Assessment Functions Appraisal Concepts Appraisal Process...Assessment Functions Appraisal Concepts...

Assessment FunctionsAppraisal ConceptsAppraisal Process

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Assessor’s Responsibilities

DiscoverListValue

Three Kinds of Taxes Income Sales Property

The Property Tax is an ad valorem Tax; it is based solely on value.

Property Tax

Budget

minusRevenues from other sources

Divided byTotal Assessed Value

Tax Rate Formula

Total Assessed Value

The numerator in developing a tax rate

Budget

The denominator in developing a tax rate

Total Assessed Value

Assessed Value

÷Market Value

Assessment Ratio

Revenue from Taxes $10,000,000Assessed Value $500,000,000

What is the Tax Rate?

Tax Rates

Neighborhood Assessed Value of $800,000

Based on the previous Tax Rate - - - - - - - - -

What is the amount of property tax revenue that will be generated?

Tax Rates

What is a mill ? 1/10th of one cent 1/1000th of one dollar

80 mills is 8 cents, $0.08, .08, or .080

50 mills is $0.05 per $1, $50 per $1,000, $5 per $100, or 5%

Property Tax

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Effective Tax Rate Formula

The effective tax rate (ETR) is the ratio between the current Tax Bill and the Property Value

E=Effective Tax RateA=Assessment Ratio

T=Tax Rate

EAT Triangle

ETR ExampleAssessment Ratio = 25%

Current Tax Rate - $6.50/$100

Step 1. Divide $6.50 by 100 to get Decimal6.50/100=.065

Step 2. Multiply Assessment Ratio by the results of Step 1ETR = .25 X .065 = .0163

EAT Triangle

Assessment Ratio

Effective Tax Rate

Tax Rate

ETR/A= T (.0163/.25=.0652)

ETR/T= A (.0163/.0652=.25)

T x A = ETR (.065 X .25 = .0163)

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The Property tax is an ad valorem Tax; it is based solely on Value

The relationship between the assessed value and the market value of a property is known as an Assessment Ratio.

General Practices

Determine the effective tax rate for a jurisdiction with a nominal tax rate of $3.64 per $100 of assessed value and a 35% assessment ratio?

General Practices

What is June 15th?

What is June 1st?

Improvement Factors are adopted by ______?

Blast from the Past

And what was 32.0% to 36%?

What is July 1st?

Blast from the Past

Questions?

Appraisal Process

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What is an appraisal?

An appraisal is an opinion, or estimate, of value.

Appraisal Process

The assessment process encompasses the appraisal process.

The appraisal process is a systematic, logical method of collection, analyzing, and processing data into reasoned value estimates.

Appraisal Process

The Appraisal Process

Definition of the Problem

Scope of Work

Preliminary Survey and Analysis

Data Collection and Analysis

General Specific Comparative

Physical Site Cost

Economic Off-Site Sales

Governmental Improvements Income/Expense

Social

Highest and Best Use Analysis

Application of Data : Three Approaches to Value

Cost Approach Sales Comparison IncomeCorrelation/Reconciliation of Indicated Values to Derive Final Value Estimate

Identifying the Property to be Appraised Determining the property rights to be appraised Defining the purpose and intended use of the appraisal Specifying the date of appraisal Defining the type of value

Definition of the Problem

What work is necessary to produce fair and equitable valuations for property tax purposes.

Scope of Work

Should have tentative HABU Inventory of data required to be collectedConsidering which approaches to valueAllocation of time and resources

Preliminary Survey & Planning

Data Collection & Analysis

Analysis of DataCost ManualsDepreciation SchedulesHistorical CostsImprovement FactorsAdjustmentsMultipliers

Appraisal Process

Highest and Best Use Analysis

Legally Permissible

Physically Possible

Financially Feasible

Maximally Productive

In Nevada, appraisers must value improved land consistently with:

The uses of other land in the vicinity

The highest and best potential use for the land

An estimate of capitalized fair economic income expectancy

The current use of the improvements

Do I need to Know This?

Three Approaches to Value

Appraisal Process

Reconcile to an indicated Value Conclusion

Appraisal Process

Questions? How about a Break?Questions after the break……………..

