Valuation Guide

1. General Information
2. The Assessment Process
3. Assessment vs. Appraisal
4. How Value Is Estimated
5. Statistical Tools Used To Measure Accuracy

General Information

The City Assessor's Office is required by law to conduct an annual reassessment for over 49,000 properties in the city. To accomplish this annual task, the assessor's office uses mass appraisal methods and techniques to adjust prior year assessments to reflect changes in current market values.

A reassessment is simply the process by which the assessed value of each property is reviewed to keep that value consistent with what the property is worth on the open market. Please keep in mind that a reassessment does not necessarily result in increased assessments for all properties as properties do not appreciate or depreciate at the same rate. In a given fiscal year, there will be assessments that rise, fall or stay the same based on internal and external factors that influence property values. All real estate professionals will agree, location is the single most important consideration. However, appreciation, depreciation, new construction, remodeling, rezoning and many other factors also play a role in determining value. Property taxes, on the other hand are determined by various taxing bodies - not the Assessor's Office.

City taxes are paid twice a year, on June 5 and December 5. For information on taxes, please call the City Treasurer at (757) 727-6374.

The Assessment Process

The City's appraisal staff annually reassesses each neighborhood in the City using a mass appraisal process. The International Association of Assessing Officers (I.A.A.O.) defines Mass Appraisal as:

"The process of valuing a group of properties as of a given date, using standard methods, employing common data, and allowing for statistical testing".

All properties in the City are grouped by neighborhoods (defined as a group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises). First, the appraiser reviews a report of all recent property ownership transfers from that neighborhood. He/she then eliminates transfers that are not arms length (bonafide) sales. Examples of sales that may not be arms length include family transactions, foreclosures, and distress sales. It is sometimes necessary for the appraiser to extensively research a property transaction before he/she can determine if it is reliable information. Field visits to the sold properties are conducted to determine condition of the structure(s) and site and also to give the appraiser a feel for the overall condition and desirability of the neighborhood. When the appraiser is confident that the sales analyzed present an accurate picture of the market value in the neighborhood, he/she will extract rates to apply to the living area (climate controlled area) of the various models or size ranges of homes comparable to the sales. Market Value is defined by the I.A.A.O. as:

"The most probable price (in terms of money) 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, as of a specific date."

Next the appraisers value the land and amenities of the sold properties, such as porches, garages, swimming pools, etc., and subtracts the total value of those items from the sales price of the homes. What remains are indicated base rates of the living area of those homes.

These base rates are entered into the Computer Assisted Mass Appraisal (CAMA) software system and applied to all the properties, even those that did not sell.

Adding the established value of the amenities and valuing the sites result in assessments of all the homes in the neighborhood and collectively the entire City.

Using the technology available today, this process is becoming more advanced, allowing more detailed and accurate valuations of all properties.

Assessment vs. Appraisal

Private sector appraisals:

• Can be done for many different purposes, including financing, eminent domain, estate settlements, insurance, etc.
• Usually require an interior inspection and a complete individual market analysis of the subject property and comparable properties that have sold.
• Appraisers average 100-130 short form residential appraisals per year or 2.5 per week. Some more complex appraisals can take months to complete.
• Equity within neighborhood not considered. Equity as defined by the I.A.A.O. is: "The degree to which assessments bear a consistent relationship to market value and is synonymous to tax fairness".

Assessments/Mass appraisals:

• The assessor annually reassesses each neighborhood in the city using a mass appraisal process. This process values a group of homes in a defined area (neighborhood) by analyzing the property sales within that area and applying those values to homes similar to the ones that sold.
• Use special statistical procedures and computer software (CAMA) to accomplish the annual reassessment as accurately as possible.
• Each appraiser in the City Assessor's Office reassesses 6000 to 8000 properties per year or 160 per week.
• Equity is a primary consideration.

How Value Is Estimated

There are three methods typically used to estimate value:

The Sales Comparison Approach
This method compares your property to others that have sold. When using the sales comparison approach, the assessor considers and analyzes all available market data to arrive at a fair valuation of your property. Size, quality, condition, amenities, location and time of sale are some of the important factors given consideration. The sales comparison approach generally produces the most reliable indication of the value of residential property.

The Cost Approach
The cost approach estimates the value of the land plus the current costs of material and labor needed to replace your home with one of similar quality and function. Depreciation is factored into the valuation of the improvements. The cost approach is a good method for appraising newly constructed, special purpose and unique properties.

The Income Approach
The income approach values the revenue producing capabilities of a property. This method reviews market data derived from properties to determine income, expenses, vacancy rates and capitalization rates. A net operating income is capitalized into a value which includes the land. The income approach is widely used to assess commercial properties which generate income derived from tenant leases. It can also be used on residential properties that produce income to the owner.

Statistical Tools Used To Measure Accuracy

Assessment Ratios are used to compare the sales price of a property to the current assessment. For example, if a property sells for $100,000 and is assessed at $95,000 the ratio is .95. If a property sells for $100,000 and is assessed at $105,000, the ratio is 1.05.

Assessment ratios are analyzed individually, by neighborhood and the entire city. The perfect assessment ratio is 1.00.

Coefficients of Dispersion (COD) are utilized to see what percentage of the sales fall within a reasonable range of the average sales ratio. Acceptable CODs depend on many factors such as type of property/improvements, number of sales available, etc. Lower COD's indicate better data.

Price Related Differential (PRD) is used to determine if higher price houses are being assessed in the same manner as lower priced houses. A PRD range of .98 to 1.03 indicates that most properties are treated equally regardless of value.