If you’re puzzled by real estate prices these days, you’re not alone.
One thing you can do is compare the value of your real estate with the price of nearby properties. Your local newspaper will no doubt have a real estate section in which property transfers are listed. Do compare prices, but don’t be too alarmed when you see a property in your neighborhood sell for a much lower price than you had hoped for. Every now and then a property will sell for below-market value, usually because of special circumstances such as a divorce settlement or an estate sale.
You can also bone up on the subject by reading some beginners’ guides to real estate property values. Both your local bookstore, online stores, and the library should offer a wide selection of books on this topic.
Here are some basic factors determining real estate and property tax valuations:
- Market value. The official definition of market value is “the amount a buyer would be willing to pay for a particular property.” Do not confuse the dollar amount your business is paying for property tax, because most businesses are assessed at a lower dollar value for property tax purposes. (Important note: If you haven’t reviewed your property tax bill and assessment value lately, it’s time to do so.)
- Improvements to the property. Many small business owners delay making improvements to their property because they’re afraid their property tax will be increased. This isn’t a wise move. Building improvements do not raise the property tax assessment rate for a number of years. The money you spend now will soon serve to increase the value of your property.
- Historical value. Is your business housed in a property that has been declared “of historical significance?” Depending upon where your business is located, this may work either for or against you. Some local governments actually tax businesses more if they are in an historic building, while others do just the opposite. If you’re thinking of moving your operations into any historic property, check with your local property tax assessment office to see how much you’ll be paying.
Real estate values and property tax have always been a hot issue with both business owners and homeowners. Keep in mind that when state and local budgets are stretched thin (as many are these days), it’s not unusual to find increases in property tax bills.
