Property, Valuation, and Practice
Property, Valuation, and Practice
This domain combines property interests, appraisal methods, and Georgia practice details such as ad valorem taxation. Questions often ask you to choose the right valuation approach or calculate value and tax.
Property interests and descriptions
Fee simple absolute is the broadest ownership interest. Easements, liens, encroachments, and deed restrictions burden title. Georgia land may be described by metes and bounds, by lot and block in a recorded plat, or by reference to a recorded survey. A deed must be in writing, identify the parties and land, and be recorded to protect against later purchasers.
Valuation approaches
The sales comparison approach adjusts comparable sales for differences. The cost approach is cost new minus depreciation plus land value, useful for special-use property. The income approach capitalizes net operating income: value = NOI ÷ capitalization rate. Highest and best use is the reasonably probable, legally permissible, financially feasible use that produces the highest value.
Georgia property tax
Georgia assesses property at 40% of fair market value. The millage rate is applied per $1,000 of assessed value. A homestead exemption reduces taxable value for an owner-occupied home. Taxpayers may appeal to the county board of equalization.
Worked example
A duplex produces $60,000 in net operating income. Comparable sales indicate a 7.5% capitalization rate. Value = $60,000 ÷ 0.075 = $800,000. If the county fair market value is $800,000, the assessed value is 40% × $800,000 = $320,000. At 25 mills, tax = $320,000 ÷ $1,000 × $25 = $8,000. A $4,000 homestead exemption would reduce taxable value to $316,000 and the tax to $7,900.
Traps
Multiplying NOI by the cap rate instead of dividing; using assessed value as market value; forgetting the 40% assessment ratio; applying the millage rate to fair market value; ignoring highest and best use when the current use is not the best use.