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Property Appraisal for Tax Purposes
Unlike an appraiser in the private sector who is hired to ascertain the value of one particular property as of a given date, the Assessor of Property's mission is much broader in scope. The goal of the Assessor is to estimate fair market value for all property in the county. Fair market value is defined as how much a property would sell for, in an open market, under normal conditions. To determine market values, the assessor must be familiar with all aspects of the local real estate market, such as: what different types of properties are selling for, local construction and repair costs, normal operating expenses, typical rents, and current financing charges for borrowing money to build or buy property.
The rules governing the tax appraisal process in Tennessee are based upon the same principles and procedures that are used throughout the appraisal profession. There are three basic approaches to the valuation of real property:
- The MARKET approach involves comparison of a property to other properties with similar characteristics that have recently been sold.
- The COST approach involves estimating the replacement cost of a structure, and adjusting that estimate to account for depreciation.
- The INCOME approach is an analysis of a property's value based on its capacity to generate revenue for the owner.
Frequently Asked Questions
- How is property appraised?
- There are three “Approaches to Value” that are used worldwide in the appraisal profession. These are the Cost, Income, and Market approaches. The Cost Approach calculates the cost to build a structure today, and then discounts that cost, for the age and condition of the building to arrive at a value. The Income Approach measures how much income a rented property will generate for its owner. The Market Approach compares a property, to sales of similar properties, to estimate a value.
- Which method does the Assessor use?
- The predominant method used by the Assessor is the Cost Approach. The Assessor establishes square foot costs for all types of buildings and structures and their amenities, then by using the Market Approach, the Assessor establishes depreciation factors ( based on sales ) to apply to those square foot costs. The Assessor also uses the Market Approach in statistical analyses to verify the cost figures established, are supported by the market ( i.e. sales ). The Assessor uses the Income Approach to value income producing properties, when the owner supplies the necessary income and expense data.
- What’s the difference between an Appraisal and an Assessment?
- An Appraisal is an
estimate of market value. An Assessment is the value on which taxes are
based. Some states assess 100 % of market value, so the Appraisal and
Assessment are equal. By law, Tennessee has “Fractional Assessment”
which means taxes are based on a fraction of the Appraisal amount.
Tennessee law dictates the following assessment levels:
Ratio Property Classification 25% Residential/Farm 40% Commercial/Industrial 30% Personal Property 55% Public Utility
- Who does the Assessor’s appraisals?
Since the Assessor is responsible for the “Mass Appraisal” of all properties in Montgomery County, he utilizes a staff of 12 to assist in different aspects of the mass appraisal process. The Assessor’s current staff is broken down as follows:
- 1 Chief Deputy Assessor
- 1 G.I.S Mapping Specialist
- 5 Data Entry Specialists
- 1 Personal Property Appraiser
- 1 Commercial Appraiser
- 2 Residential Appraisers (in the city)
- 2 Residential Appraiser (in the county)
- 1 In-House Appraiser
All members of the Assessor’s staff are crossed trained in various aspects of the mass appraisal process and work together as a team to fulfill the responsibilities of the Assessor’s office. The Assessor also has the resources of the State of Tennessee Division of Property Assessments ( DPA ) to assist in the mass appraisal process. The DPA assists the Assessor with oversight, legal resources, a system of checks and balances, as well as computer technology, and training.
- How often does the Assessor appraise my property?
- One of the Assessor’s responsibilities is to maintain the county’s appraisal records as accurately as possible. The Assessor strives to discover changes to a property, which affect that property’s value, and adjust the county’s appraisal records accordingly. If no changes occur, or changes have not been discovered, someone from the Assessor’s office will visit each property in the county once in-between the county-wide reappraisals.
- How often is the whole county reappraised?
- Montgomery County is on a 5-year reappraisal cycle. County-wide reappraisals occurred in Montgomery County in 1991, 1997, 2003 and 2009. The frequency of the reappraisal cycle can be changed by a vote of the County Commission. Consequently the frequency of reappraisals varies from county to county. Some counties are on a 4-year cycle, others on a 5-year cycle, and still others on a 6-year cycle. Montgomery County is in their first 5-year reappraisal cycle.