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Introduction

Kansas statutes require the county appraiser's office to maintain all real estate values within specified ranges of fair market (K.S.A. 79-1485 et seq.) and to physically inspect each parcel at least once every six years (K.S.A. Supp. 2002 79-1476). Accomplishing these objectives requires careful planning and proper allocation of resources.

Purpose of Appraisals

The purpose of the valuations is to estimate fair market value for ad valorem tax purposes and the values generated are to be used only by taxing jurisdictions in the county. The effective date of each of the appraisals is January 1. The valuations are to be prepared in conformity with Kansas law; rules and regulations of the Department of Revenue, Division of Property Valuation (PVD) and with Standard 6 of the Uniform Standards of Professional Appraisal Practices unless that standard is superseded by jurisdictional requirements.

Assumptions and Limiting Conditions

The valuations are subject to the following assumptions and limiting conditions:

1. Title to the property is assumed to be good and marketable and the legal description correct;

2. No responsibility for legal matters is assumed. All existing liens, mortgages, or other encumbrances have been disregarded and the property is appraised as though free and clear, under responsible ownership and competent management, the fee simple estate;

3. All sketches and maps in the appraisal documents are visual aids and should not be construed as surveys or engineering reports;

4. All information in the appraisal documents has been obtained by employees of the County Appraiser's office or from sources considered to be reliable;

5. The value for each property applies to land and improvements only. The value of trade fixtures, furnishings, equipment and/or intangibles has not been included with the value of the real estate;

6. The appraisals are prepared exclusively for ad valorem tax purposes;

7. The appraisers developing the appraisals are not required to give testimony or attendance in court by reason of the appraisals, unless directed by, employed by and provided legal counsel by the Doniphan County Appraiser;

8. Subsurface rights (e.g., minerals and oil) were not considered in developing appraisals;

9. The Doniphan County Appraiser's office will physically inspect the exterior of all properties in the county once each six years as required by K.S.A. Supp. 2001 79-1476. Interior inspections are not done on a majority of the properties;

10. The appraisers have inspected, as far as possible, by observation, the land and the exterior of improvements thereon; however, it is not possible to personally observe conditions beneath the soil or hidden structural components within the improvements. Therefore, no representations are made as to these matters unless specifically considered in an individual appraisal;

11. The reports generated by the county have been approved by PVD and are generated through the Kansas Computer Assisted Mass Appraisal System (KSCAMA) and other computer applications; and

12. The data collection manual used as a guide to collect and evaluate the land and improvement data was developed by PVD. The manual is maintained at the Doniphan County Appraiser's office.

Definition of Value

The value is fair market value as defined by K.S.A. 79-503a except for agricultural land that is valued at its agricultural use value as defined in K.S.A. 79-1476. K.S.A. 79-503a defines fair market value as "the amount in terms of money that a well informed buyer is justified in paying and a well informed seller is justified in accepting for property in an open and competitive market, assuming that the parties are acting without undue compulsion." The property rights appraised by the county are fee simple.

Highest and Best Use

The highest and best use of a property may change over time if the character of the neighborhood changes creating demand for a different use. Absent evidence of such a change, the current use will be considered the highest and best use.

The only type of real estate in Kansas that is not valued at its highest and best use is agricultural land. Agricultural land is valued at its agricultural use value as required by K.S.A. 79-1476. The agricultural use value rates for each county are provided by PVD.

Physical Inspection

During each year, one-sixth of the parcels in the county are physically inspected on the exterior by employees of the Doniphan County Appraiser's office. The purpose of the inspection is to insure the continued accuracy of the physical characteristic property records, the Property Record Card (PRC).

To insure accuracy of the inspection, a quality control program is in place at the county. A number of parcels are re-inspected by a supervising appraiser to insure that the data is correct.

Each property has a unique parcel identification number and a property description developed by the Records and Tax Administration. The property description is not the legal description of the parcel and its use is only for tax purposes. Individual sketches are drawn for each parcel unless otherwise noted. A digitized image of the improvements is also maintained on file. A PRC  is available for each parcel detailing the physical characteristics that have been collected on that parcel.

Sales File

The county has an inventory of all sales that have occurred in the county and the latest three years are stored on the KSCAMA. A separate file of valid residential sales stores a "snapshot" of the property characteristics as of the date of the sale along with information concerning sale price and date.

Sales Analysis

Sales of real estate establish trends in the market and valuation models must reflect those trends. Therefore, in order to understand and adapt to changes in the market, it is first necessary to analyze those sales. A significant part of the initial analysis involves determining the extent and direction of movement in the market to answer the questions, is the market up or down and how fast is it moving in that direction?