Appraisal Process

Were there questions during the break?

Appraisal Process

Reports Verbal WrittenNarrativeForm

USPAP CompliantCredible

Appraisal Process

Questions?

How about a quiz?

Almost Done

The Property tax is an Tax; it is based solely on Value

ad valorem

The relationship between the assessed value and the market value of a property is known as an .Assessment Ratio

The Nevada State Constitution provides that the total tax levy (tax rate) shall not exceed .$0.05/$1 of assessed Value

Nevada law defines the assessment ratio for all property subject to taxation as what percentage of taxable value?

Determine the effective tax rate for a jurisdiction with a nominal tax rate of $3.64 per $100 of assessed value and a 35% assessment ratio? 1.274 Percent

The Right of Government to regulate property to protect the public health is_________________?

Police Power

The right of government to take private property for public use with just compensation is ________________?Eminent Domain

A small house surrounded by larger houses may have a higher value that if it were surrounded by smaller houses. This demonstrates the principle of _________________?

Progression

A built-in oven in a house is an example of a _______ while a portable dishwasher is an example of ________________?

Fixture

Chattel

Market value is the present worth of all anticipated future benefits. This reflects the principle of _______________?

anticipation

______________ is the highest possible degree of ownership.Fee simple estate

Some private limitations on property are: _______________? _______________? _______________? _______________? _______________? _______________?

Co-owner’s rights

______________ is the highest possible degree of ownership.

Fee simple estate

Deed restrictionseasementsmortgages

Leases Liens

The Four forces that affect value are? P E G S

hysicalconomic

overnmentalocial

Neighborhoods can be ______, ________, ________, or ________.

Stable

Highest and best use criteria, in order are:

L_______

P______

F______

M_____

Are We Done?

General DataTrends Affecting Data

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General Terms

Just tell me which terms are on the test!

General Terms

The six basic rights associated with property are:

_______________? _______________?

_______________? _______________?Do Nothing With

Give Away

Rent (Lease)

Four powers of government limit the full exercise of the property rights

Police Power Eminent Domain Taxation Escheat

General Terms

Which of the following rights of government derives from police power?

Escheat

Taxation

Eminent domain

Zoning

Estate planning

General Terms

Appraisal theory defines real estate (differentiated from real property) as:

A The sum of tangible and intangible qualities of land and improvements

B The physical parcel of land, its improvements and appurtenances

C The ownership of all legal rights obtained with fee simple title

D The property which, in theory, forms an inverted pyramid from the center of the earth extending infinitely into space

E The property title free and clear of all liens and encumbrances

General Data

How would you answer this question?!?

Real estate is simply a piece of land plus any natural or artificial (man-made) improvements that are attached or have been added. Examples of natural attachments to the land include trees, valuable mineral deposits and oil –anything that would normally be considered part of the land. Artificial improvements include buildings, sidewalks and fences.

General Data

Real property is a less commonly used term and less commonly understood concept. Real property includes real estate, and it adds a bundle of rights. This bundle of rights consists of the rights for property owners to use their property as they see fit. In this way, real property consists of both physical objects and common law rights; real estate only consists of physical objects.

General Data

Personal Property consists of every kind of property that is NOT real property; Movable without damage to itself or the real estate Subdivided into tangible and intangible

Furnishings, artwork, antiques, gems and jewelry, machinery and equipment, NOT Real Estate

General Data

Appraisal theory defines real estate (differentiated from real property) as:

A The sum of tangible and intangible qualities of land and improvements

B The physical parcel of land, its improvements and appurtenances

C The ownership of all legal rights obtained with fee simple title

D The property which, in theory, forms an inverted pyramid from the center of the earth extending infinitely into space

E The property title free and clear of all liens and encumbrances

General Data

Now……How would you answer this question?!?

Smart Dog?

How does the Nevada Administrative Code define improved land?

Land on which there is an improvement sufficient to identify the current actual use.

Eminent Domain The right of government to take private property for

public use with just compensation.

General Data

Escheat Right of government that gives the state ownership of a

property when there is no longer an owner.

