....property taxes too high?

[FlyingScot]

Originally Posted by Descant

Building cost is often not related to market value. Spend $40K to install a swimming pool and you may not have increased the market value at all. Spend $40K on a new kitchen and you may have increased market value by $60K.

Yes, that's exactly my point. If the owner has "over-improved" the property to the point where it is not marketable, or additional improvements are not longer increasing market value, isn't that his fault? Shouldn't he still pay taxes on the improvements?

[Descant]

Originally Posted by FlyingScot

Yes, that's exactly my point. If the owner has "over-improved" the property to the point where it is not marketable, or additional improvements are not longer increasing market value, isn't that his fault? Shouldn't he still pay taxes on the improvements?

"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.

[FlyingScot]

Originally Posted by Descant

"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