A big thank you to the professionals at LaMountain Communications (ht: Eugene Sinclair) in setting me up with a great website. These guys are great!
I am very pleased to see that Bridgewater Township, Somerset County has entered into a deal to purchase the Hancock properties on North Bridge Street. This acquisition adds a key parcel to the adjacent ten acres already owned by Bridgewater. We at Mark Tinder Appraisals were glad to have provided the appraisals that were required in order for the township to negotiate with the property owners. Land preservation/open space acquisition continues to enjoy overwhelming public support, and we are always happy to do our part.
A worthy cause: keeping Somerset County green.
A growing part of my business in recent days has been in “pre-purchase appraisals,” whereby a prospective purchaser orders an appraisal of a property (especially commercial properties) before making a firm contract purchase offer. The benefit of this should be obvious, and can be very significant: by knowing in advance what the property is worth (and, by extension, what it is likely to appraise for when applying for mortgage financing), the prospective buyer can be confident that he/she is paying market value (and, only market value) for the property in question.
Another benefit of this (as with nearly all appraisals) is that I can identify well in advance whether the tax assessment is accurate. If not (that is, if the assessment is significantly higher than the market value estimate), then the new owner/purchaser can be prepared to challenge the tax assessment right away, usually without the need to order a new appraisal.
If you are currently considering purchasing a commercial property, you would be well advised to have an appraisal in hand prior to making a purchase offer. Doing so could save you thousands.
On Friday, March 7, 2014, Congressman Leonard Lance (NJ-7) held a constituent outreach in Bridgewater Township, Somerset County. Sponsored by the Somerset County Business Partnership, this breakfast meeting featured in-depth comments and observations by Congressman Lance, along with an informative question-and-answer period after the Congressman’s remarks. After the meeting, I took the opportunity to speak one-on-one with the Congressman, and I was pleased that his schedule allowed him to devote the time to hear me out. As a member of the House Energy and Commerce Committee, Congressman Lance is a valuable advocate for the small business men and women of the 7th NJ Congressional District.
With the start of the new year, it’s time to think seriously about appealing the tax assessment on your property (ies). If your property is assessed for more than it is actually worth, then by definition, you are paying more than your fair share of the tax burden for your municipality. Keep in mind, the actual dollar amount of the property assessment is not necessarily the taxable value being applied for tax purposes. In New Jersey, property tax assessments are based upon what is known as the “Assessor’s True Value” of the property. This figure can be calculated fairly easily, by dividing the tax assessment by the Equalization Ratio for the tax year in question. For example:
A property located in Montgomery Township, Somerset County is assessed at $750,000. The Chapter 123 (Equalization) Ratio for 2014 tax appeals is 83.58%. Therefore, the 2014 Assessor’s True value for this property, for tax assessment purposes, is actually $897,344 ($750,000 divided by .8358). Without being aware of the Equalization Ratio (and what it means with respect to how exactly your property is being assessed), you might mistakenly believe that your property tax assessment is accurate. If you owned this property, and thought that $750,000 was a fairly accurate value estimate, then your assessment would actually be nearly 20% too high!
In a recent article titled “Celebrity Hypocrites,” author and television journalist John Stossel wrote “Bon Jovi …. at tax time, …. labels himself a “farmer.” He pays only $100 in state property tax. And his tax dodge gimmick: raising honeybees.”
Without commenting specifically on John Stossel or his politics (for the record: this site is strictly NON political, as my interest is solely in real estate valuation), I feel it is important to correct the misstatements and misunderstandings inherent in the above sentence.
