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.
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Property Tax
Budget
minusRevenues from other sources
Divided byTotal Assessed Value
Tax Rate Formula
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÷
Total Assessed Value
The numerator in developing a tax rate
Budget
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The denominator in developing a tax rate
Total Assessed Value
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Assessed Value
÷Market Value
Assessment Ratio
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Revenue from Taxes $10,000,000Assessed Value $500,000,000
What is the Tax Rate?
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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?
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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%
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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
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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
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EAT Triangle
Assessment Ratio
Effective Tax Rate
Tax Rate
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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.
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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?
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General Practices
What is June 15th?
What is June 1st?
Improvement Factors are adopted by ______?
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Blast from the Past
And what was 32.0% to 36%?
What is July 1st?
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Blast from the Past
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Questions?
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Appraisal Process
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What is an appraisal?
An appraisal is an opinion, or estimate, of value.
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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.
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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
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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
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Definition of the Problem
What work is necessary to produce fair and equitable valuations for property tax purposes.
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Scope of Work
Should have tentative HABU Inventory of data required to be collectedConsidering which approaches to valueAllocation of time and resources
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Preliminary Survey & Planning
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Data Collection & Analysis
Analysis of DataCost ManualsDepreciation SchedulesHistorical CostsImprovement FactorsAdjustmentsMultipliers
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Appraisal Process
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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
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Do I need to Know This?
Three Approaches to Value
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Appraisal Process
Reconcile to an indicated Value Conclusion
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Appraisal Process
Questions? How about a Break?Questions after the break……………..
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Appraisal Process
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BREAK
Were there questions during the break?
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Appraisal Process
Reports Verbal WrittenNarrativeForm
USPAP CompliantCredible
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Appraisal Process
Questions?
How about a quiz?
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Almost Done
The Property tax is an Tax; it is based solely on Value
QUIZ
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
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Nevada law defines the assessment ratio for all property subject to taxation as what percentage of taxable value?
QUIZ
35%
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
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The Right of Government to regulate property to protect the public health is_________________?
QUIZ
Police Power
The right of government to take private property for public use with just compensation is ________________?Eminent Domain
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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 _________________?
QUIZ
Progression
A built-in oven in a house is an example of a _______ while a portable dishwasher is an example of ________________?
Fixture
Chattel
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Market value is the present worth of all anticipated future benefits. This reflects the principle of _______________?
QUIZ
anticipation
______________ is the highest possible degree of ownership.Fee simple estate
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Some private limitations on property are: _______________? _______________? _______________? _______________? _______________? _______________?
QUIZ
Co-owner’s rights
______________ is the highest possible degree of ownership.
Fee simple estate
Deed restrictionseasementsmortgages
Leases Liens
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The Four forces that affect value are? P E G S
QUIZ
hysicalconomic
overnmentalocial
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Neighborhoods can be ______, ________, ________, or ________.
QUIZ
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Stable
Highest and best use criteria, in order are:
QUIZ
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L_______
P______
F______
M_____
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General DataTrends Affecting Data
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General Terms
Just tell me which terms are on the test!
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General Terms
The six basic rights associated with property are:
_______________? _______________?
_______________? _______________?
_______________? _______________?Do Nothing With
Enter
Give Away
Rent (Lease)
Use
Sell
Four powers of government limit the full exercise of the property rights
Police Power Eminent Domain Taxation Escheat
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General Terms
Which of the following rights of government derives from police power?
Escheat
Taxation
Eminent domain
Zoning
Estate planning
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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
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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.
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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.
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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
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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
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General Data
Now……How would you answer this question?!?
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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.
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General Data
Escheat Right of government that gives the state ownership of a
property when there is no longer an owner.
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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.
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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.
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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.
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General Data
The principle of __________________________ is the basis of the three approaches to value.
Substitution
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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)
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General Data
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BREAK
Elements of Value (Do I need to know this?)
Desirability Utility Scarcity Transferability
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General Data
Highest and Best Use Analysis -As Vacant and As Improved
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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.
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NPV (Net Present Value) Present Worth of future Benefits
What makes something have value?
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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.
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General DataMarket Value
Is Cost and Price and Value the same thing?
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General Data
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BREAK
Questions?
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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
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Principle of Anticipation
Expected Future Benefits
VALUE12 Economic Principles of Market Value
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Principle of Balance
State of Equilibrium
VALUE12 Economic Principles of Market Value
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Principle of Competition
Availability in harmony with demand
Principle of Change
Market value is never constant
Principle of Conformity
Reasonable similarity among improvements
VALUE12 Economic Principles of Market Value
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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
VALUE12 Economic Principles of Market Value
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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
VALUE12 Economic Principles of Market Value
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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
VALUE12 Economic Principles of Market Value
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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
VALUE12 Economic Principles of Market Value
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Elements of DemandConsumer tastes and
preferences, consumer income, price of related commodities, consumer expectations and
price of the commodity
Supply & Demand
VALUE12 Economic Principles of Market Value
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Elements of Supply
Cost of production, price of other goods, entrepreneur
expectations and number of sellers in the market
Supply & Demand
VALUE12 Economic Principles of Market Value
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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
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HABU & Obsolescence
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More Questions
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SCHEDULE
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Are We Done?