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Mfpark
| | Posted on Wednesday, January 24, 2001 - 2:08 pm: |     |
I have a Masters Degree in Appraisal from Wisconsin. Although I am not an active appraiser now, and am not a residential appraiser by training, the appraisal process is relatively similar.
I am sorry if this will sound like a lecture, but I used to teach this stuff, and it appears that we all could use some education on the subject.
I was told today that I would not be able to meet with the assessor to discuss what comparables were used to value my property. When I asked to even see the comps or how they were adjusted, I was told that was not possible.
Let me explain why it is IMPERATIVE to be able to review the comps. As Ed Galante tried to say last night before being shouted down, when you appraise an owner-occupied residential property, you typically use the market approach to value. In this approach, you compare properties that have sold to those for which you are trying to estimate a value. You try to deduce the factors that affected the price of the house that sold, and then compare those factors to the hypothetical sale of the other house.
In other words, you take direct evidence of market behavior and apply it to the hypothetical sale of another property. By necessity, this process is more art than science, and it can only be accepted as reasonable if we see how it was done.
Since no two properties are exactly alike, the comparison approach requires a lot of adjustments. The appraiser tries to find properties as closely matched as possible to minimize adjustments, but adjustments must be made nonetheless.
How are adjustments made? One way is to use a statistical model (typically some form of regression model) on a large quantity of sales to come up with statistically valid weights for each variable (room count, bathroom count, perimeter size, lot size, garage, and HVAC are typically some of the variables). You then apply these weights to the subject properties to get a value estimate.
The key is "statistically significant". I doubt such a model was used here, but if it was, we have to see the model and the standard tests of correlation and reliability for the variables.
More commonly, as we have all seen on our bank appraisals of our homes, the appraiser uses discretionary adjustments based on somewhat subjective evaluations of the market. The appraiser tries to use matched sales to isolate the effect of each variable (see list above), but that is nearly impossible.
I do not complain about this. If the appraiser is experienced and professional and careful, then in many cases the adjustments are fairly reflective of the market. The problem I have is that without seeing how the adjustments were done or even what comps were used, none of us can see if they are reasonable. This has added to your credibility problem immensely.
An error in choosing a comp or making an adjustment can affect the value estimate as much or more than an error in room count, bathroom count, or perimeter measurement--all of which the assessor will let us review on our tax card, by the way, even though we cannot see the comps.
Let me give some examples. If my house has no backyard, and the comps do have backyards, there has to be a downward adjustment made in the price of the comps. Or if the comparable sale had $100,000 of renovations before being sold, and my house has not been touched for 40 years, then there needs to be a downward adjustment.
During the meeting last night, Mr. Galante tried to explain that time adjustments were made to the sales. That also is standard in appraisals, but again, how they are made is critical. I will leave aside the issue of adjusting sales upward towards a bubble price (which I strenuously object to as being highly biased and possibly subject to class action challenges).
The standard way to deduce a time factor is to find a house that has sold twice within a year or two. The difference in the two sales prices gives an indication of market trajectory in pricing. That is fine, but you have to make sure that in the time between the two sales the house was not improved, harmed, or changed in a major way. If there were thousands of dollars of renovations, then that has to be accounted for. We know that a house with a move-in kitchen or bath is worth more than one that needs remodeling. But I cannot evaluate this without seeing the comps and their data cards.
I do not wish to dispute the amount of each adjustment--that is up to the reasonable discretion of the appraiser. But I do want to be able to check for errors of fact in the use of comps and adjustments relative to my property, just as I can check for errors of fact in room count. And I cannot do this without seeing the data and the adjustment model.
This is not an East-West issue. It has been a travesty of justice (and possibly illegal) for assessments and taxes to have been differentially imposed in the past. It is an issue of fixing a broken system, and you can only fix it by educating the population that the process is now being done in a fair and equitable way for everyone in town. Democracy relies on legitimacy.
My complaints about not being able to see the data should concern everyone, even someone whose assessment went down. How does this person know that it went down far enough? We heard from plenty of folks from the "East" side last night who still wonder how they could sell their house for the assessed value.
Shame on the Town for allowing so many to be unjustly overtaxed for so long, and more shame on the Town if it does not learn the lesson and open up the process totally once and for all so that such an injustice cannot happen again. This is your chance to let the sun shine in, to make this a real open democracy.
