Central Appraisal District
Wharton County
APPRAISAL PROCESS
- OVERVIEW
- Definition of Property Tax – A tax
that is measured by the value of property that a taxpayer owns. Property
taxes are also called ad valorem taxes.
Ad valorem is a Latin phrase
that means “according to value”.
- Sources of Law
i. Civil Statutes – Laws passed
by the State Legislature
ii. The Property Tax Code – The primary
source of law regarding operation of the Texas Property Tax system.
iii. Case Law – Laws created
by decisions from the appeals court and Supreme Court.
iv. Attorney General’s Opinions – Written
opinions that often carry the force of law for appraiser districts.
v. State Agency Rules – Governmental
entities treat such rules as law.
- Tax Calendar
i. Appraisal Phase – (October 1
through May 15)
1. Rendition
submission
2. Exemption
application
3. Discovery
and appraisal of new property
4. Reappraisal
of existing property
5. Send
appraisal notices
ii. Equalization and Review Phase – (May 15
through July 20)
1. Appraisal
Review Board reviews appraisal records
2. ARB hears taxing
unit challenges and taxpayer protest
3. ARB sends
final orders
4. ARB approves
the appraisal records
5. Chief
Appraiser certifies the appraisal roll to the TAX UNITS
iii. Assessment Phase – (July 25
through October 1)
1. Assessor
receives the appraisal roll
2. Assessor
calculates the effective and rollback rates
3. Taxing unit
publishes required publications
4. Taxing unit
governing body adopts a tax rate
5. Taxes are
calculated and Tax bills mailed
iv. Collection Phase – (October 1
throughout the year)
1. Collection
of current and delinquent taxes
2. Mailing of
required delinquent notices
3. Legal action
taken to secure payment of taxes
- APPRAISAL
- Definition of Market Value – The
price at which a property would transfer for cash or its equivalent under
prevailing market conditions if:
i. Exposed for
sale in the open market with a reasonable time for the seller to find a
purchaser;
ii. Both the
seller and purchaser know of all the uses and purposes to which the property is
adapted and for which it is capable of being used and of the enforceable restrictions
on its use;
iii. Both the
seller and the purchaser seek to maximize their gains and neither is in a
position to take advantage of the exigencies of the other.
- Steps in Developing the
Appraisal Records
i. Discovery – Determine
the property type (real or personal)
and general classification (commercial,
residential, inventory, agricultural….). Appraisers should be alert to
clues that indicate the presence of taxable value. Information sources that may
be helpful include deed records, subdivision plats, zoning records, building
permits, telephone listings, newspaper advertising, exemption applications,
real estate brokers, developers, and civic organizations. Renditions also serve
as a good source for the discovery of taxable property.
ii. Listing – The property
is classed and assigned an identification number. Information included in the
records may contain account number, taxing units, land description and value,
improvement description and value, inventory and/or fixtures description and
value, exemptions, and improvement sketches. Listings are maintained in digital
data files and may be produced in the form of appraisal cards and/or listings.
iii. Appraisal – Law requires
that property be reappraised at least once every three years. It is this
districts policy, that under current market conditions, that all property be
reappraised each year. Property is valued at its market value as of January 1.
However, inventory owners may have their property appraised as of September 1
of the preceding year if a written request is filed by July 31st of
the prior year. Property is appraised according to full market value unless the
property is qualifies for special appraisal. Even then, the market value
remains on the property records along with the special use value. Appraisers
must use generally accepted appraisal methods to find market value. These
methods include the market approach, the income approach, and the cost
approach. Appraisers must use similar techniques to appraise similar
properties. When mass appraisal methods the appraiser must comply with the
uniform standards of professional appraiser practice (USPAP). Mass appraisal
means valuing a large number of similar properties by applying value schedules
for typical properties to data about specific properties.
iv. Situs and Jurisdiction to Tax – Jurisdiction
to tax refers to the power of the state to tax real and personal property.
