The Leader - September/October 2008 - (Page 67) ta ke a fr esh look: u N Der s taND hI G he s t aND Be s t us e B e for e fI lI NG a tax ap p e al hoW oWNers caN use hBu HBU represents the foundation of a real estate appraisal and, in almost every case, an assessor’s or board of tax appeal’s market value judgment. The Uniform Standards of Professional Appraisal Practice (USPAP), the “bible” to which appraisers must conform their work, tells us that appraisers must develop a market value opinion based on HBU. The factors to be reviewed by an appraiser include: n n n n The physical capabilities and potential of the site The impact of applicable land use regulations Economic supply and demand Neighborhood, local and regional economic factors Many property owners, either acting themselves or through others, initiate ad valorem assessment review proceedings, if even on an informal basis, before an HBU judgment is reached. Ignoring the chance that your current use is inferior to the HBU of your property is not a wise gamble. Sometimes, contests are initiated simply because taxes increased over a prior year or because some predetermined ratio of taxes to gross operating income has been violated. Hopefully, the foregoing discussion shows how unwise this approach can be in certain cases. The pitfalls of bringing a tax appeal without thoughtful consideration of HBU are amply displayed by an actual event not involving the authors or their employers. A large commercial property developer engaged a consultant officed in a distant state to appear before the local Connecticut board to challenge the assessment of a vacant land parcel. He came charging up to the appeal on a snowy evening in early March. As part of his informal presentation, he showed the board a valuation analysis his client had prepared both on an “as vacant” and “as improved” basis. Since the property was in the midst of a hot development market, the board fastened on the “as improved” conclusion and tripled the assessment which the hapless fellow had come before it to appeal! The same observation is applicable to ill considered assessment challenges which fail to recognize the likelihood of an assessor reaching a higher HBU opinion than the current use. Calling the property to the assessor’s or the board’s attention can trigger a reconsideration which will increase an assessment. Spending the time to consider the potential of this risk before rushing off to an assessment contest is highly recommended. HBU is not a conclusion reached mechanically; it requires at least a bit of thought. Ignoring the chance that your current use is inferior to the HBU of your property is not a wise gamble. aBout the authors Elliott B. Pollack is a member of Pullman & Comley in Hartford, Connecticut and chair of the firm’s Valuation Department. The firm is the Connecticut member of American Property Tax Counsel (APTC). Richard R. Wright is Senior Property Tax Manager of J.C. Penney Company, Inc. in Dallas, Texas. For more information on this topic, go to CoreNet Global’s Knowledge Center Online. Converting Liabilities to Assets: What Can Brownfields do for You? http://www2.corenetglobal.org/dotCMS/ kcoAsset?assetInode=950281 Developing Innovative Strategies for Clients, Employees, and Communities http://www2.corenetglobal.org/dotCMS/ kcoAsset?assetInode=1065730 2 0 0 8 th e le aDe r 67 septemBer / octoBer http://www2.corenetglobal.org/dotCMS/kcoAsset?assetInode=950281 http://www2.corenetglobal.org/dotCMS/kcoAsset?assetInode=950281 http://www2.corenetglobal.org/dotCMS/kcoAsset?assetInode=1065730 http://www2.corenetglobal.org/dotCMS/kcoAsset?assetInode=1065730
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