Sticker shock on valuations
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Last week property owners in Ringgold County received their updated tax valuations from the assessor’s office, and while some received a degree of tax relief, others were hit with double-digit increases which triggered many to question the causes behind the new valuations.
The Record-News reached out to county assessor Melinda England for answers to several questions related to the new valuations:
RN: An article from the Assessor’s Office published in the March 21 Record-News and Diagonal Progress explained that “only the good sales are used to determine what the market value is when conducting the sales ratio analysis.”
What is the definition of a “good sale”?
England: “Good Sales” or “Normal Sales” are defined as fair & reasonable exchange between a willing buyer and a willing seller. Abnormal sales are transactions that are not reflecting true market value and may be influenced by factors which distort market value. Sales with abnormal characteristics may be, but not limited to, a sale between family or related parties, auction sales, sales by an estate, court-ordered sales, forced sales from foreclosures, partial interest sales, or split parcel sales, just to name a few. Vacant lots are considered “abnormal”; however, we do look at those sales in determining land value rates.
RN: What is a “sales ratio”?
England: The Sales Ratio is a ratio of the Assessed Value to the Sales Price. So – Assessed Value divided by Sales Price = Sales Ratio for that sale. A property with a sales ratio that is less than 95 percent is considered to be “under-assessed”. A property with a sales ratio that is more than 105 percent is considered to be “over-assessed”. Ideally, ratios that fall between 95 percent and 105 percent are considered to be in compliance. When the list of sales is reviewed for the year, the median ratio in the list is used to determine if the assessed values need to be adjusted in order to meet the 100 percent requirement and avoid Equalization Orders by the Department of Revenue. For 2018, the median sales ratio on Residential properties for the county was 81.39 percent. This means that residential properties in the county were under-assessed which called from some drastic changes to our pricing structure.
RN: The article also states all sales information is sent to the Iowa Department of Revenue which then informs each assessing jurisdiction “what percentage of increase or decrease is needed to be at 100 percent market value.”
Does the Department of Revenue conduct their market value analysis on each individual parcel or by neighborhoods, sections, townships, or the county as a whole?
England: Generally, the Department of Revenue looks at all sales in the county as a whole. The Department of Revenue calculates the additional value needed to meet the 100 percent market value requirement. It is the Assessor’s responsibility to conduct a comprehensive sales ratio study which breaks it down by neighborhoods, townships, towns, age of dwelling, type of dwelling or condition. Indicators in that sales ratio study show where possible inequities may be occurring like in a town, specific area, type of dwelling or age of dwelling.
RN: Were the new valuations set by the State or the county assessor’s office?
England: New valuations are set by the county assessor. The Assessor’s office in Ringgold County conducted a Comprehensive Sales Ratio Analysis with assistance from our software company, Vanguard Appraisals. That analysis determined that we needed to change many factors throughout our pricing system. Construction cost factors, location factors and depreciation schedules were all revised to reflect the current market. These changes were effective for the entire county.
RN: The article goes on to state that if local assessors do not “increase or decrease property values as indicated by the market and directed by the Department of Revenue, then the Department of Revenue will make these changes by issuing an equalization order.”
How are increases or decreases in valuation in an equalization order determined?
England: The Department of Revenue uses our certified value from the previous year and divides that by the median sales ratio in the list of “normal sales” to determine the total valuation increase needed to meet the 100 percent of market value requirement. If the Assessor has not done enough or has done too much in the way of revaluation, then the Department of Revenue issues an Equalization Order to the Auditor to bring the county into compliance. Equalization orders generally get applied as an across the board increase or decrease to the assessed value prior to calculation of the taxable valuations, which are then used by taxing entities to determine the tax levy.
RN: What might such an equalization order look like in Ringgold County?
England: When the final 2018 sales numbers were received in March, 2019, Ringgold County was facing a 25 percent order on Residential and a 32 percent order on Commercial. So that, together with the results from the Sales Ratio Study, indicated that our pricing structures need to be revised in drastic fashion. After all changes were made to meet the Sales Ratio requirements, it wasn’t enough to meet the revaluation increase needed to avoid Equalization Order.
RN: The article stresses the impact of sales data in determining market value and, in turn, increases and decreases in valuation.
Are sales the only factor in determining valuations?
England: In mass appraisal, sales drive the assessed value. Sales are driven by buyers and sellers. Other factors such as, but not limited to, changes in condition, vacancy, remodeling, new construction, or demolition are also considered if the Assessor’s office are aware of such changes to individual properties.
