Lynch Pen : Property appraisal is subjective at best
Posted on Wednesday, October 15, 2008
I fear we have become a nation and a county divided within itself. Not a division for the purposes of wholesome competition, but divided in a battle for control. This will be the second in the series of articles about my experiences in trying to reduce my property taxes on the farm. In the process of trying to work within the system, my observations have convinced me we have allowed the power struggle for wealth and control of government to get out of hand - and we can blame ourselves for allowing it to happen.
In a newspaper article published Saturday, Oct. 11, (Northwest Arkansas Edition, Arkansas Democrat Gazette ) Robert J. Smith reported that Benton County's total property value increased from $ 2. 9 billion in 2005 's appraisal to $ 4. 2 billion in the current 2008 appraisal. That is a 44. 8 percent increase in the three-year period. A large portion of that would certainly be from new construction both in larger, more expensive homes and commercial properties, but the 25. 8 percent increase in the appraised value of my farm has been reason for me to look closely at the appraisal process.
Once again I want to clarify that my questions are about the process, not the people. The cooperation from the Assessor's Office has been great and everyone has been courteous and helpful.
The increase in land value of the family farm amounted to 19. 4 percent and the property "improvements"jumped a whopping 32. 1 percent - over 10 percent per year for the three-year period. What I have discovered is simply the subjective first decision of assigning the "grade"of construction and the guesstimate of the age of the dwelling along with the actual measurements to determine the square footage (a very objective figure ) have a major impact on the final value assigned to the "improvements. "
Meeting with the Equalization Board, they agreed to lower the "improvements"to a 12. 2 percent increase by simply changing the effective age of the house from 36 years to nearer its actual age at 40 years. (The original two rooms were constructed in 1935, an addition added to double the square footage in 1946, another section added in 1948 and the bathroom added in 1958. A minimum of 50 years, but the Assessor's computer can only go back 40 years. ) The actual size of the dwelling is 975 square feet. The Equalization Board cannot reduce the "land "value unless there is an error in the size of acreage or "use code. "As a result of the proposed adjustment, the overall increase goes from 25. 8 percent to 15. 7 percent, with a 10 percent increase in the actual taxes the first year and 5. 7 percent added the second year If I feel that is still unfair, the next step is to petition the County Court (the County Judge ) for a hearing. If that does not provide for a satisfactory answer / solution, the final step is to go to the Circuit Court, the highest level of recourse in the county. That is a bit extreme based on the dollar amount involved. It is not extreme when you look at the principal involved in our real estate tax system and see how certain factors in the process affect the final tax being paid.
The objective of the Assessor's Office is to establish a fair and equitable tax base for (in this case real estate ) our schools and local government through the appraisal system. The basic guidelines are established at the state level (by the ACD or Assessment Coordination Department ) and the current edition of the guidelines for residential real estate is a 1995 edition of housing values, based on sales before the downturn in real estate values. It is the responsibility of the County's Assessor to "adjust "those numbers to "current "values. (Note: manufactured and mobile homes have more current values than standard stick and mortar homes. ) His job is to raise money for the schools and government and the basis for this appraisal is real estate values for 2006 and 2007, our "boom"years. Therein lies the conflict - the "law "says use those years but that does not account for the current real estate market which is much, much, lower than 2007. And, we are seeing unemployment starting to raise its ugly head as those market values from 2007 are being applied to the 2008 appraisal to determine the taxes which we will pay in 2009. That might not be a welcome surprise to people next year if they are on a fixed income or are unemployed when those increased taxes are due.
Please tell me, who is actually in control - the schools and their lobbyists, the government who writes the procedures or the people who supply the funds ? Is the object to raise taxes regardless of the consequences to the people ?
One of the first things that you learn when you start to look at the appraisal process is just how subjective it really is and how it penalizes those who invest in their real estate (homes, etc. ) The more you work to improve the real estate, the more you are penalized in taxes. What I found was quite simply that doing nothing my taxes were going up because others were going up.
If you look on your Property Card on Page 2, the upper left hand corner, you will find a box identified as "Grade," mentioned in paragraph 2. This number runs between "1 "which is the highest grade of construction or condition to a "6 "which is the lowest level. Many of the properties (dwellings ) I looked at were a "5 "as is my farm house. As stated before, the grade, age and square footage (living area ) provide information for determining the base price. This is derived from the tables in the 1995 source book - the cost manual.
The smaller the house, the higher the base price for that grade. This is based on the assumption that construction costs go down, per square foot, as housing size increases. This is for comparable quality homes and does not include amenities. The house I was appealing had a "base price "of $ 38. 26 per square foot. This was reduced to $ 26. 59 by multiplying by a factor of 0. 695 for a grade (construction or condition ) of "5. "This is not the worst of condition, but certainly not a new home. The actual age of the first two rooms of the structure is 73 years. The newest addition is over 50 years old, but as previously mentioned, the "cost manual "does not accommodate a house older than 40 years. Because there is a further adjustment factor for grade 5 of + / - 15 percent they could have reduced this "Adjusted Price per Square Foot"an additional 10 percent to accommodate the occupancy level and the Adjusted Price per Square Foot would have dropped to $ 23. 93. The original Base Value is $ 25, 925 (Grade x Adjustment Factor x Square Feet ). The base value could have dropped to $ 23, 332 if I had known about the adjustment percent and had pursued that at the Equalization Board and been successful. If the house had been assigned a grade of 6, this would probably have been lower per square foot.
At this point, we have a base value that is in the upper right hand corner of your Property Card on page 2. Next week, I'll get into the "Adjustments to Base"and further shock you at how "subjective"the process can be.
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