Mark A. Furman
50 Claremont Drive |
Euclidean
| | Posted on Wednesday, January 24, 2001 - 2:36 pm: | |
So, in theory, if we could build and maintain a database containing the appraisable attributes of every property in Maplewood, the tax assessor could perform some statistical analysis every year and reissue valuations on a yearly basis on the basis of the latest sales information.
I wonder if such a database was one of the outputs Certified was supposed to generate? Once you create such a database, keeping it up to date and periodically inspecting all property in the town would probably be easier than these periodic revaluations.
Finally, I wonder why the tax inequity which has existed in Maplewood at least since the housing market of the late 80's didn't become a political hot potato a ten years ago. All of the information you need to figure out that something is wrong is publicly available. The tax assessor had to have known. I wouldn't necessarily expect individual homeowners to know about this. I certainly didn't. |
Njjoseph
| | Posted on Wednesday, January 24, 2001 - 3:00 pm: | |
Euclidean -- your paragraph 2 explains exactly what I understood Jerry to say several times on this board regarding ongoing assessments.
Maybe a member of the TC can confirm? |
Townie
| | Posted on Wednesday, January 24, 2001 - 3:39 pm: | |
Mfpark,
May I suggest a simpler test for homeowners looking at their assessments and wondering if they are valid? Ask yourself this:
Would you be happy to take less than that price for your home?
If you would, talk to a local real estate professional to see if there is any chance you are mistakenly underpricing your home. If you're not, it makes sense to go ahead with your personal appeal.
I realize you are only talking about your personal appeal, but I just wanted to note that I don't think the township is required to hold public meetings about the methodologies used town wide. Such a public meeting, I believe, would quickly degenerate into arguments from amateur assessors about why one methodology is "fairer" than another, which would not solve the town's political problems or add credibility to the process. All models look flawed in light of the full blown 3-dimensional reality; all statistical analysis looks unfair and suspect.
Ask for all the information you think you need if you are appealing your own assessment. But don't think a public disclosure process is necessary for everyone or would enhance implementing the revaluation. |
Eliz
| | Posted on Wednesday, January 24, 2001 - 3:45 pm: | |
Townie for Commissioner of Common Sense ! |
Euclidean
| | Posted on Wednesday, January 24, 2001 - 3:49 pm: | |
Lies, damn lies and statistics. Alternatively, statistics mean never having to say you are sure.
Anyway, if a property attribute database could be maintained, the tax assessor could make annual valuation adjustments using statistical analysis and thereby avoid revaluation shocks. |
Mfpark
| | Posted on Wednesday, January 24, 2001 - 4:13 pm: | |
Euclidian: I agree that this can and should be maintained, and I believe also that this is what Jerry Ryan mentioned.
Townie: You missed my point. I don't want to hash this out in a public meeting. I simply want access to the data for my review. They are denying me this, so far. I posted my letter so that others could learn about the need for them to get their own data as well.
Note also that I am not asking to debate the magnitude adjustments per se, but to evaluate whether the comps are correct and the adjustments at least in the correct direction.
Other than that, I like most of what you have said today on line. Thanks. |
Townie
| | Posted on Wednesday, January 24, 2001 - 5:55 pm: | |
Mfpark,
I do understand you are only asking for your own data. Sorry if I wasn't clear about that. I hogged a bit of space in this thread to point out that other people aren't being as reasonable as you, and think everybody should be poring over the methodologies, looking for flaws, supposedly to spread "confidence" in a result that people can already see is largely correct. I hope your assessment meetings give you the answers you are looking for and result in a reassessment you agree is correct. |
Melidere
| | Posted on Wednesday, January 24, 2001 - 8:00 pm: | |
Mark,
i hope you have a chance to look at the large database that jerry has provided for us. There is a lot of information in there.
And the closer you look at it the more you realize what a complicated task this is. Statistical relevance of comps? First of all, find one (lol). I was struck by how few sales there are.
And every house in this town is so different. Some houses get snapped up by people who have been lying in wait for THAT house for 10 years. Few houses in maplewood are without some special charm.
They weren't trying to value a subdivision. |
Mfpark
| | Posted on Wednesday, January 24, 2001 - 8:15 pm: | |
melidere:
I agree it can seem complex. But there are few enough sales that I doubt any statistical analysis was performed--it would be invalid for having too small of a sampling population.
That means that they did manual adjustments for sure. And in that case, it is not a complex matter at all. Of course all properties are dissimilar--that is why we hire appraisers and assessors, and do not simply use a machine to set values.
