Value of Preservation Improvements in a Tax Sale Investment

How do you place a value on your preservation improvements if you are a tax sale investor?  In the best of all possible worlds, you would have an appraisal of the property value before those improvements, and an appraisal of property value afterwards.  If you make upgrades–such as adding structures, upgrading counters, etc–then ask your appraiser to disregard the value added by the upgrades. You are not entitled to THAT portion of the increase in value.

The best solution that saves money is to have an appraiser do the “before” valuation for you. That is because it will be difficult for you to find comparable properties in similarly run-down condition. The appraiser has the training and experience to make downward adjustments based on property condition. His or her calculation will stand up to scrutiny if you end up in court, or if you are just arguing with an owner about value.

Then, if you want, you can probably do the “after” valuation yourself. Most likely, you will be able to find comparable properties in good condition. You might even be able to use the same comparables as the appraiser, but without the downward adjustments. If you do this work yourself, be sure to keep good records, in case it becomes important later.

Remember, if any newbies are reading this–you are entitled to the value of preservation improvements upon redemption ONLY if the property contains a residential structure. You are entitled to the value of ALL permanent improvements if the property (with or without a residential structure) is within certain municipal incentive zones.  To read the statute, click HERE and scroll down to the highlighted portions of the law..