General Discussion

I won't argue with anything else you said but, a common misconception is that when the assessed value (fair market value as determined by your city/town assessor - i.e. the appraiser that works specifically for the taxing body(s)) goes up, your taxes will automatically go up. It actually has nothing to do with your individual property tax burden. The city/town/county operating budgets are set by their governing boards. The budget represents the total amount of expenditures the governing bodies will require for services, capital improvements, schools, etc. The assessment process determines the total equalized value of all real property in the taxing district. Then a mill rate is calculated. The mill rate is a figure representing the amount (think: percentage of) per $1,000 of the assessed value of property, which is used to calculate the amount of property tax owed.

Consider this: if the overall fair market value of all properties goes up, but the operating budget goes down, the mill rate will be adjusted downward and even though the fair market value of your property as determined by the assessor has gone up to reflect the current market value, your taxes will actually go down. This rarely happens though because budgets almost never go down because of general inflation and wage growth, the growth of the cost of services due to population growth, new services and the expansion of existing services, etc. One thing the assessor needs to be very careful of however is that the values do indeed reflect the general real estate market value increases/decreases. Yes, decreases happen. 2008 was a good example but even then, your taxes didn't go down, they simply adjusted the mill rate to meet the overall budget requirements. The other, and in some ways the most important thing the assessor is careful of, is that all properties are considered equally. In other words, if you have a 6 room 3 bedroom 1 1/2 bath 1,200 square foot ranch with a full basement and a 2-car attached garage on 1 acre, the person on the other side of the taxing district (city/village/township, etc.) with the a 6 room 3 bedroom 1 1/2 bath 1,200 square foot ranch with a full basement and a 2-car attached garage on 1 acre better damn well have the same valuation and be paying the same amount of taxes or, there will be hell to pay! For the assessor…

Of course, there really are no two properties that are exactly the same so adjustments are made for features and amenities and the value or those features and amenities are extracted from the market. We as appraisers for the lending industry do that “by hand” but assessors use (computer) models designed for mass appraisals as they are dealing with what is referred to as “a universe of properties”. They collect specific data points such as overall square footage, number of bedrooms and baths, garage and other car storage capacities, basement rooms and finished area, etc. They also have a quality of construction and property condition rating system (we do too) and the properties get assigned a numerical rating based on those factors too. Finally, the models are “honed” so that the result reflects the sales in the actual real estate market so, assessors spend a great deal of time on that because most states require that ad valorem valuation be no less than 90% of market value. In general, almost all ad valorem fair market values (property values for tax purposes), at any given time, are lower than the actual value of the property.

Sound clear? (sarcasm…)