Finding the correct location of property for tax purposes is “determining
situs”. In general, a taxing unit has authority to tax property with situs
within its boundaries on January 1. Personal property, due to its nature, is
given four rules to determine situs by The Property Tax Code:
1.
Located in the unit on January 1 and is there for
more than a temporary period.
2.
Normally resides in a taxing unit but is temporarily
outside the unit on January 1.
3.
Usually returns to a place in the taxing unit
between uses outside the unit and is not located in other place for more than a
temporary period.
4.
The owner lives in or his or her principle place of
business is in the taxing unit, and the property is not taxed by another unit.
v. Exemptions – Under the
Texas Constitution, all real and tangible personal property that the state has
jurisdiction to tax is taxable unless exempted by law. The Texas Constitution
directly exempts some properties. Legislative statutes exempt others. An
exemption is an exclusion of all or part of a property’s value from taxation.
The qualifications and administration of exemptions is a detailed and complex
process. The Property Tax Code should be utilized to ensure that all rules and
regulations are followed. Most exemptions are listed in Section 11 to include
the following: Residence Homestead, School Tax Ceilings, Homestead Caps, Public
Property, Religious Organizations, Private Schools, Veterans, Historical Sites,
Freeport, Solar and Wind Powered Energy Devices, Tax Abatements, Nonprofit
Water Supply, Pollution Control, Low Income Housing.
1.
Application
– A person must apply in writing to receive an exemption. Usually, once the
exemption is granted, the person does not need to reapply unless the chief
appraiser requires a new application. Applications must be turned in before May
1 of the tax year. The chief may extend the deadline for taxpayers who submit
written request prior to the filing deadline.
2.
Actions
on Applications – The chief appraiser may approve the application. The
chief appraiser may allow a modified exemption and notify the taxpayer within
five days; or the chief appraiser may disapprove the application and request
more information. The chief appraiser may deny the exemption and notify the
taxpayer in writing within five days after the denial. Exemptions
determinations may be protested to the ARB.
An Appraisal manual is designed to
assist in the mass appraisal of Improvements to real property. It is a
mass-appraisal tool based on a classification system by which improvements are
grouped and then valued according to a schedule drawn from sales and/or costs.
The basic steps in using this manual for
appraising are as follows:
1.
Determine
the exact location of the subject property, using an ownership map. This should
be verified at the time of the site visit.
2.
Visit
the subject property, record all information required by the appraisal card.
3.
Determine
in which use-type category the subject property belongs.
4.
Assign
the subject property to a quality/class within its use-type category on the
basis of the information recorded on the appraisal card.
5.
Modify
the value by the appraiser’s estimate of depreciation.
6.
Make
adjustments for the additives that are at variance with the standard
specifications or typical features of the subject property’s class.
7.
Finally,
assign a neighborhood modifier if needed to adjust the value of the subject
property.
The steps outlined are discussed in
greater detail below.
INSPECTION
The
appraisal of improvements involves an on-site inspection of each property by
the appraiser. The pertinent data obtained through the inspection should be
recorded on the appraisal card.
During
the inspection, the appraiser should measure and diagram the building. Internal
walls and their measurements only need to be shown when they represent a change
in use or construction type or a change in quality of construction from one
area of the building to another. Each floor level should be shown on the
diagram. Separation of the basic structure from such appurtenant structures as
porches and garages should be shown on the diagram. A separate appraisal card
should be used for each major structure on a parcel of land, but such minor
structures as tool sheds can be included on the appraisal card with a major
structure.
The
appraisal card should accommodate the recording of such general construction
features as those shown in the basic specifications for the classes in the
classification system.
A
detailed step by step process for a proper field inspection is in the Field
Appraiser’s Guide.
CLASSIFICATION
Incorporated
in the appraisal manual is a classification system based on the most common
use-type improvements in the area. A quality/class code is assigned to each
typical improvement in the classification system. The appraiser should use the
system for guidance in classifying each property.
