How are the real estate appraisals for ad valorem taxes done?

Appraisal process

Throughout the year information about each property is collected and reviewed, sales analyzed and appraisal models refined for the annual appraisal.

Classification into types

The Constitution of the State of Kansas requires that property be classified according to its use for tax purposes. The classes of property are:

• Residential property is used for long-term residences whether it is a single family dwelling, apartment complex or a long term adult care facility. The assessment level of this class of property is 11.5%.
• Agriculture use property is land and buildings devoted to agricultural uses. Ag land is assessed at 30% of its Use Value appraisal. Ag buildings are assessed as any other commercial building at 25%.
• Vacant lots is the classification for land with no beneficial improvements. The assessment level for vacant land is 12%.
• Not-for-Profit property owned and operated by organizations not subject to federal income taxes pursuant to certain 501 sections of the federal internal revenue codes. Not-for-profit property is assessed at 12% of its market value.
• Public Utility property is property owned and operated by a public utility such as telephone or electric utilities excepting railroad property. Public utility property is assessed at 33% of its appraised value using an income approach by the Kansas Department of Revenue.
• Commercial property is the classification of parcels with commercial or industrial use. The assessment level of commercial property is 25% of market value.
• Other property that is not otherwise specifically subclassified is classified as other property. This class of property is assessed at 30% of market value. They are further classified as rural or urban.

How is the real property appraised?

Real property is appraised for tax purposes at 100% of its fair market value utilizing the cost, income and comparable sales approaches to value with the exception of agricultural land. Ag land is appraised for taxes at its use value based on its income producing capability. It is also appraised at its fair market value. However, the fair market value is not used as a tax basis.

Special circumstances

Incomplete new construction

The appraisal date for all real estate parcels is January 1st of each year. The amount of construction completed as of that date is estimated and appraised. In Kansas, a property does not have to be complete to be included in the tax basis. If a structure has not been started until after January 1st and has any or all of the structure completed during that year, it is not appraised for tax purposes until the following year.

Demolition or disaster during the year

The date of ad valorem appraisals is January 1st of each year. If a property is damaged or destroyed during the year, the appraisal for taxes is not adjusted. If it is still damaged on January 1st of the following year, the property is appraised in its damaged state.

2008 RESULTS OF MARKET ANALYSIS

Results of the market analysis for Miami County for the 2008 annual appraisals published pursuant to KSA 79-1460a are as follows:

A paired sales analysis based on homes selling twice between January 2005 and August 2007 indicated an overall increasing trend of 5.49 average and 3.13 median percent per year. Individual trends by region are also utilized.

The residential real estate market in Paola of homes built after 1945 indicates an appreciating trend of 2.06% per year for time. The average selling price for homes in that category increased 1.57% per square foot during the 2005 through 2007 market term. Dwellings built before 1945 had an annual increasing trend for time of 2.45%. The average sale price per square foot increased 3.81%.

A study of the residential real estate market in Osawatomie indicates a 3.23% per sqft increase in the average sale price. The time adjustment is an increase of 2.37% per year.

The residential real estate market in Louisburg and Spring Hill indicates a 2.67% per sqft increase in the average sale price.

The average time trend is an increase of 2.12% per year.

The increase in the average selling price of homes in the rural areas of Miami County was 4.46% per sqft for the study period.

The time trend used was an increase of 1.81% per year.

In all residential models, increases in selling prices of vacant land and dwellings and changes in other model coefficients account for market changes not attributable to time trend.

A paired sales analysis of vacant land sales occurring from 2000 through 2007 indicates that there is an overall increasing trend of 12.8% per year.

A paired sales analysis of the commercial real estate market utilizing only properties which had sold twice during the 2000 through 2007 years indicates that the market has an increasing trend of 4.7% per year overall.

The result of the market analysis concludes that properties are generally worth more currently than in previous years. Individual property values may change by more or less than the indicated trend due to changes in other model coefficients, availability of more comparable sales and changes in market preferences.

In accordance with the provisions of K.S.A. 79-1476, the Division of Property Valuation is required to annually furnish each county the results of its study relating to changes, if any, of the use-value appraisals of agricultural land. Ag land values change as a result of several factors including cropping practices, commodity prices and production costs. For the 2008 appraisal, agricultural land was delineated on the basis of its use and soil type in accordance with the official soil survey of Miami County. Changes may occur on individual properties due to reclassification and re-delineation of acres in a soil type.

The results of the study relating to Use Value appraisals of agricultural land completed by the Division of Property Valuation when compared to the prior year’s rates indicates value changes for cultivated land of $26.00 lower to $8.00 higher per acre by soil type; an overall decrease of 9.5%. The overall change in all grassland values is $6.00 lower to $8.00 lower per acre by soil type resulting in an overall decrease of 6.8%.

Statutory Compliance

In 2007 Miami County was rated by Kansas Property of Valuation Department at 100% compliance to Kansas Statutes governing Property Appraisal process. The County compliance ratings have consistently maintained the highest standard possible since the Kansas State Board ordered reappraisal in 1994.

Annually Kansas Property of Valuation Department conducts statistical testing of the appraised values against actual home sales. This ratio study for 2007 indicated residential appraised values averaged 98% of sale prices of valid arm’s length transactions. The commercial ratio was 99% and the ratio for vacant land appraised value versus sale price was 99%. The overall ratio of all classes of property was 98.7%
The chart below illustrates current and previous years’ ratio information.