Property assessments lie at the very heart of a functioning local government. Important public services such as law enforcement, firefighting, and education depend in large part on local property taxes for funding.

But for many homeowners who open their tax bills and see valuations that leave them scratching their heads, the process is a mystery; it’s like a black box that spits out a number. The economic recession of the last several years and distressed markets haven’t helped, turning what were anomalies into the new normal. 

To help break down that process, we took a look at what would normally happen in an appraisal process and what factors are in play now. 

Basics

It’s important to remember that tax assessors are always working with numbers that are lagging a year behind; it is last year’s sales and values, as of January 1, that apply to this year’s tax bill. 

Appraisals can be done in three ways - by looking at fair market sales of similar properties, looking at the value of the materials that make up the property, or looking at the income that is derived from the property. Most homes will be evaluated using fair market sales of similar properties.

Mass Appraisals vs. Individual Appraisals

The purpose of a property appraisal drives the process, explained Burt Manning, former Fulton County assessor who now heads the Georgia Department of Revenue’s assessor certification and training programs. 

“An appraisal is an opinion of value,” said Manning. “If a person is trained and licensed, it’s going to be relatively similar.”

Individual appraisals can be done for homebuyers, home sellers, insurance companies, banks or for getting a mortgage loan. These would all be appraisals of an individual home with an in-depth, detailed examination. The aim is to get the most accurate snapshot of that individual home’s value at that time. 

In a mass appraisal, the goal is not necessarily to get the most accurate snapshot of the individual, but to get a good enough snapshot that is fair to the individual and accurate to the group as a whole. For a county tax assessor, the aim is to get a picture of the total value in the county.

Appraisals for the purposes of taxing will most likely be a mass appraisal, since most county offices don’t have the time and resources to closely examine each home out of the thousands of properties in the county. In Rockdale, there are more than 30,000 parcels of property, including residential and commercial. Rockdale Tax Assessor Lamar Sims said his office, which as four assessors, tries to examine each property at least once every three years. That might not mean physically visiting a property, since assessors can also use tools such as aerial photography and other data gathering. 

The mass appraisals for taxing purposes are required to be within a certain range of each other and the median and are subject to statistical tests. In Georgia, they’re required to be within 10 percent of the median level of assessment.  The state Department of Audits tests each county’s digest and sets what is the acceptable level. 

If the mass appraisal fails the statistical test, the assessor then has to go back layer by layer – areas, neighborhoods, subdivisions, streets – to figure out where the values are that are throwing off the tests and adjust them until they pass the statistical tests.

Changes

Although the tax assessments have always lagged behind what was happening in the market, while the values were rising homeowners mostly didn't care, said Manning, because that meant they were able to pay a little less than they would have for the current value.

“Prior to 2008, taxpayers weren’t upset if I was behind the curve,” he said. “By January 2009, every property said ‘you can’t be behind the curse when values are falling. You have to be ahead of it.”

With the changing curve came many more appeals in the property values, although Sims said in May the percent of properties appealed was still in the single digits.

A few new laws have come into effect that are the requirement that foreclosures, short sales and other bank sales now have to be considered as fair market sales. 

“We now amend formulas that help mass appraisers weigh bank owned sales versus individual to individual sales to come up with a fair and uniform value for properties, “ said Manning. 

Nowadays, common sense, experience and networking with other assessors are also important tools to use in getting to an assessment, said Sims.

What may have affected Rockdale’s markets last year are that foreclosures are being processed more quickly now, observed Sims. Typically, foreclosures could take a long time to reach an actual sale. “In the first couple years (of the recession), we weren’t seeing a whole lot of foreclosures,” said Sims. “Not all the listings in the newspaper actually happen.” 

“A lot of this is timing,” he said. Rockdale is experiencing what some of the other metro Atlanta counties have already gone through and have been able to address, such as Clayton, DeKalb, and Fulton.

While many say the markets are showing signs of turning around, the real test of that will be when builders find it profitable to begin constructing new houses, say real estate experts.