There
are two district divisions in the classification system: use-type and
quality/class. Both divisions of the system are used in determining the
classification of any particular structure.
USE-TYPE
Use-type
classification separates structures according to their usage. For example, a
residence is one use-type and a store is another. Use-type classification should
be based on the actual use of each structure. Listed below are the use-types
used in the manual and their codes.
|
CODE |
USE-TYPE |
|
A |
Residence, Single-Family |
|
C |
Vacant |
|
D |
Rural Land |
|
E |
Rural
Buildings on Ag land |
|
M |
Mobile
Homes |
|
B |
Multi-Family |
|
F |
Commercial/Industrial |
|
J |
Utility |
|
L |
Personal
Property |
|
X |
Exempt |
Codes:
A – C – D – E – M
Property Inspections go to
Residential
Rural Land Appraisal Department
Codes:
B – F – J – L – X
Property Inspections go to
Commercial
Appraisal Department
The
Class/Quality separate structures according to their type of construction,
quality of construction and in some cases specific classes of structures within
the broader use-type classification. Class/Quality classification is indicated
by an alphabetical code.
F=Frame,
V=Veneer/Brick, followed by a quality rating:
VG-
Very Good
G- Good
A- Average
F- Fair
L- Low
Photographs
of typical buildings are shown with each set of specifications to assist the
appraiser in finding a building comparable to his subject. This is available in the Field Appraiser’s
Guide.
SPECIAL BUILDINGS
Some
structures, due to their unusual types of construction, do not correspond to
any category in the classification system. These include nineteenth-century
houses, mansions and such novelty houses as underground houses or other houses
or other structures of highly unusual shape or design. Such structures are not
generally suitable for mass-appraisal techniques and usually must be appraised
on a case by case basis. The appraiser should realize that the unusual nature
of these properties means less information is available for appraising them,
and thus the estimate of value will be less reliable than estimates for other
properties.
The
best way to appraise such property is by comparing recent sales of similar
property. This can be especially true of nineteenth-century structures. Many
older towns have several of these, and there may be an active market for them.
The appraiser should attempt to discover the features that have the greatest
influence on the sales price. The
greatest influence on the sales price of a nineteenth-century structure may be
the amount of irreplaceable gingerbread trim or the date of the most recent
renovation. The appraiser may discover that the total square footage is of less
importance to the buyer than it is in more conventional structures. Discussion
with buyers, sellers, brokers, and loan officers should be helpful in
discovering the factors influencing sales prices.
On
modern but unconventional structures, the appraiser may be able to use the cost
approach if sales data are not available. In using the cost approach, the
appraiser should deal with reproduction-cost new rather than replacement-cost
new because most special types of structures can be replaced with less
expensive materials to build conventional structures that have equal utility.
The use of reproduction-cost new ensures that the more costly special features
of the structures’ construction are included in the value estimate.
The
most difficult step in the cost approach on special structures is the
estimation of value lost through depreciation. The loss of value due to physical
depreciation and economic depreciation is estimated just as it would be for any
other structure. Functional obsolescence presents the greatest difficulty. A
structure of unique constructions of design may be functionally obsolete on the
day it is built if it is not in harmony with current tastes and norms. On the
other hand, a unique structure may have special features that give it greater
functional utility than that of conventional structures. The example of an
underground house illustrates this point. Because significant savings on energy
costs can be realized through the use of an underground house, it gains
functional utility. If, however, the appearance and design of the house make it
unappealing to potential buyers, the house suffers for functional obsolescence.
There
is no easy or standard method for measuring either functional obsolescence or
increased functional utility in structures for which there is not an active
market. The appraiser must simply use his judgment and try to gather as much
information as necessary for the builders, sellers, brokers, and financers of
such structures.
INCOMPLETE STRUCTURES
Incomplete
structures-Because our statues require that only property in existence as of
the assessment date be taxed for a specific year, it is necessary that
buildings under construction as of that date be taxed for only what existed on
the property as that time. This is accomplished by visiting the property on or
near the assessment date and establishing a percent of completion accordingly.
