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Old 09-29-2018, 10:31 PM   #97
FlyingScot
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Quote:
Originally Posted by Descant View Post
"Improvements" are only improvements if somebody wants to buy them. (Willing buyer, willing seller) No market, no value, no tax. If I put on an addition, and nobody wants to buy my indoor movie theater, it still has added value in the square footage because it can be used for other purposes.
Normally that would be true. But let's say you have a house that is already so expensive that it can only be sold at a fraction of its cost. The market value is capped way below replacement value because virtually nobody but you can afford to buy it.

Now let's say you put on a new wing to house a movie theatre. In this case, you have not increased the market value of the home (its already at its cap), but you would still expect an increase in taxes.

More reading here. Note that in the case I describe there is a sharp split between the sales comparison approach and the cost approach, both of which are valid. https://www.iaao.org/Media/Pubs/Property_Owner.pdf
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