RN: How can the State determine market value based a small sample size of sales?
(For example, in 2018 the city of Mount Ayr had only seven properties sell for over $100,000, with only two exceeding $200,000. However, dozens of properties with current valuations of over $100,000 increased by double digit percentages.
On the other hand, Sun Valley had 28 properties sell for between $135,000 – $700,000.
England: The State determines the amount of revaluation needed for the entire county. It is the Assessor’s job to determine how those valuation dollars get spread throughout the county using the Comprehensive Sales Ratio Study to determine where inequalities in assessments might exist. This might be by area of the county, neighborhood, type of construction, age of dwelling, or condition. The Sales Ratio Study also indicates the degree to which high value properties are valued in relation to low value properties. It is the Assessor’s responsibility to set a pricing structure that is fair and equitable across the county based on market trends.
RN: Are Sun Valley sales driving up property values across the entire county?
England: Sales for 2018 were very good across the county. 38.1 percent of the residential sales for the county were on property located at Sun Valley Lake while Mount Ayr had 36.9 percent of the residential sales. So 75 percent of the residential sales in the county are concentrated in 2 specific areas. When considering valuation changes, we look to those areas of concentration first, to determine what should be changed.
RN: Consider this scenario: two residences sit directly across the street from one another in Mount Ayr. Both carry nearly identical current valuations, but the new valuation increases one by nearly 16 percent while the other decreases by over 16 percent.
How was market value determined to arrive at these valuations?
England: In general, the market value analysis determined a need to change construction cost factors, location factors and depreciation schedules. Every building in the county is assigned a grade factor and condition factor as well. If this situation occurred, as a result of the revaluation, we would need to review several items in our pricing schedule, such as type of construction, grade of the property, condition of the property, and any other factors that may have changed the value. We would look at all factors on one property compared to the other.
RN: Why are some valuations increasing while others are decreasing?
England: Basically, because of all the changes we made in our pricing structure. Changes to construction cost factors, location factors and depreciation were the main influences. The conversion of our data from the previous pricing system to our new software also caught some pricing errors that needed to be fixed. Changes and corrections were made to parcels based on our findings during a review of the 2017 aerial photography as compared to the previous photography from 2014 which may have indicated changes to the property such as new construction or removal of buildings.
RN: Do you have an estimate of the average percentage increase in property values across the county?
England: Residential property changed by varying degrees and factors. An “average” per parcel would be somewhat misleading because of all the different factors that were changed.
All commercial and industrial property increased 28 percent.
Agland is valued on the productivity formula and net earning capacity as calculated from a 5 year average. Ringgold County’s productivity value for ag land decreased 15 percent and ag buildings decreased 4 percent. Dwellings on agriculture classed properties were subject to the same changes as the Residential Class.
The 2019 assessed value will be used as a base to determine the property taxes due for the September 2020 and March 2021 payments. Estimates can be calculated using the current year’s rollback (differs by class of property) and the current year’s tax levy for the district of the parcel. Rollback and tax levy information is available from the Auditor’s office, from the previous tax bill, or from the Iowa Department of Management’s website. The Assessor’s office does not calculate taxes or estimate taxes as that is not our responsibility.
RN: Do you have any other questions you have received that you would like to answer?
England: The Assessor’s office is responsible for setting Assessed Values only and those values are required to be at our best estimate of 100 percent of market value based on a mass appraisal of the county. Ask yourself these questions when looking at your total assessed value: Could I sell my property for what it is assessed at based on today’s market? What did it cost to purchase the property and make improvements since purchasing? What did it cost to build the new structure or dwelling that just got added to the assessed value? What did some neighboring properties sell for and were those properties comparable to mine? If, after considering those questions and answers, you are still unhappy with your assessed value, then talk to the assessor and request review of the pricing for the property. If, after considering those questions and answers, you feel your assessed value is fair in today’s market, then you have little reason to contact the Assessor’s office.
The Assessor’s office sets a tax levy only for the operation of their office and that levy is subject to approval by the Conference Board, the local governing body of the Assessor’s office. The Assessor’s portion of the tax levy is less than 2.5 percent of the consolidated tax levy used to calculate your tax bill. All other tax levies set by the different entities in the county are not controlled by the Assessor’s office in any way. If your complaint is about the amount of property taxes you pay, your complaint should be directed to all of the taxing entities listed on the bottom of your tax bill.