Valuation Model Calibration

A valuation model is a formula used to value a specified set of properties. It can be as simple as an amount per square foot to be multiplied by the square footage of the properties to be valued, for example,

$37.50 per square foot X 1,200 sf = $45,000

or it may be so complex that it takes a computer to efficiently apply it. In either event, they share the common characteristics of being developed from the local market and are subject to human acceptance or rejection.

Cost Approach Overview

The cost approach provides a value estimate based on the market value of land and the depreciated cost to replace improvements. KSCAMA uses Marshall & Swift develop the cost schedules and tables in which costs are shown for a combination of items comprising a building component. Application of the schedules involves adjusting the component costs to compensate for the characteristics of the property.  Marshall & Swift is the leading provider of cost data.

The concept, replacement cost new, is based on the principle of substitution which states that an informed buyer will not pay more for a property than what it would cost to obtain an equally desirable substitute property. The cost approach provides a uniform starting point in the process of finding a value for each property. The difference between replacement cost and reproduction cost is that the reproduction cost is the cost to construct an exact replica of the subject, including any functional obsolescence, while replacement cost is the cost to build a substitute with equal utility but without any functional obsolescence such as outdated design. The county relies only on replacement cost.

Replacement cost, as used in KSCAMA cost tables and schedules, reflects the total cost of construction including materials, labor, subcontracts, builder's overhead and profit, architectural and engineering fees, consulting fees, survey and permit fees, legal fees, taxes, insurance, and cost of interim financing. There are separate cost tables and schedules for residential dwellings, commercial buildings and agricultural buildings. Land values are reported in the Computer Assisted Land Pricing (CALP) schedules.

The components of the cost tables were developed by the Marshall & Swift Company for PVD when the Orion system was installed. They are modified yearly by several factors to insure they reflect the current local market.

Land Value Estimation

The first step in the land valuation process is to identify neighborhood boundaries. A neighborhood can be defined as the environment of a property that has a direct and immediate impact on its value. The neighborhood boundaries can be natural (e.g., rivers, lakes, hills), man-made (e.g., streets, railroads, major utility right of ways) or political (e.g., city limits, school districts, zoning districts).

Vacant land sales are used to develop land values whenever a sufficient numbers of sales are available. Land values are developed for each residential and commercial neighborhood. The land models are developed on front foot, square foot or acreage units of comparison.

Index Study New Construction Data

Before the current Orion system was installed an index study was required as a component of how cost values were derived.  The following method can still be used to determine if the Marshall & Swift figures represent the local market: 

Recent sales of newly constructed homes are analyzed to develop the county index for residential properties.  First, the replacement cost new for these parcels, as calculated by KSCAMA, is divided by the existing county index to calculate the 100% replacement cost prior to any adjustment. Then the land, other buildings and yard improvement values are subtracted from the selling price and divided by the 100% replacement cost to calculate the adjustment required to account for the actual costs of construction. There is no need to adjust the selling price for depreciation because only newly constructed homes are included in the study.

For example, if the residual selling price is $103,500 and the 100% construction costs from KSCAMA are $90,000, the index is:

103,500/90,000 = 1.15

Depreciation

Depreciation reflects a loss in value from all sources. For residential property, these losses in value are accounted for in the CDU rating. In the commercial/industrial markets, these adjustments are made through physical condition and functional utility ratings.

Details on Adjustments to KSCAMA Depreciation Tables

Depreciation tables in KSCAMA consist of a set of figures representing the percentage good remaining in a dwelling relative to its age and CDU rating. In the table, the age ranges are displayed in the left column with each succeeding column to the right displaying the appropriate percent good for each CDU level from a rating of excellent to unsound.

The first step in analyzing the residential depreciation tables involves running a report to test accuracy. The report subtracts the value of land and outbuildings from the adjusted selling price to arrive at the indicated depreciated replacement cost. This figure is divided by the replacement cost new to establish the percent good indicated by actual sales. Comparing that figure with the one used in current tables indicates the need for and amount of adjustment to match the sales information.

Market Models

The sales comparison approach, or market approach, for residential property is performed through the use of multiple regression analysis and comparable sales. A sales comparison approach for commercial/industrial properties is not done for two reasons. First, the county does not have a computer assisted mass appraisal sales comparison system for commercial properties. Secondly, there are an insufficient number of commercial sales to do a reliable sales comparison approach. However, to comply with K.S.A. 79-503a, sales prices on a per square foot basis are considered as a check against the commercial values.