Real people are making real comparisons between properties, and they may have made real errors in this process, just as they did when they counted our rooms or measured our perimeter. We cannot know for sure unless we can look at the comps they used for our specific property.
The fact that some people lay in wait for a specific house does not mean that they necessarily overpay for it. And even if they do, that is representative of the demand for housing in this market, so I would argue that they are not overpaying but paying a market-driven price.
Further, most houses that transferred in my neighborhood did so after a public, arms-length exposure to the market, so I believe that the sales reflect market conditions at that point in time. Of course, this does not mean that market conditions at a bubble-point of irrational exuberance should determine assessment values--quite the contrary. Again, that is why we hire professionals to use their judgement--which in this case, failed. |
Lee
| | Posted on Thursday, January 25, 2001 - 2:42 pm: | |
Going all the way back to Euclidean's first posting on this thread, I think what needs to be done is to push for the most frequent revals possible, until such time as trends show all neighborhoods in town are rising and falling at nearly the same rates.
Since the valuations are based on a statistical model that includes comparable sales by neighborhood, it would seem the model can be updated with recent sales and new valuations estimated nearly on the fly.
I'm not suggesting this if for no other reason than the numerous errors the model seems to have generated. But after the model is corrected and tested (by CVI), a similar exercise to determine trends on a regular basis, with time to make the necessary manual overrides including adjustments based on improvements (triggered by construction permits)could be implemented.
The ideal situation would be that all properties are appraised properly, and that subsequent revals would only slightly change the allocation of taxes.
Prices will change at different rates in different neighborhoods, and since the market value of a property is conversely correlated to its tax burden, each reval will set the pendulum in motion, again improperly distributing the burden. But the more frequently the revals occur, the smaller the affect.
Full Disclosure: I am in part responsible for the magnitude of the pendulum's swing having paid above asking price in 1999. My current valuation is slightly less than I paid, but very close to those of my two next door neighbors, and probably within the range of "fairness". Based on most recent numbers, my taxes will be going up just shy of $3000 or 29%.
I'm interested in others' comments.
Lee |
Euclidean
| | Posted on Thursday, January 25, 2001 - 3:10 pm: | |
The value of maintaining and annually analyzing property attributes and sales data is that the tax assessor will have the information he/she needs to prevent the formation of large property tax inequities and the resulting revaluation shocks which occur under the current system of revaluation every 20 years or so. It wouldn't really eliminate the need for detailed valuations from time to time.
Given the number of variables which go into the sale price of a home, I can't imagine that any valuation model will be more accurate than perhaps +/- ten or fifteen percent.
In my opionion, a property tax will never be fair and equitable because so many intangibles go into the sale of my house. For example, a nicely furnished home may very well sell more 10% more than the same home empty. At least with income tax and sales tax, the value of the taxed item is pretty clear. The best we can hope for with property tax is to elminate wholesale inequities such as currently exist in Maplewood.
Any lawyers here? Would the imprecision of property tax valuations provide a basis for challenging the institution of property tax in general. |
Townie
| | Posted on Thursday, January 25, 2001 - 5:15 pm: | |
I can't resist a comment, although I confess I don't fully understand the issues:
It seems to me that markets aren't "real" but are psychological. I mean, if Alan Greenspan dies, I can't sell my house the next day. Right? Can I appeal my assessment? Lee pays above the asking price for my neighbor's house because he loves it, and I get to put mine on the market for more (and I get more because now that's "the going rate). Does the neighbor across the street get an automatic tick up?
I renovate my kitchen and the tax assessor descends on me with a new assessment, and while he's at it, he boosts up my rate to include the sale of my other neighbor's house, which was sold to Lee's rich mother at too high a price because she wants to live close to him? As bad as the overdue shocks are, wouldn't the constant tinkering be outrageous, too, and have unfair impacts?
