Point Out the Flaw in Valuation to Win your Clayton Property Tax Appeal

Posted by Daniel Jones on Jan 20, 2020 9:45:00 AM

If you’re a hotel owner, you should point out the flaws used in the valuation methodology in order to increase your chances of winning your Clayton property tax appeal. Many other factors should be considered in the appeal process, which your tax reduction consultant can discuss in greater detail.

Sales Comparison

Unfortunately, local tax assessors may use the sales comparison basis in assessing the property values for hotels and the like. But this shouldn’t be as the comparison of sales values between similar pieces of property presents many risks for unfair valuation. Think about it: A newly-constructed hotel in the neighborhood can increase your property values in the current year, even when there were no increases in your occupancy rates or no improvements were made.

If you and/or your tax reduction consultant have definite proof that, indeed, the county tax assessors used the sale comparison method, then you should point it out. You will likely win your Clayton property tax appeal at the first venue, thanks to the fact that it isn’t a fair, equitable and just valuation method. 

Income Approach

If the county tax assessors used the income approach in their property valuation for your commercial property, then you’re in luck. The income approach, after all, is the most meaningful because it takes into account the ups and downs of your income stream. Thus, the assessed value for your hotel will likely be fair, equitable and just but – there’s almost always a “but” in property taxes matters – this isn’t always the case.

There are also possible errors that the county tax assessors can make when using the income approach. Again, you have to keep a keen eye on these errors so that these can be pointed out, if necessary, during the appeal hearing. These errors can touch on the following matters:

  • The ancillary profit centers of the hotel, such as convention centers, day spas, golf courses, private clubs, trendy restaurants, and full-service spas and gyms, can be a pain in the neck to consider.
  • The recognition and allocation of the hotel’s total assets can be a pain in the neck, too. Keep in mind that taxing intangible assets, such as goodwill, as tangible real property is a violation of the law in most jurisdictions in the United States.

The simple yet significantly flawed method of deducting franchise costs and management fees will not work as well. Why? This doesn’t remove the business elements and intangible assets from the equation!

Your tax reduction consultant should have a deep understanding of income capitalization. Such understanding is a must in the development of an income valuation approach correctly reflecting the value of the property, sans the intangibles. Plus, direct capitalization is the approach used most commonly in property assessments, as opposed to other methods like discounted cash flow analysis.

While the burden of proof in an appeal lies with the county tax assessors and appraisers, you and your tax reduction consultant must be ready with your own evidence to win your Clayton property tax appeal. You can start by looking for and then pointing out the errors in their valuation methods. 

Need help with your Clayton property tax appeal? Contact Fair Assessments, LLC now!

Topics: Clayton Property Tax Appeal

property tax appeals

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