Authors: Scott C. Miller & Shane L. Smith; Williams Mullen (North Carolina & Virginia, USA)
If the locality where your company’s real property is situated went through a revaluation of real property for tax purposes effective as of January 1, 2014, your company should soon be receiving a notice of assessment. You may open the envelope with a sigh, read the contents, and wonder how the local assessor came up with that value.
Familiarity with some basic assessment terminology and procedures[1] will help you understand the principles that guide your local assessor’s determination of the value of your property, and may also help inform your analysis of whether an assessment appeal is warranted.[2]
All real property in Virginia and North Carolina is subject to ad valorem taxation unless the property is constitutionally or statutorily exempt from taxation. The Constitutions of both Virginia and North Carolina require all taxable real property to be assessed at fair market value and in uniformity with other similarly situated properties. These dual (if not dueling) principles of fair market value and uniformity form the foundation for every assessment, and the concepts are not as easy to understand in application as you might at first assume.
Fair Market Value
Both Virginia and North Carolina have adopted definitions of fair market value that are, for practical purposes, consistent with The Appraisal Institute’s definition of “market value”:
The most probable price that the specified property interest should sell for in a competitive market after a reasonable exposure time, as of a specified date, in cash, or in terms equivalent to cash, under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, for self-interest, and assuming that neither is under duress.
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