Real Property Assessment Guidelines
Real property is a legal term for the land you own--not just the land itself but the minerals and soil under it and any permanent structures built on top of it. Everything else is classified in the law as personal property. Real property is subject to tax by various authorities, such as city and county government and school boards, based on the assessed value.
All states set a specific date for assessing the value of real property; for example, the first day of July in New York state and Jan. 1 in California. The assessor will either set the market value for the property on that date or--if the law limits the taxable value--will set the value according to the law. In California, for instance, many pieces of real property can't be appraised for more than the previous year's value, plus up to 2 percent inflation.
Fair Market Value
"Fair market value"--what a knowledgeable buyer and seller would agree is the fair price of the property--is a common guideline for assessing property. To figure out fair market value for your property, assessors check recent sales of similar buildings or land. They may also look at the construction market to figure out what it would cost to build a duplicate of any structures on your property and factor that information in. New York's Department of Taxation states that sale or construction costs on one building aren't sufficient to establish market value: To value property accurately, the assessor will need multiple examples of comparable sales or structures.
Some owners don't use their property at its "highest and best use," and this may affect how it's assessed. If you own a farm next to a shopping center, for instance, the fair market value would be based on someone buying and developing the farmland; some states, however, try to preserve agricultural land by assessing it based on "current use," which means a lower value and lower taxes. New York State assesses all property based on current use, unless it's vacant--neither built on nor farmed--in which case it will be assessed for its potential use.
- under construction seven image by Rick Sargeant from Fotolia.com