What is Market Value?
Residential, Commercial, and Industrial properties are to be assessed at 100% market value with a few exceptions. The market value of a property is an estimate of the price that it would sell for on the open market on the first day of January of the year of assessment. This is sometimes referred to as the "arm’s length transaction" or "willing buyer/willing seller" concept. See Iowa Code 441.21
How Does the Assessor Estimate Market Value?
To estimate the market value of your property, the Assessor generally uses three approaches.
- MARKET APPROACH: The first approach is to find properties that are comparable to yours which have sold recently. Local conditions peculiar to your property are taken into consideration. The Assessor also uses sales ratio studies to determine the general level of assessment in a community in order to adjust for local conditions. This is usually considered the most important in determining the value of the residential property.
- COST APPROACH: The second approach is an estimate of how many dollars at current labor and material prices it would take to replace your property with one similar to it. In the event an improvement is not new, appropriate amounts for depreciation and obsolescence are deducted from replacement value. The value of the land is added to arrive at an estimate of the total property value.
- INCOME APPROACH: The third method is used if your property produces income such as an apartment or office building. In that case, your property could be valued according to its ability to produce income under prudent management. In other words, the amount another investor would give for your property in order to gain its income. The income approach is the most complex of the three approaches because of the research, information, and analysis necessary for an accurate estimate of value. This method requires thorough knowledge of local and national financial conditions as well any developmental trends in the area of the subject property being appraised. Errors or inaccurate information can significantly affect the final estimate of value.
Why does Market Value change?
State law requires that all real property be reassessed every two years. The current law requires the reassessment to occur in odd-numbered years. Changes in market value as indicated by research, sales ratio studies, and analysis of local conditions as well as economic trends both in and outside the construction industry are used in determining your assessment.
Any valuation changes, an assessment notice is required to be mailed to the property owners. These shall be made in writing by April 1st for any adjustment of the real property. (441.23)
Assessment notices for properties can also be found on the Beacon website.
If you disagree with the Assessor's estimate of value, please consider these two questions:
2. How does the value compare to similar properties in the neighborhood?
If you have any questions about the assessment of your property, feel free to come in and discuss it with the Assessor’s Office. Also, see How to Protest the Value of your Property.
Agricultural Property Valuation
Agricultural property, except agricultural dwellings, are assessed on the basis of productivity and net earning capacity using a five-year crop average and capitalized at a rate (currently seven percent) set by the Legislature. To determine net earning capacity and productivity assessor shall use data from the Iowa Department of Revenue and results of a modern soil survey. IAC 701.71.3
The Iowa Department of Revenue is responsible for "equalizing" assessments. The Director of Revenue and Finance issues tentative and final equalization orders in odd-numbered years on or about August 15th and October 1st respectively. The orders are sent to the various county auditors who apply them to the classes of property affected if any. On or before October 8 county auditor shall notify each property owner whose valuation has increased by final equalization.
A general explanation of the purpose of equalization follows: The Department of Revenue compares the assessors' abstracts to a "sales assessment ratio study" completed independently of the assessors. If the assessment (by property class) is 5% or more above or below the median ratio of the sales ratio study, the Department of Revenue increases or decreases the assessment to reach 100% of actual value. There are no sales ratio studies for agricultural and industrial property.
Equalization occurs on an entire class of property, not on individual properties. Equalization is applied based on an assessing jurisdiction, not on a statewide basis.
Equalization helps maintain equitable assessments among classes of property and among assessing jurisdictions. This contributes to more equitable distribution of state aid, including aid to schools. It also helps to equally distribute the total tax burden within the jurisdiction.
To protest an equalization to your property, click on How to Protest the Value of your Property.