Tax Assessments Based on Value in Use, or Value in Exchange

Know Your Jurisdiction

By David Chitlik Vice President - Hospitality Tax, Altus Group | February 12, 2017

Regardless of property type, tax assessment valuation would appear simple enough. A generally accepted definition of market value is:

"The probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress".

This definition comes from the Appraisal Institute and it closely matches the definition provided by the International Association of Assessing Officers. Buyer and seller arrive at a price based on their own determinations of the highest and best use of the property. Most assessors in the US will include the recent sales data that has occurred in their jurisdiction with other market indicators and trends to arrive at the assessments for the taxable properties in their jurisdiction.

This process is called "value-in-exchange." Approximately 90 percent of residential and commercial real estate tax valuations are determined in this manner. Additionally, as noted above, assessors must consider what the highest and best use is for the subject property, regardless of what the buyer may have in mind. A basic definition for highest and best use, again from the Appraisal Institute:

The reasonably probable use that produces the most benefits and highest land value at any given time.

While most tax assessments are based on that analysis, as well as the value-in-exchange concept, what if the law requires the assessor to overlook the highest and best use determination? How then does the assessor evaluate the market value of the property? In a few jurisdictions, most assessments are based on the existing use regardless of the possibility of higher value alternatives.

Choose a Social Network!

The social network you are looking for is not available.

Close

Hotel Newswire Headlines Feed  

Michael S. Wasik
Tony Bridwell
Scott Parisi
Rob Rush
Frank Meek
Vanessa Horwell
Steven Belmonte
John Ely
Sherry Heyl
Frank Meek
Coming up in June 2019...

Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.