REAL ESTATE APPRAISAL

I.R.S. auditors (glorified bookkeepers) often perform Real Estate appraisals. They obtain recent land/improvements ratios to total value, from the local Property Tax Authority. These land/improvement ratios are then used to extrapolate a value for the improvement at purchase, thereby revising the depreciation schedule and wrecking many years of tax returns.

• There are two flaws to this method
• Land to building ratios change over time as market conditions change. (The land/building ratio to total value of The United States Capitol in Washington D. C. is different today than it was in 1776, i.e. there was no capitol building in 1776.)
• In the mass appraisal process the Property Taxing Authority does not value your house, per se, but instead uses a statistical equivalent of your home to estimate its value. So any ratios based upon this number are suspect.