Market modeling in KSCAMA involves determining the coefficients to use to adjust sale properties and the weights to be placed on property characteristics to (1) select sales for comparison with the property being valued and (2) adjust selling prices to that property. No two properties are the same. Some differences are cosmetic and tend to have very little impact on value, such as color. Others have a significant impact on value, such as the quality of construction or the size of the structure. The actions of buyers and sellers in the market place determine which factors affect value and what weights to apply to each factor.

The computer assists in this process by providing estimates of the relative weight of certain factors. By alternating different factors and weights, the best combination to value parcels within a given geographic area is determined. The specific factors and weights chosen for one model may be different than those chosen for another because of the differences in neighborhoods. For example, a detached garage may be the rule in one part of the county and the exception in another; an attached garage may add value in one area but add very little in another area. Once the factors are established, the weight applied to each factor is determined.

Income Models

Income models within KSCAMA are developed directly from the market. Income and expense information is obtained from a variety of data provided directly from taxpayers, a review of previous appeal files and various public surveys and publications. From that information, typical rental and expense rates are established according to the type and use of the property along with its location. These rates are placed in income valuation models according to the property type and use.

Income models are not used in Doniphan County due to insufficient data being avaiable. 

Final Review

Following the field inspection of parcels and the development of valuation models, preliminary values are generated. For residential, values are estimated using the cost and sales comparison approaches. For commercial/industrial, values are developed using the cost and income approaches.

During final review, the field appraisers compare the PRC, pictures of each property, the values discussed above and any sales information. At this point, the field appraiser establishes a final value to be used for the next tax year. The rules given to the appraisers are:

(1) the value chosen must be consistent with the neighborhood, assuming the improvements themselves are consistent;

(2) proper justification and documentation must be available to change a value that was established at a hearing during the previous year; and

(3) under no circumstance is an estimate chosen just because the computer made it.

Performance Tests

The method used to test the accuracy of the county's valuations is a sales ratio study conducted by PVD. The sales ratio study looks at statistical measures such as the median ratio and the coefficient of dispersion. The ratio study is conducted annually.

Changes Affecting Property Values

A property's value may alter over time due to physical changes such as an addition or a garage, family room, bedroom, or extensive remodeling and modernization. also, property values may fluctuate due to the local economy. The economy of the entire community may affect the market value of your property negatively or positively.

Changes made to maintain your property's current value such as painting your home, replacing the roof, replacing the hot water heater, or making repairs would not necessarily increase the value of the property. However, if these tasks were not performed, the condition of the home would deteriorate, which could cause the appraised value of your home to decrease.
 

Property Tax Calculation

Your property taxes are determined by multiplying the actual value times the assessment rate times the mill levy. The assessment rate on residential properties is 11.5%. The assessment rate for commercial and industrial purposes is 25%. The assessment rate is fixed by law and is the same statewide.

Sample Calculation:
Let's assume the market value of your home has been determined to be $100,000, and the statewide residential assessment rate is 11.5%. This would mean that the assessed value of your home would be $11,500 ($100,000 times .115 = $11,500).

Let's also assume that the total mill levy is determined by the local taxing authorities of your particular taxing district. Multiply the assessed value of your property ($11,500) by the mill levy (105 mills or .105). The amount is $1,207.50, which is your share of the total responsibility to support the programs for which taxes are budgeted.

 

Property Type	Assessment Rate	Approach to Value
Residential - includes homes, apartments, and condominiums	11.5%	Market Value / Cost / Income
Commercial - real property used for commercial or industrial purposes	25%	Market Value / Income
Ag Land - land used to develop agricultural use	30%	Use Value / Income
Ag Imprv - improvements on land devoted to agricultural use	25%	Market Value
Vacant Lots - vacant land with no improvements	12%	Market Value
Non-Profit - real property owned and operated by not-for-profit organizations	12%	Market Value
All Others - all other real property not elsewhere classified	30%	Market Value

Change of Valuation Notice

Each year, on or before March 1, the County Appraiser is required to send you a change of valuation notice. This notice describes the property you own, gives the actual values for both the prior and current year, and will provide you an opportunity to present your objection to the Appraiser. When you receive a change of value notice, study it carefully. The value shown on the notice will affect the amount of taxes you will pay the following December. The deadlines for appeal are set by Kansas law and are enforced. If you feel the value the Appraiser has placed on your property is incorrect, you may wish to inspect the Appraiser's records on your property. If you choose to file an appeal, you will want to provide information and documentation to support your estimate of value. Information such as a recent independent appraisal, recent sales of similar homes in your neighborhood, similar homes that are currently on the market, and written estimated from real estate professionals will all lend support and credibility to your opinion of value.

 

Links:

Fee Appraiser Lookup (KREAB Appraiser Directory)