As a guideline for establishing percent of completion, the following table has
been prepared. The appraiser may have a
more detailed breakdown at the property site.
See the Field Appraiser’s Guide
|
10-30% |
Foundation |
Includes
all work from beginning up to, but not including, raising the exterior walls |
|
30-40% |
Open Frame |
Includes
all framing work in the exterior walls, ceiling, roof, and interior bearing
walls. |
|
40-50% |
Boxed In |
Includes
all roof and exterior wall covering or sheathing and primer coat of paint if
required. |
|
50-60% |
Weather-Proof |
Includes
installing all openings and primer coat of paint if required and a dried-in
roof. |
|
60-70% |
Interior
Wall |
Includes
raising interior walls and interior wall ceiling covering. |
|
70-80% |
Trim |
Includes
all mill work and cabinets |
|
80-90% |
Paint |
Includes
all painting, sanding, and finishing. |
|
90-100% |
Finish |
Includes
all clean-up, hardware, and floor finish. |
DEPRECIATION
Depreciation
is loss in value due to any cause. It is the difference between the value of a
structural improvement or piece of equipment and its reproduction or
replacement cost as of the date of valuation.
Physical
depreciation is loss in value due to physical deterioration. Functional
obsolescence is loss in value due to lack of utility or desirability of part or
all the property, inherent to the improvement or equipment. Thus a new
structure or piece may suffer depreciation when built.
Economic
obsolescence is loss in value due to causes outside the property and
independent of it, and not included in the tables.
The
effective age of a property is its age as compared with other properties
performing like functions. It is the actual ageless the age which has been
taken off by face-lifting, structural reconstruction, removal of functional inadequacies,
modernization of equipment, etc. It is an age which reflects a true remaining
life for the property, taking into account the typical life expectancy of
buildings or equipment of its class and usage. It is a matter of judgment,
taking all factors into consideration.
Extended
life expectancy is the increased life expectancy due to seasoning and proven
ability to exist. Just as a person will have a total normal life expectancy at
birth which increases as he grows older, so it is with structures and
equipment.
Remaining
life is the normal remaining life expectation. It is the length of time the
structure may be expected to continue to perform its function economically.
Percent
good equals 100% less the percentage of cost represented by depreciation. It is
the present value of the structure or equipment at the time of appraisal,
divided by its replacement cost.
See
Depreciation guide in the Field Appraiser’s Guide to proper inspections.
Appraisal
Review Board
INTRODUCTION
The
Appraisal Review Board (ARB) is a time period between May1st, and
July 20th, of every year.
Appraisal notices are mailed out every year around May 1st. At this time the taxpayers are able to
protest their property value, denial of an exemption, being taxed by the wrong
entity(s), and/or not receiving an appraisal notice. Appraisers are given the opportunity to speak
with the taxpayers concerning any issues that the taxpayer may have. The taxpayer is also given the opportunity to
present their case in front of the Appraisal Review Board.
APPRAISAL REVIEW BOARD
PROCESS
1.
What is an Appraisal Notice
a. Appraisal Notice – A notice is
a written document that is sent to a property owner to advise the owner of a
matter related to property taxes. The property owner’s right to notice of
actions affecting a property’s value is one of the cornerstones of the property
tax system. A “Notice of Appraised Value” is a notice that informs the property
owner of the proposed value on his property. The chief appraiser sends notices
of appraised value before submitting the appraisal records to the ARB.
b.
Section 25.19 of The Property Tax Code requires a
notice if:
1.
The property owner renders a lower value than that
placed on the property.
2.
The property value has increased since the prior
year.
3.
The property was not on the appraisal roll last
year.
4.
The property is reappraised
5.
The property has changed ownership.
6.
The property owner requests a notice.
c. Items included on the notice
include
1.
