PROPERTY VALUATION PROCESS

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PROPERTY VALUATION PROCESS

• UNDERSTANDING HOW PROPERTIES ARE VALUED FOR TAX
  PURPOSES

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AD VALOREM TAXATION

• Ad valorem means to value or concerning
  value.
• Ad valorem tax is based on the principle that
  the amount of tax paid should depend on the value
  of property owned.
• The data used to establish values is from arms
  length sales.
• Ad Valorem Taxation is covered in the
  Massachusetts General Laws.
• Most information can be found in Chapter 59 of
  the Massachusetts General Laws.

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ARMS LENGTH SALE

• ARMS LENGTH SALE
• Is a sale between an informed, willing seller
  and buyer. Neither party may have an advantage
  over the other party. The property needs to have
  reasonable exposure on the open market and is
  based on the most probable price, not the
  highest, lowest, or average price.
• Examples of non-arms length sales according to
  the DOR
• Family sales
• Repossession or sale of a foreclosed property
• Private sale not put on the market

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MASS APPRAISAL

• Is the systematic appraisal of groups of
  properties as of a given date (January 1st) using
  standardized procedures and statistical testing.
  These procedures and statistics are used to gauge
  and create accuracy and consistency.
• Its purpose is the equitable and efficient
  appraisal of all property in a jurisdiction for
  Ad Valorem Tax purposes.
• These values must meet strict statistical
  criteria and undergo triennial review by the
  Massachusetts Department of Revenue.

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MASS APPRAISAL..

• The Mass Appraisal process begins with land
  valuation. Land values are derived from sales
  (usually over the prior 18-24 months) of
  Teardown lots, subdivisions of existing lots
  that create new lots, and the increasingly rare
  sale of unimproved vacant land.
• There is an analysis of all arms length sales in
  a given calendar year.
• FY 2011 values are a product of calendar 2009
  sales.
• Danvers uses a Computer Assisted Mass Appraisal
  System (CAMA) administered by Patriot Properties,
  Inc.
• Their system uses a market adjusted cost
  approachthis adds a market derived land value to
  a computer generated building cost plus or minus
  any indicated market fluctuations.

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• MASS APPRAISAL..
•  
• The Mass Appraisal Process uses statistical
  analysis of valid sales, and their assessments,
  in relation to their sale prices, to check the
  accuracy of assessments. Two of the key
  components of this statistical testing are the
  Median Assessment to Sales Ratio (ASR) and the
  Co-efficient of Dispersion (COD).
• For single family homes, the Massachusetts
  Department of Revenue requires that the Median
  ASR be between .90 and 1.10. The COD must be less
  than 10.0. 
• The ASR is calculated by dividing the assessed
  value by the sale price.
• If a property assessed at 570,000 sells for
  600,000 the ASR would be .95.
• The overall MEDIAN is calculated by arranging
  all the ASR on individual sales in numerical
  order and finding the middle number.

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MASS APPRAISAL

• To calculate the COD of a group of properties
  that have been sold, you must find out how far
  each individual ASR is from the overall MEDIAN
  and find the average of those differences.
• If the MEDIAN for a group of sales is .97 and the
  ASR of a particular sale is .90, the ABSOLUTE
  DEVIATION IS .90 MINUS .97 OR .071
• The AVERAGE ABSOLUTE DEVIATION (ADD) is simply
  the average of all the ABSOLUTE DEVIATIONS for a
  given set of sales.
• The final step in the COD calculation is to
  divide the ADD by the MEDIAN and multiply the
  result by 100 to turn it into a whole number.
• EXAMPLE
• AAD .041
• MEDIAN .97
• COD (.041/.97) x 100 or 4.27

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COMMERCIAL/INDUSTRIAL VALUATION

• Properties are valued using a market adjusted
  cost approach
• The DOR requires that we develop a income
  approach as an additional approach to value
• Send out IE Forms each year
• Informative introduction letter
• I E form has clear instructions
• Automatic ATB dismissal for non-compliance
• Analyze I E data
• Develop/update our schedule of rents, vacancy,
  expenses
• Concentrate on the details of recent leases
• Become familiar with standard market based
  expense ratios
• Apply data to income approach section of software

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ABATEMENTS

• YOU MIGHT BE ENTITLED TO AN ABATEMENT
• If you find a discrepancy in the physical
  characteristics of your home in relation to what
  is on file at the Assessors Office (3 baths
  listed, when you only have 2, or a finished
  basement that you do not have).
• If several houses in your neighborhood similar in
  style, total building square footage and total
  land area to yours, sold for less than the
  assessed value of your property during the time
  period Assessors used for valuation purposes for
  the fiscal year.
• If several houses in your neighborhood similar in
  style, total building square footage and total
  land area to yours HAVE NOT sold recently, but
  have a significantly lower assessment than your
  property.
• Note other areas that should be considered for
  comparison purposes are year built, grade,
  condition, of bathrooms, etc.
•   Unfortunately, if your taxes are just Too
  High or the House down the street, just like
  mine, sold last month for less than my
  assessment, the abatement process may not be the
  appropriate route to lower your tax bill.

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PROPOSITION 2 ½ AND THE LEVY LIMIT
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HELPFUL LINKS..

• Information can be found in Chapter 58 of the
  Massachusetts General Laws, which covers General
  Provisions Relative to Taxation
• http//www.mass.gov/legis/laws/mgl/gl-58-to
  c.htm
• Information can be found in Chapter 59 of the
  Massachusetts General Laws, which covers
  Assessment of Local Taxes
• http//www.mass.gov/legis/laws/mgl/gl-59-to
  c.htm
• Assessors Online Data Base can be found at
• http//danvers.patriotproperties.com/defaul
  t.asp
• Assessing Department Web Page can be found at
• http//www.danvers.govoffice.com/