Be alert! You've been hearing those words in all quarters these days, but awareness, especially of impending problems and/or opportunities has long been the hallmark of property owners. When changes involve reworking of real estate appraisal theory by the governing body of the appraisal industry leading to a viable precedent for reducing property taxes, the property owner should look and listen, and consult with his own tax experts to determine how he can use the changes to lower his property tax bill.

In Tennessee, a property owner sought - and won - a lower real estate value on a hotel which was part of an ongoing business by using a new appraisal industry method of determining such evaluations. Through his legal appeal, the business owner now pays lower taxes. The case, decided by a judge, may also extend to different types of property that are integral and vital parts of an ongoing business.

How do appraisers put a value on the real estate of businesses? The appraisers in a property tax appeal must determine the value of real estate and non-real estate assets. The real estate values must be determined for a correct value to be assigned. In Tennessee, the assessor used a method that had long been accepted - deducting management and franchise fees from the hotel's income which supposedly eliminated the value that was non-real estate. In 2002, the governing body of the appraisal industry said that the determination is the market value of the business' total assets or the value of all assets it sold together as a going business. According to the Appraisal Institute, which governs the industry of real estate appraisal, the new method removes all non-real estate value. The market value of non-real estate assets is deducted from the value of the going business. What's left is - you guessed it!- the real estate value. 

Determining real estate value so that non-real estate values are not taxed illegally affects hotels, as in the landmark case, but eventually through challenging assessments with the new method, owners of properties like shopping centers, nursing homes and other assisted living facilities will also benefit. So be alert! Changes in the methods of appraisal as well as in the legal precedents will benefit the aware and proactive property owner.