Separate appraisals of land and improvements.
2.
List of taxing units which the property is taxable.
3.
Appraised value of the property in proceeding year.
4.
Assessed and taxable value in the preceding year for
each taxing unit.
5.
Appraised value of the property for the current year
and the type and amount of each exemption.
6.
Prior year’s tax rate for each unit
7.
Estimated tax due for current year
8.
Explanation of the time and procedure for protesting
value
9.
Protest form with mailing instructions
10.
Date and place of ARB hearings
2. What is
a protest?
Taxpayers may file a notice of protest before June 1
or 30 days after the Appraised Value Notices are mailed, whichever is later. An
ARB correction or omitted property notice must be protested within 30 days.
Normally it is the property owner that files the notice; however there are some
occasions that others may file a notice. Some examples are; a person who rents
the property, a previous or future property owner, and/or a tax agent. A tax
agent may represent the property owner with an Affidavit.
a. Taxpayers
have the right to protest the following issues at and ARB hearing;
1. The
appraised value of property if the taxpayer believes is over appraised;
2. Unequal
appraisal of property in comparison to the median appraisal level of other
property in the district;
3. Inclusion of
property on appraisal rolls;
4. Denial of
partial or whole exemptions;
5. A
determination that property does not qualify for special-use appraisal;
6. A
determination that a change of use has occurred on previously qualified
agricultural or timber land;
7. Identification of the taxing units in which
the property is taxable;
8. Determination
of ownership;
9. Failure of
the ARB or chief appraiser to send required notices; and
10. Any other
appraisal district action that applies to a property owner and adversely
affects the owner.
b. The ARB may
only make decisions based on the above circumstances. It will not hear cases
about the tax rates, payment policies, exemption adoption, and other issues
that are the responsibility of the taxing units.
c. The property
owner also has the right to speak to their property appraiser, and/or the
deputy/chief appraiser. This is also
known as an informal hearing. At this time, the appraiser may make any changes
they feel necessary, or they may also explain the appraisal process. The
appraiser will also need to show evidence that explains the reasoning for the
judgment based on the property. The taxpayer may also provide evidence that may
affect judgment on the property.
HOW
TO PROCESS A PROTEST
1. Once the
appraisal notices are mailed, the protests will begin to return. The protest
will need to be entered into the system.
2. The protests
are filed in the order that they were entered into the system, and filed in
file boxes.
3. At this time
the appraisers may contact the taxpayers and set an informal meeting with them
to discuss the issues that were protested. At this time evidence is provided by
either the property owner or appraiser to support their opinion of value. If a
decision is not met, or if the taxpayer does not agree with the appraiser, they
may request to be heard in front of the ARB.
If a decision is met, then the taxpayer may sign a withdrawal or settlement
and waiver.
4. A Notice of
Protest Hearing is sent 15 days prior to the hearing date. This will allow the taxpayer and the
appraiser to gather their evidence that will support their opinion.
5. Once the
case is heard in front of the ARB, the board determines judgment. After this another letter is sent, either a
Final Order No Change, or Final Order Change.
IMPORTANT
THINGS TO KNOW
1. All
paperwork received concerning protest must be filed and kept with the original
protest.
2. A copy of
all supporting evidence that is sent from the taxpayer or tax agent must be
provided to the assigned appraiser.
3. Copies of
all correspondence must be kept with the original protest, and filed.
Schedules are printed prior to the ARB hearing
dates. Copies will need to be made and distributed to all appraisers, person(s)
at the sign in desk, all board members, and ARB Secretary
SALES ADMINISTRATION
INTRODUCTION
Acquiring
sales and entering them into the system is a very important part of the
appraisal process. A number of sales can
give justification to property value increase or decreases, and/or what type of
market that we may have.
Some
of the items that may be of concern are, the selling price, square footage,
additional improvements, or additions, increased land sizes, and or other items
that may constitute for the appraiser to re-inspect the property.
