Revaluation – An Overview
The State of Connecticut has long required towns to revalue all real estate on a periodic basis – a policy embraced not only by our state, but by nearly every taxing jurisdiction in the nation.
According to the Dictionary of Real Estate Appraisal (Third Edition) published by the Appraisal Institute, revaluation is the “mass appraisal of all property within an assessment jurisdiction to equalize assessed values.” The objective of a mass appraisal process is to estimate the fair market value of all real estate (a term that is synonymous with the term real property) as of a common date.
Under Connecticut law, the assessment of each parcel of real property represents 70% of its fair market value as of the date of a revaluation. Unless there is physical change to a property (e.g., the construction of an improvement or a structure’s demolition), its assessment remains unchanged until the next revaluation, when the property’s fair market value is determined again.
Black’s Law Dictionary (Fifth Edition) defines fair market value as:
“The amount at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. By fair market value is meant the price in cash, or its equivalent, that the property would have brought at the time of taking, considering its highest and most profitable use, if then offered for sale in the open market, in competition with other similar properties at or near the location of the property taken, with reasonable time allowed to find a purchaser.”
Demand for property and the available supply are arguably the primary factors influencing the real estate market. Reaction to supply and demand considerations and to other economic, social and legal factors determines the prices that people pay for real estate.
Potential purchasers of different types of real property (e.g., residential, commercial or industrial) react to different market influences. For example, the reputation of a local school system could play a more important part in determining the choice of a community in which a family with young children chooses to reside than it would for a manufacturer, to whom the availability of skilled labor and access to transportation may be more important.
As a result, changes in the fair market values of real estate of different property classes do not occur at the same rate and inequities in assessment levels develop over time. Additionally, fair market values of real estate in the same property class may change at a different rate than other property in that class (e.g., residential waterfront property and residential property not located on the waterfront).
A revaluation eliminates these inequities in assessment levels and equalizes the tax burden among property owners.
Copied from the State of Connecticut Report regarding Revaluation Policies and Procedures dated December 27, 2004.