Tax Assessment Question

[kenai_king]

So I have looked at commercial appraisals before but an interesting thing came up for my tax assessment and figured I would ask cause it doesn't seem right to me or mostly makes me wonder. On the commercial appraisals I have seen it was fairly straight forward for the market/sales approach. An adjusted average sq ft value times the sq ft for the subject property, and that will give you a final value for everything there. For the tax assessment there its broken up, land and improvements/buildings. So for the tax assessment it was somewhat the same but at the end only some of the land was subtracted out. Not the total amount of land. Only some of the land and it was explained that it is only for the land used for the structures for tax assessment purposes. On a commercial appraisals, at least the ones I have seen included all land and it was just the final value like I have described above. Shouldn't it be all land be removed for the tax assessment also? Or is there rules, code, guideline that says only the used portion of land is to be removed and rest stays? Thanks.

 

[Artemis Fowl]

You may have a couple moving parts there. Firstly and most importantly, have you contacted the assessor and asked these questions? Hopefully they could provide better answers than we can...it's what they do, are certified in your state, and actually worked up your property value. Any valuation professional will separate land and building when doing a Cost Approach...which it sounds like your assessor is doing. We generally don't use Sales Comparison methods because it is logistically impossible to do, in my case, 48,000 appraisals every year. The appraisals you are referring to appear to use Sales Comparison methodology and that is entirely appropriate for a singular property valuation. Assessors are not actually appraising your single property...they are generally valuing the entire class of properties of which yours is a part of. Different purposes, intended uses and methodologys apply so it is not surprising you see differences. It is validating, however, that the resulting value is somewhat similar.

 

[kenai_king]

What they do is use the 3 approaches of cost, income, and market since it is a rental property. They figure out or do their own weights on each, most of the weight on income and market, with very little on cost. I have asked them and all they said was we use just what the improvements are on the property and estimate how much land those improvements use up and subtract just the used land portion but didn't provide me the code or anything to back that up which I asked for. I got a exasperated sigh and said just trust us and that was about it. Which for me doesn't sound right for some reason compared to a private appraisal or bank or something like that. On my commercial property the 8 buildings I have take up probably 2/3 of the land so that is all that is being removed from the market approach. Was hoping that somebody might know or point in a direction of they use such and such organization as guidelines or something like that.

 

[Artemis Fowl]

Wish we had an Alaska assessor here. So the assessor said they do all three approaches? All of their methods should be mandated by statute...state law. There's a manual for them somewhere. It can be difficult to understand the differences between mass appraisal methods and singular appraisal methods. They are different and sometimes different logic applies. Singular property appraisal is very intimate to the subject property. Logic and methods cater towards a solution to the value of that single property. Mass appraisal is more about central tendencies and statistics so logic and methods cater towards statistical analyses.

 

[sputnam]

Assessors don't use the same methodology as fee appraisers. They even have their own sections (SR 4 & 5) in USPAP. State law sets some of what they do.. and the county in question sets some. Theoretically, the opinion of value found by a fee appraiser should be similar to the opinion of value found by an assessor. In real life, it doesn't work that way. And, in some ways, it doesn't matter. The assessment is for the purposes of determing tax liability.

 

[Terrel L. Shields]

Every assessor I know separates land and improvements. The taxable market value is the sum of the two. Land is valued as if vacant and available for its highest and best use and improvements upon their contributory value. That applies to commercial or residential property. Regardless the size of the parcel, the land is valued that way. Therefore, in reality, they do use all 3 approaches since they can (not always) use the income approach and here, do, for apartments, etc. or if you contest it, they will defend their work with all three.

 

[kenai_king]

Thanks for the information, I appreciate it. Helps me out guys.

 

[Tiffany Gibbons]

Every assessor I know separates land and improvements. The taxable market value is the sum of the two. Land is valued as if vacant and available for its highest and best use and improvements upon their contributory value. That applies to commercial or residential property. Regardless the size of the parcel, the land is valued that way. Therefore, in reality, they do use all 3 approaches since they can (not always) use the income approach and here, do, for apartments, etc. or if you contest it, they will defend their work with all three.

I worked as a commercial appraiser for a large county. Properties such as apartments, retail, office, mini storage, hotel, and warehouses were valued using market rental income. Movie theaters, fast food, auto sales, manufacturing facilities, day cares, nursing homes and other properties not not typically rented were valued with cost, vacant land was valued using sales, etc. All three approaches are in the Mass appraisal system, but the most reliable for that value group is chosen, with cap rates for the income, etc. We published a cap rate study every reappraisal. When commercial owners appeal, they submit more data such as claiming higher vacancies, etc. and we got even more data: income, expense. rent rolls, etc. In the hearings, we would prepare a full appraisal with all 3 approaches to value, a brief narrative summary appraisal to present to the BOE or the administrative law judge. This is why Wal Mart likes the "Dark Store Theory".

 

[Terrel L. Shields]

This is why Wal Mart likes the "Dark Store Theory".

For many years WalMart's tax department who handled valuation and appeals employed not only a former county assessor but also CG001 in the state of Arkansas. That CG001 was Mike Pyron. Pyron was notable for being the man who brought down the Whitewater scandal of Jim McDougal and exposing an appraiser who was being given sweetheart loans for valuing property for former indicted governor Jim Guy Tucker who succeeded Clinton. After that, Pyron was basically blacklisted by every bank in Little Rock, and so Walmart - unafraid of any banker in the state - hired him. Pyron died a few years ago from Parkinson's. I knew him and he was an honest man.

 

[Tiffany Gibbons]

For many years WalMart's tax department who handled valuation and appeals employed not only a former county assessor but also CG001 in the state of Arkansas. That CG001 was Mike Pyron. Pyron was notable for being the man who brought down the Whitewater scandal of Jim McDougal and exposing an appraiser who was being given sweetheart loans for valuing property for former indicted governor Jim Guy Tucker who succeeded Clinton. After that, Pyron was basically blacklisted by every bank in Little Rock, and so Walmart - unafraid of any banker in the state - hired him. Pyron died a few years ago from Parkinson's. I knew him and he was an honest man.

I used to do contract work for the MAIs that were Wal Mart's appraisers, find them the correct land sales when they were building a new one or adding a hypermarket (gas station) to an existing one in rural Tennessee. When worked at Shelby County, all the appraisers liked working with their appraisers, they were fair and honest on appeal work. WM got rid of the CGs that were smart and uses an awful tax rep company now, nothing but attorneys and "analysts" who wear $3000 suits. Now it's all about frivolous appeals and tying up the different Assessor employees time in appeals. Which leaves the public servants less time to actually help Mom n Pop owners who may have legitimate concerns.