The
other items that sales may show are how the property sale is financed. There
are several different ways that a property can be financed, this too can affect
the way that a property is appraised. For instance a foreclosed property
selling price will not have an affect like a home that is sold as a typical
sale.
DISTRICT SALES LETTERS
District
sales letters (DSL) are produced after a deed transfer of property is
conducted. A DSL is printed out on every
transfer except for Wills, probate, and/or divorce transfers. Every week DSL are mailed out to the property
owners. The district does not require that the property owner return the DSL.
The district receives the DSL daily. DSL
need to be worked periodically throughout the week. Once they are worked, we filed them according
to the filing dates.
HOW TO ENTER A DISTRICT
SALES LETTER
a. District sales letters can be worked
weekly. They can be entered on a daily
basis, however they are found to be easily entered as a group.
b. There are questions on the DSL that
can give vital information to the appraisers.
Some of the information that would be vital is for example, personal
property.
c. Some DSL are produced on commercial
transfers. These transfers can and do
involve personal property. Personal
property will affect the sales price that you will enter into the system. Personal property cannot be included in the
sales price. An adjustment will need to be made in order to capture the true
purchase price of the property. A copy of the DSL will need to also be provided
to the Real Estate Appraiser and the Personal Property Appraiser.
d. There is also a question on the DSL
that will make you aware of whether or not the sale is typical or
non-typical. It may or may not be either
a relative or foreclosure sale. If it is
either one of these, then the sale will need to be reviewed. In a market of foreclosures, the market area
should be reviewed to see the impact in a neighborhood of foreclosures.
e. After all of the DSL are entered, they
will need to be filed. They will need to be filed in deed date order, by the
month.
Appraisal
Appraisal Methods
The
legislature authorizes appraisal districts to use a method called mass
appraisal to calculate the value of a large number of properties. In a mass appraisal, the appraisal district
classifies categories of properties according to a variety of factors.
Using
data from recent property sales, the appraisal district determines the value of
properties in each class. They consider
differences such as age, location and use to appraise all the properties in
each class. The market value of a
residence homestead must be determined solely on the basis of its current use
regardless of its “highest and best” use.
This means that your homestead must be appraised as such, even if it is
located where its best use might be as the site for an office building or a
parking lot for a mall. In addition,
individual characteristics of property must be considered in developing
appraisal models and schedules, as well as adjusting values as a result of
taxpayer protests.
The
appraisal district may use three common methods to value property:
Market Data Comparison
Approach: The market
approach asks, “What are properties similar to this property selling for?” The market approach is most often used to
appraise residential property.
Income Approach: The income approach asks, “What
would an investor pay in anticipation of future income from the property?” The income approach is usually used to
appraise types of properties that generate income, such as offices, hotels or
retail centers.
Cost Approach: The cost approach asks, “How much
would it cost to replace the property with one of equal utility?” This method is often used to appraise types
of properties that are not frequently sold or properties under construction.
The
value of property is an estimate of
the price for which it would sell on Jan 1.
The appraisal district compares your property to similar properties that
have sold recently and determines its value.
A sale cannot be considered as a comparable if it is made more than 24
months before the appraisal date, unless there are too few comparable sales
within that time span to constitute a representative sample.
Comparable
sales must be appropriately adjusted and must be similar in factors such as
location, lot size, improvements, age condition, access, amenities, views,
income, operating expenses and occupancy.
The existence of easements, deed restrictions or other legal burdens
affecting a property’s ability to be sold also must be considered.
In
determining the market value of your residence, the chief appraiser must
consider the value of other residential property in your neighborhood, even if
the other property:
- was
sold at a foreclosure sale conducted in any of the three years preceding
the tax year in which your residence is being appraised, if it was
comparable at the time of sale with other residences in your neighborhood;
or
- has a
market value that has declined because of a declining economy.
In
using the income approach, the chief appraiser may not separately appraise or
account for personal property that is already included in the appraisal of real
property.