1. Albert F. Chanese, MAI, R/W-AC, CTA New Jersey Realty Advisory Group, LLC 333 State Street Perth Amboy, NJ 08861 (732) 853-0271 Presented by Urban Land Institute North Jersey

2. The Appraisal Process Date of Value October 1 st of preceding tax year Fee Simple Basis Market Rent – existing leases may or may not matter Market Expenses – unless proof can be introduced as to why a property operates at levels above or below market parameters The fee simple estate is defined as follows: Absolute ownership unencumbered by any other interest or estate subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. Detailed Market Analysis Your own work, not national studies

3. Site Data Configuration of the site (restrictions, easements, setbacks, etc.) Wetlands, waterways Setback requirements Flood zones Access to site, Parking Ratios, Truck Access and Storage Zoning restriction, changes in zoning

4. Improvement Data Type of Property Office Retail Industrial Apartment Age, Condition, Current Use Is the building functionally obsolete Is the building economically obsolete Make sure the size is correct Value what’s there

5. Highest and Best Use The Heart and Sole of the Appraisal As Vacant As Improved Physically Possible Legally Permissible Financially Feasible Maximally Productive

6. The Cost Approach Rarely used in tax court Could be used for special use properties Support the land value Support the cost estimates Support the depreciation

7. Sales Comparison Approach Easiest Approach to Use (but not always) Make sure they are similar in location Similar in use, age and design Recent Sales as possible Support for Adjustments Inspect Comps Verify with a good source. Tax Court does have problems with employing a market approach on income property

8. Income Approach Most relied upon in Tax Court Direct Cap (No discounted cash flows) Stabilized occupancy (Support) Market Rent (Support) Stabilized Expenses Support Cap Rate with Market Data National surveys are not enough Derive from sales when possible Interview investors and bankers File Chapter 91’s

9. Overview of the Valuation Philosophy of the Tax Court Properties must be valued in a uniform matter – N.J. Const. art. VIII, sec 1 (1947); 2nd-Roc-Jersey Assocs. v. Town of Morristown, 158 N.J. 581 (1999). Properties must be valued in a manner that is consistent with market behavior on a stabilized basis. Properties must be valued on a stabilized basis Hyper occupancy or vacancy cannot be considered in the valuation. Valuations must comply with the definition of market value

10. Definition of Market Value The most probable price which a property should bring in a competitive and open market under all conditions requisite to fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: buyer and seller are typically motivated; both parties are well-informed or well-advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

11. Helpful Hints Don’t wait until last minute to hire an appraiser Hire an experienced, knowledgeable appraiser Tell the appraiser everything there is to know about the property (Good and Bad) Let the appraiser in on the negotiations Consider County Tax Board

12. Albert F. Chanese, MAI New Jersey Realty Advisory Group, LLC 333 State Street Perth Amboy, NJ 08863 (732) – 853-0271