assessor compares a taxpayer’s property directly with other recently sold properties in the marketplace using units of comparison, typically price per square foot. The assessor adjusts these units of comparison for differences between the taxpayer’s property and comparable sales.
However, this is problematic because this approach is only reliable when the comparison data is very similar to the taxpayer’s property. This is a good approach to value homes, but it is extremely impractical for complex, income-producing properties, and becomes even more convoluted when time elapses between sales and the date of valuation. In complex assets, like hotels or shopping malls, there are significant qualitative differences in the finish quality, branding, management, condition of sale and location. This makes the sales approach to value basically worthless, and why experienced assessors prefer the more reliable income approach to value.
Commercial property owners are encouraged to prepare for reassessments and make note of any functional or economic obsolescence issue specific to their property. It is unlikely that assessors will consider obsolescence during reassessment unless prompted. The appeal deadline to challenge property assessments in Philadelphia is Oct. 7, 2013.
For the full article from REBusinessOnline.com, click here.