Property Appraisal for Tax Purposes
Unlike an appraiser in the private sector who is hired to
ascertain the value of one particular property as of a given date, the
Assessor of Property's mission is much broader in scope. The goal of
the Assessor is to estimate fair market value for all property in the
county. Fair market value is defined as how much a property would sell
for, in an open market, under normal conditions. To determine market
values, the assessor must be familiar with all aspects of the local real
estate market, such as: what different types of properties are selling
for, local construction and repair costs, normal operating expenses,
typical rents, and current financing charges for borrowing money to
build or buy property.
The rules governing the tax appraisal process in Tennessee are
based upon the same principles and procedures that are used throughout
the appraisal profession. There are three basic approaches to the
valuation of real property:
- The MARKET approach involves comparison of a property to other properties with similar characteristics that have recently been sold.
- The COST approach involves estimating the replacement cost of a structure, and adjusting that estimate to account for depreciation.
- The INCOME approach is an analysis of a property's value based on its capacity to generate revenue for the owner.
Frequently Asked Questions
- How is property appraised?
- There are three “Approaches to Value” that are used worldwide in the appraisal profession. These are the Cost, Income, and Market approaches.
The Cost Approach calculates the cost to build a structure today, and
then discounts that cost, for the age and condition of the building to
arrive at a value. The Income Approach measures how much income a rented
property will generate for its owner. The Market Approach compares a
property, to sales of similar properties, to estimate a value.
- Which method does the Assessor use?
- The predominant method
used by the Assessor is the Cost Approach. The Assessor establishes
square foot costs for all types of buildings and structures and their
amenities, then by using the Market Approach, the Assessor establishes
depreciation factors ( based on sales ) to apply to those square foot
costs. The Assessor also uses the Market Approach in statistical
analyses to verify the cost figures established, are supported by the
market ( i.e. sales ). The Assessor uses the Income Approach to value
income producing properties, when the owner supplies the necessary
income and expense data.
- What’s the difference between an Appraisal and an Assessment?
- An Appraisal is an
estimate of market value. An Assessment is the value on which taxes are
based. Some states assess 100 % of market value, so the Appraisal and
Assessment are equal. By law, Tennessee has “Fractional Assessment”
which means taxes are based on a fraction of the Appraisal amount.
Tennessee law dictates the following assessment levels:
- Who does the Assessor’s appraisals?
Since the Assessor is
responsible for the “Mass Appraisal” of all properties in Montgomery
County, he utilizes a staff of 12 to assist in different aspects of the
mass appraisal process. The Assessor’s current staff is broken down as
- 1 Chief Deputy Assessor
- 1 G.I.S Mapping Specialist
- 5 Data Entry Specialists
- 1 Personal Property Appraiser
- 1 Commercial Appraiser
- 2 Residential Appraisers (in the city)
- 2 Residential Appraiser (in the county)
- 1 In-House Appraiser
All members of the Assessor’s staff are crossed trained in
various aspects of the mass appraisal process and work together as a
team to fulfill the responsibilities of the Assessor’s office. The
Assessor also has the resources of the State of Tennessee Division of
Property Assessments ( DPA ) to assist in the mass appraisal process.
The DPA assists the Assessor with oversight, legal resources, a system
of checks and balances, as well as computer technology, and training.
- How often does the Assessor appraise my property?
- One of the Assessor’s
responsibilities is to maintain the county’s appraisal records as
accurately as possible. The Assessor strives to discover changes to a
property, which affect that property’s value, and adjust the county’s
appraisal records accordingly. If no changes occur, or changes have not
been discovered, someone from the Assessor’s office will visit each
property in the county once in-between the county-wide reappraisals.
- How often is the whole county reappraised?
- Montgomery County is on a 5-year reappraisal cycle. County-wide reappraisals occurred in Montgomery County in 1991, 1997, 2003 and 2009. The frequency of the reappraisal cycle can be changed by a vote of the County Commission. Consequently the frequency of reappraisals varies from county to county. Some counties are on a 4-year cycle, others on a 5-year cycle, and still others on a 6-year cycle. Montgomery County is in their second 5-year reappraisal cycle.