Appraisal vs. Assessment
by Jesse Lochman, State Certified Trainee
One complaint I hear frequently from property owners is about assessments and taxes. Even if taxes are properly assessed, no one is happy to pay them. The discontent is even greater when they are taxed at an amount far greater than they should be. In those cases, what can property owners do if they believe they are being overtaxed?
Before we can understand that, we must first examine how real estate taxes are determined. In Missouri, an assessor is elected in each county. The assessor then assigns each parcel a “market value”, which is then “assessed” at a percentage of that market value based upon its use. This percentage is set by the Missouri State Tax Commission at 19% for residential real estate, 12% for agricultural, and 32% for commercial. (Personal property is assessed and taxed separately in Missouri.) Then the assessed value is multiplied by the tax levy, which is determined by local districts. An example would be as follows:
Your house is assessed with a “market value” of $100,000, and your tax levy is 5.70%. Your taxes are figured as $100,000 x 19% x 5.70% = $1,083. If you think this is too high, you only have one course of action. The tax levy and assessment percentages are non-negotiable, but you can dispute the assessor’s market value of your home.
Assessors must find efficient ways to assess properties due to the high number of parcels to assess. For example, Marion County Missouri has a population of about 29,000 people, and has over 15,000 distinct parcels on the tax rolls, most of which must be assessed (non-profits and government buildings are not taxed). This is no small task. Additionally, due to the time constraints of having so many properties to assess, assessors usually cannot enter the structure, so the valuation is done by viewing property from the street. While the Missouri State Tax Commission notes on their website that they consider the cost, sales comparison, and income approaches to value, most properties are taxed using the cost approach, where the buildings are sketched in a software program, an effective age is assigned, and the program automatically estimates the “market value”. This is an efficient way for the assessor to cover the entire county.
In addition to time constraints, assessors are often limited by red tape and dated software. These problems can prevent them from considering other important non-physical types of depreciation, such as functional and external obsolescence. Furthermore, in the mostly rural areas where we work, assessors are generally most familiar with conventional residential construction methods and cost data, and may not be as well versed in unconventional construction or specialized commercial properties. Evaluating the style of those construction methods and being familiar with the specific challenges associated with commercial real estate valuation, may not be possible in every case given their limited resources.
If you think your property is being over-taxed, one way to help to persuade the assessor to reduce the assessment is to contract an appraiser to provide an opinion of value. Appraisers act as third parties to provide a non-biased opinion of value that carries much more credibility with assessors than a homeowner’s opinion. The only part of the tax-appeal process we assist with is the valuation of real estate. We recommend hiring a lawyer to represent you should you choose to appeal, although you can represent yourself. At Spurgeon Appraisals, we have experience with complex property tax appeals, and our appraisals have been used by our clients to successfully lower their tax obligations. Call us today to begin your own tax appeal.
Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.
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