Property Tax Assessment Methods
January 30, 2012
State and local property tax statutes have a common goal, which is to ensure that owners bear an equal proportion of the tax burden in relation to other owners based on the relative value of their properties. The valuation of real property is at best an inexact science; thus, a state can choose its own method of assessing property so long as it is fair. An assessment made in substantial compliance with the legislative directive will most likely be upheld upon review.
In valuing real property for taxation, the assessor/appraiser uses his or her judgment in considering and weighing all factors that can affect valuation. These factors include the property's location, actual earnings, earning capacity, current use, potential use, cost, current zoning, and comparison with other similar properties. The price paid for property in a recent sale between a willing buyer and seller is considered evidence of its value but may not be conclusive as to the proper valuation. The assessor must also take into consideration other factors such as the method of payment and any abnormal changes in economic conditions.
Most often, the taxation of real property is done on an "ad valorem" basis in an attempt to measure or assess the market or true value of a piece of property. The definitions for "true" or "market" value vary from state to state based on statutory language and judicial interpretation of that language. However, these definitions tend to refer to the price that a willing buyer would pay a willing seller in an arm's length transaction.
There are three basic methods for determining the fair market value of real property. States may use any or all of the three, including combinations or variations, depending on the nature of the property to be assessed. Once a valuation is made using a statutorily approved method applied in a fair manner, the established tax rate is applied to the valuation, yielding the assessment.
One approach for determining valuation is the comparable sales or market method. This method estimates a property's fair market value by analyzing recent arms length transactions for similar properties adjusting those sales prices for any differences between the property sold and the property to be valued. The weighted result is a prediction of what the "market" would yield for the property on a given date. However, if there is no reliable market data, the appraiser will have to turn to another method of valuation.
A second valuation method is based on the cost of the property. Using the cost method, the appraiser will begin with the property's reconstruction or replacement value, deducting estimated depreciation. This valuation is not considered ideal unless any improvements on the land have been recently developed or sold.
Finally, real property can be valued using an income approach, which is most frequently used when assessing income-producing property such as apartments and leased commercial property. The appraiser estimates the annual net income expected to be generated by similar property and capitalizes that income stream into a measure of fair market value.
Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.
Please add a comment
Posted by
Humberto
on
Mar 28th, 2012
Hi Lola,Thanks for your question. You would take the total esaessmsnt of $118,500 and divide it by the tax ratio of 32.63, ($118,500 / 0.3263 = $363,162). This amount is what the assessor has as the market value of the home in question as of October 1, 2009. If you buy the house for $224,000 and it is not a foreclosure or duress sale, then there is a strong chance the home is over assessed. Of course you would need to search for other sales to support this. Your taxes are calculated by dividing the esaessmsnt by 100 and multiplying by the tax rate. Given the town ratio is 32.63%, there is a strong chance of a town wide revaluation in the short term. You can call the assessor in town and ask if they have a planned revaluation. As for the variance between sections of town, this is the result of a long term in between town revluations. The revaluation is supposed to smooth out variances like this.Hope this helps you
Posted by
Vinicios
on
Mar 28th, 2012
Well both real estate ralaaispps and tax ralaaispps are based on the location of the home.Usually (again based on state and local tax laws) a tax appraisal is lower than a real estate appraisal. (Some locations they are the same) It usually is based on some type of approved formula and has modifiers based on property usage.Real estate ralaaispps are usually market based, where an appraiser will identify homes in your area that are close in style and size to yours that have recently sold. They will use these to come up with an estimated market value for your home. They will take into consideration all the aspects of a home, where a tax appraisal is done more around sq footage and acreage.As for tax appraisal problems, well it doesnt affect market value of home, but it does effect your pocket book. property taxes are based off these ralaaispps. You will have a small window to challenge a new tax appraisal. these ralaaispps are not always fair and accurate. You can go to your local county/city clerks office to get information on tax appraisal process, percentage value of appraisal to market value, property tax rate and process to challenge tax appraisal if you feel it is not correct based on market value of home.Good luck
Posted by
Manel
on
Mar 28th, 2012
Makes little to no sense. The BOCC has a lot on their plate and it was voibous from their questions this evening at the Carolina North presentation they want no new expenses.I haven't read all the anti-tax missives out there but I'm surprised that the existing members of the BOCC Barry, Mike, Alice and Valerie aren't taking more heat. They could've derailed the new valuations before Jan. 1st and been on solid legal ground.Now, as they point out , derailing the process puts them in a legal quagmire.
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