What is the purpose of adding an allowance for effective tax rates in the overall rates model?

The purpose of adding an allowance for effective tax rates in the overall rates model is to adjust values accurately. Effective tax rates can significantly influence property values, as they reflect the actual financial impact of taxes on property owners. By incorporating these rates into the appraisal model, it ensures that the estimated property values account for the financial burden of taxation that property owners face. This adjustment allows for a more realistic and precise estimation of market value, leading to better-informed decisions regarding property assessments and pricing.

In scenarios where effective tax rates are not considered, there is a risk of presenting inflated or deflated property values that do not reflect the true market dynamics, as they fail to take into account the localized tax burdens that can affect buyer behavior and property desirability. Therefore, including an allowance for effective tax rates is crucial for maintaining the integrity and accuracy of the overall appraised values within the model.