Determining Fair Market Value

Real & Personal Property

There is a physical distinction to be made to determine whether property is Real or Personal.

Real Estate is the physical land and appurtenances including structures affixed thereto in addition to the interests, benefits and rights inherent in the ownership of physical real property known as the bundle of rights.

Personal Property is generally those items not permanently affixed to real estate. Personal property is Moveable and can be removed without serous damage either to the real estate or to the item being removed.

The three categories of taxable personal properties are:

  • Business and professional furnishings.
  • Household furnishings, in property other than principal residence.
  • Personal property of public utilities.

Revaluation

Assessors in every city and town are responsible for developing a Revaluation program to completely analyze and revalue all property within its borders every year. Revaluation annually is required under Massachusetts law and is regulated by the Massachusetts Department of Revenue's Division of Local Services. The rationale for revaluation is to always maintain property at fair market or fair cash value to ensure equity for all classes of property.

Every five years, the Assessors must re-value all real and personal property and submit these values to the Department of Revenue for certification.

Fair Market Value

The Assessors are required to assess all property at its "Full and Fair Cash Value" a term which could also be described as "Market Value". Massachusetts General Law defines full and fair cash value as the price an owner is willing, but not under compulsion, to sell, ought to receive from a buyer willing but not under compulsion to buy.

The definition of market value as noted by the International Association of Assessing Offices (IAAO) is as follows: "Market value is the most probable prices expressed in terms of money that a property would bring is exposed for sale in the open market in an arms length transaction between a willing seller and a willing buyer both of who are knowledgeable concerning all the uses which the property is adapted and for which it is capable of being used." An "Arms Length Transaction" would be a sale between two unrelated parties both seeking to maximize their position from the transaction.

To determine fair market value, actual sales are used. The (minimum amount of) sales considered are those, which occurred in the 12 months prior to the new January 1 assessment date and up to six months after the January 1 date, trended back to January 1. Only arms length sales are considered bearing in mind that all buyers and sellers are not "knowledgeable" and that the market is imperfect in that regard. For this reason, one individual sale is not used to determine"market value." In reviewing and researching at least 18 months of sales, the Assessor is able to estimate the approximate price a willing buyer might pay for a property on January 1.