General Data

What are Estates and Interests???? Do I really need to know this? Fee simple estateAbsolute ownership unencumber by any other interest

or estate, subject only to the limitations imposed by governmental powers of P.E.T.E.

General Data

What are Estates???? Do I really need to know this?

Leased Fee Interest An ownership interest held by a landlord with the rights of use

and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the lessee

are specified by contract terms contained within the lease.

General Data

What are Estates???? Do I really need to know this?

Leasehold InterestThe interest held by the lessee (the tenant or renter)

through a lease transferring the rights of use and occupancy for a for a stated term under certain conditions.

General Data

The principle of __________________________ is the basis of the three approaches to value.

Substitution

General Data

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Which four forces affect value in a regional or neighborhood analysis?

A Economic, Social, Physical (environmental) and Governmental

B Governmental, Social, Financial and Physical (environmental)

C Financial, Taxation, Physical (environmental) and Governmental

D Physical (environmental), Economic, Governmental, Social

E Social, Taxation, Governmental and Physical (environmental)

General Data

Elements of Value (Do I need to know this?)

Desirability Utility Scarcity Transferability

General Data

Highest and Best Use Analysis -As Vacant and As Improved

General Data

Legally Permissible

Physically Possible

Financially Feasible

Maximally Productive

General Data

Value-in-Use

Net Present Value (NPV) of a cash flow or other benefits than an asset generates for a specific owner under a specific use.

Value-in-ExchangeWait!

Is this ….Market Value?The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.

NPV (Net Present Value) Present Worth of future Benefits

What makes something have value?

General Data

D.U.S.T.

Market value means the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:

(1) Buyer and Seller are typically motivated; (2) Both parties are well informed or well advised, and acting in what they consider their

own best interests; (3) A reasonable time is allowed for exposure in the open market; (4) Payment is made in terms of cash in U. S. Dollars or in terms of financial

arrangements comparable thereto; and (5) The price represents the normal consideration for the property sold unaffected by

special or creative financing or sales concessions granted by anyone associated with the sale.

General DataMarket Value

Is Cost and Price and Value the same thing?

General Data

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General Data

Anticipation

Balance

Change

Competition

Conformity

Consistent Use

VALUE12 Economic Principles of Market Value

Contribution

Increasing & Decreasing Returns

Progression & Regression

Substitution

Surplus productivity

Supply & Demand

Principle of Anticipation

Expected Future Benefits

Principle of Balance

State of Equilibrium

Principle of Competition

Availability in harmony with demand

Principle of Change

Market value is never constant

Principle of Conformity

Reasonable similarity among improvements

Principle of Consistent Use

Entire property (Land & Building) valued with a single use

Principle of Contribution

The Value of a component depends on its contribution to the whole

Principle of Increasing & Decreasing Returns

After some point, addition of more of something will decrease future incomes or amenities

Principle of Progression and Regression

Value increased or decreased by association with higher or lower quality properties

Principle of Substitution

Market value set by cost of acquiring equally desirable and valuable substitute

Principle of Surplus Productivity

Net income remaining after the costs of labor, management and capital have been satisfied

Principle of supply and demand

Good that producers are willing to sell at a given price and the amount of a commodity that consumers buy at a given price

during a specific period

Supply & Demand

Elements of DemandConsumer tastes and

preferences, consumer income, price of related commodities, consumer expectations and

price of the commodity

Supply & Demand

Elements of Supply

Cost of production, price of other goods, entrepreneur

expectations and number of sellers in the market

Supply & Demand

Equilibrium

The point at which the demand curve and supply

curve intersect

? And…..why do I need to know this?!?

Under NRS, which of the following is not a valid method for determining obsolescence?

Comparative sales, based on prices actually paid in market transactions.

Basing the value on the highest and best use of the property rather than the current use.

A summation of the estimated full cash value of the land and contributory value of the improvements.

Capitalization of the fair economic income expectancy or fair economic rent, or an analysis of the discounted cash flow

HABU & Obsolescence

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Assessment Functions Appraisal Concepts Appraisal Process...Assessment Functions Appraisal Concepts...

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