Under the Farmland Assessment Act of 1964, all improvements (if any) on a qualifying property are assessed as if situated on a hypothetical building site, known as a Homesite parcel. The bulk of the land is assessed at values reflecting farmland productivity, rather than market value, and is identified as a Qualified Farmland parcel. This is done in order to preserve farmland, in a state where such land has been gobbled up with housing developments at a staggering rate over the years. This makes it possible for people who are land rich but cash poor (otherwise known as “middle class”) to keep their land, rather than being forced to sell it to developers because of the high property taxes. John Bon Jovi doesn’t “label(s) himself a ‘farmer.’ ” He leases his farmland to an actual farmer, in order to qualify for the Farmland Assessment. Nor does he pay “only $100 in state property tax.” (In fact, there is no such thing: we don’t pay “state property tax” in New Jersey. Real estate is assessed and taxed at the local; i.e, municipal level.) As for his house and any other improvements on the land? They are assessed at full market value (see “Homesite Parcel,” above), so Farmland Assessment is not at all the dodge, or hypocrisy, that the article makes it out to be. It would be good if those who report would get the facts first.
It should also be pointed out that, once a Qualifying Farm parcel is no longer eligible for Farmland Assessment due to a change in its use, the property in question is then liable for “roll-back” taxes. In calculating the amount of roll-back taxes that are due, the municipal Tax Assessor will value the land at its actual market value (not farmland value) for the year of the change, plus the previous two years. In this way, the local municipality and school district can recoup, potentially, a substantial amount of tax revenue previously foregone.
One other note: the Farmland Assessment program, along with general Open Space initiatives, farmland easement purchases and Green Acres acquisitions, have remained very popular in New Jersey, as witnessed by the continued support for these programs. New Jersey may get a bad rap from the uninformed, but just drive around for a while, and you understand how we can justifiably call ourselves “The Garden State:” and why we would like to keep it that way.
I am often asked about the results of a tax appeal appraisal, and whether it really is worth the effort to file an appeal. One dramatic example may provide an answer.
I was asked by a client to appraise a number of mixed-use properties (retail/commercial on the first floor, apartments on the upper floors) he owns in Somerville, Somerset County, New Jersey. Several years ago, the Borough of Somerville underwent a revaluation, whereby every property in town was re-assessed for tax purposes. In the course of revaluing one of the properties owned by my client, the appraiser for the revaluation company made a significant error in calculating the gross building area of the building, so that a building of just over 16,000 square feet ended up being assessed (and, therefore taxed) based on approximately 26,000 square feet! Needless to say, this resulted in a substantially higher annual tax bill than would have been the case with an accurate calculation. When I brought this to the attention of the municipal Tax Assessor, he acknowledged the error and made the necessary correction to the property record. The end result? By correcting this error, and by providing a complete appraisal report that detailed the market value of the property as of October 1 of the pre-tax year, my client’s tax bill was reduced by more than $24,000 – every year.
Granted, this is obviously an extreme case, where a property’s over-assessment was due mostly (although not entirely) to a mechanical error in the property records. Still, wouldn’t it be prudent to find out what your own assessment is based upon?
Are you paying too much in property taxes? Unfortunately, if you own property in New Jersey, chances are you are paying quite a lot in taxes. In New Jersey, property taxes are based upon the market value of the property, which is established as of October 1st of the prior tax year. In some municipalities, the Tax Assessor will perform maintenance programs, or yearly updates to the tax assessment rolls, in order to keep up with changes in property values. However, many Assessors do not. In municipalities where the most recent town-wide revaluation hasn’t taken place for several years or more (and/or where some of the individual re-assessments were flawed to begin with), the accuracy of individual property assessments can vary widely. As a result, some properties may be greatly over-assessed in comparison to the common level ratio of assessed-to-True-Value that should apply.
Every property owner has the right to file an appeal of their property’s tax assessment, in an attempt to lower the assessment upon which their property taxes are based. This must be done by April 1st of the tax year under appeal (or, by May 1st for municipalities which have undergone a revaluation of assessments).
Do you believe your property may be over-assessed? If so, you may want to file an appeal, in order to lower the assessment. If you do decide to appeal your property tax assessment, it is advisable to have an accurate and reliable appraisal performed on your property, in order to establish your property’s market value. I have performed this type of appraisal on many occasions, and have most often met with success in establishing grounds for a lowering of the property assessment.
Give me a call, at 908-526-1226. Or, contact me by email, so that you can explore all of your options in this regard.
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