And, Euclidean, I love your big think! Declare property taxes unconstitutional and outlaw them forever because they are so unjust? Base everything on a progressive income tax? Yay, yay, yay!!! Let's start a REAL tax revolt in this country! Right in our own backyards! ;-) !!! |
Ffof
| | Posted on Thursday, January 25, 2001 - 6:26 pm: | |
The following will never hold a candle to Euclidean's excellent tax revolt idea!...But while we are changing the whole system here(!)...it seems that other states have different ways of dealing with the property tax issue that don't seem to pit neighbor against neighbor. For instance, in Illinois, Florida, Texas (and others?) you pay 1% (maybe up to 2%) of the purchase price. This way, there is no penalty to the long time homeowner. So if 2 families bought identical homes 5 years ago for $250,000, each would have taxes of $2,500. One family leaves and sells house for the going rate of $500,000 so the new owner would be paying $5,000. The other original owner still pays $2,500. Anyone's thoughts on whether this is a more reasonable approach? (Not that Trenton seems in a hurry about doing anything!!) |
Mfpark
| | Posted on Thursday, January 25, 2001 - 8:46 pm: | |
Ffof:
See the discussions about the Assemblyperson's proposal to stop basing school funding on property values. Lots of good stuff there on this topic. |
Ffof
| | Posted on Friday, January 26, 2001 - 8:48 am: | |
Will do. Thanks. |
Kathy
| | Posted on Saturday, January 27, 2001 - 11:57 pm: | |
FFoF: I lived in Illinois, and property taxes there certainly did not work the way you have suggested. In fact, we lived in a ratable-poor town much like SO or Maplewood, while nearby towns with shopping malls (much like Millburn or Livingston) had much lower property taxes.
Your proposal would produce a different sort of inequity, where neighbors in similar houses could be paying radically different property taxes. A similar system has caused big problems in California since it was implemented.
Under your proposal it also seems that the more stable the town, the less its ability to get revenue. If you are going to cap both the basis (at purchase price) and the tax rate (at 1 or 2%), the town's ability to meet its budgetary needs will be severely restricted. In California, that was part of the idea behind the tax revolt. The result has been, among other things, the destruction of a formerly model system of public education. |
Ffof
| | Posted on Sunday, January 28, 2001 - 12:49 pm: | |
I know Calif public schools have gone down the tubes, but did not know the details of the tax situation. Is there any state that has this tax issue under control or do we need a mall?! |
Townie
| | Posted on Monday, January 29, 2001 - 12:25 pm: | |
I suspect the realistic answer is:
A mall, or some other commerical ratable. |
Damellon
| | Posted on Friday, February 2, 2001 - 11:48 am: | |
Let's all face it, the reason why we are in this mess is that the "TC" did a sloppy job with the reval. Apparently, it was nobody's job to oversee the process. This is unacceptable representation. And the way that the assessments went out well after election day was like a page right out of our sleeze-ball President Clinton's handbook. How the members of the TC can go around all puffed up and full of themselves the way that they do is beyond me. I want them - out of my house, out of the pool, out of the library, out of the school district (especially!!!) - and out of town hall!!! Please consider taking a closer look at the other candidates that may represent us more appropriately during the next election! |
Teach66
| | Posted on Friday, February 2, 2001 - 4:26 pm: | |
Aye! You've got that one right, damellon! Increase or decrease, looks like everyone was asleep at the wheel on this one. |
Njjoseph
| | Posted on Friday, February 2, 2001 - 4:30 pm: | |
Another thing Damellon -- I took as close a look as I could at the two republicans that were running for TC in November. I found one poorly designed website with little information, and one of the candidates had no statement nor a picture. It wasn't until several posters here referred to one of the candidates as "him" that I realized Liv was a man. |
Eb1154
| | Posted on Saturday, February 3, 2001 - 2:18 pm: | |
Damellon,
I can't understand how you could ask us to look at the other party after how they portrayed themselves at the last election. Do you really think that they would have done a better job on this reval project? I don't think so!!! They couldn't even organize themselves for the election, and that was something that they wanted!! Okay, maybe not Liv. or atleast it didn't appear that he really wanted to win. |
Mem
| | Posted on Saturday, February 3, 2001 - 3:55 pm: | |
The Republican website was designed by Maplewood online, and as an ex-graphic artist I thought it was well done. I also felt it was informative, with good points, i.e., lobby for more money to alleviate property taxes, work more with the BOE to improve the school system as well as lower the district group factor which could lead to getting more funding from the state. Makes more sense than "proven leadership, proven results". Certified Valuations? Certifiably Insane. Need I say more? |
Nilmiester
| | Posted on Saturday, February 3, 2001 - 5:59 pm: | |
If the Republicans are smart, (and I'm not saying they are) they won't run anyone. Let the new Maplewood party candidate win. And then you'll see how the supporters of the current party slam whoever it is for having the nerve to run and daring to break up their enlightened little monopoly. Heck, they can't even be gracious winners.... |
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