Assignment 2 Chapter 2 : Real Property Assessment Flashcards
Which of the following statements are TRUE regarding the assessor’s duties with respect to the completion of an assessment roll?
- An assessor is required to locate and identity all taxable property within their jurisdiction, to determine the extent of the taxability of each property according to legislation, and to notify the owners of the assessed value of their properties only if there has been a change made from the previous assessment.
- It is important for an assessor to make an inventory of all the important characteristics of all taxable property in order to ensure that taxes are applied equitably to similar properties.
- The property tax rate is applied to the market value of a taxable property if it is greater than the amount specified in the assessment roll. The assessor would be required to adequality justify this to the appeal body and to the taxpayer.
- Assessors are responsible for the assessment roll, and they must be able to justify the appraisal methods and valuations even if contract appraisers made the appraisals.
Answer : Statement B and D are TRUE.
(B) It is important for an assessor to make an inventory of all the important characteristics of all taxable property in order to ensure that taxes are applied equitably to similar properties.
(D) Assessors are responsible for the assessment roll, and they must be able to justify the appraisal methods and valuations even if contract appraisers made the appraisals.
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Statement A is false as in most cases, owners must be notified of their assessment whether it has changed or not.
Statement C is false because the property tax rate of each tax district is applied to the assessed value
Identify the three basic approaches to estimating the value of a taxable property.
- Direct comparison approach, property analysis approach, appraisal approach.
- Value estimate approach, cost approach, taxable income approach.
- Value estimate approach, legal assessment approach, taxable income approach.
- Cost approach, direct comparison approach, income approach.
Answer :
The three basic approaches to estimating the value of a taxable property:
(4) Cost approach, direct comparison approach, income approach.
Identify the three primary assessment responsibilities in accordance with property tax policy in a real estate assessment system.
- Supervision, Valuation, Appeal
- Discovery, Listing, Valuation.
- Equalization, Valuation, Review.
- Categorization, Taxation, Listing.
Answer: (2) Discovery, Listing, Valuation
The three primary assessment responsibilities in accordance with property tax policy in a real estate assessment system, are:
- Discovery and data gathering activities
- Valuation and property appraisal,
- Listing and assessment activities
Supervision, Equalization, appeal, and appraisal Review are responsibilities of the assessor related to assessment, but are not the primary steps of the assessment roll process.
Certain property owners are typically granted exemptions from property taxation because of the benefits they provide to society.
e.g : churches and non-profit assistance groups.
Why would an assessor assess a tax exempt property?
- If low intensity properties were not assessed, the property owner may be tempted to convert the property to a higher intensity use for a greater financial return.
- A tax-exempt property is assessed if it is not at its highest and Best use and if the property owner wishes to sell the property on the open market.
- An assessor should not access the value of a property if it is tax exempt because it adds no contribution to the property values of a given jurisdiction.
- An assessment informs taxpayers and government bodies of the amount of subsidy that the owners of tax exempt properties are receiving.
Answer: 4.An assessment informs taxpayers and government bodies of the amount of subsidy that the owners of tax exempt properties are receiving.
Because:
An assessor needs to assess the property values of all the properties within a given jurisdiction, even those which are tax exempt.
The purpose of an assessment is to provide property value and taxation information to property owners and government bodies, regardless of the current or intended use of the
land.
Which of the following statements regarding periodic ratio studies are TRUE?
- A low coefficient of dispersion (COD) indicates that the central tendencies of the properties are not an accurate estimate of the market values of the given properties.
- A high coefficient of dispersion (COD) indicates that the central tendency is an accurate representation of all the different market values of the given properties.
- The coefficient of dispersion (COD) shows whether or not properties within an area or class are appraised uniformly.
- All of the above statement are true.
Answer (3) The coefficient of dispersion (COD) shows whether or not properties within an area or class are appraised uniformly.
The coefficient of dispersion (COD) measures the average percentage with which the individual assessment ratios vary from the median ratio.
A low COD indicates that the appraisals within the area are uniform and do not deviate extensively from the median.
A high COD indicates that the assessed values of the properties are at varying or inconsistent percentages to the market values of the properties.
Which of the following statements is TRUE regarding appraised value and assessed value?
- The assessed value is always less than the sales ratio for each property
- The appraised value of a property is determined according to the judgement of an appraiser on a specific appraisal date.
- Under the ad valorem taxation system, the assessed value of the property is always a fraction of appraised market value of the property.
- Legislative policy determines the appraised market value of a property.
Answer :
- The appraised value of a property is determined according to the judgement of an appraiser on a specific appraisal date.
Option (1) is false – the sales ratio is a ratio of appraised/assessed value to market value. It will typically be expressed as a percent, e.g., 90% or 115%; this number will be much smaller than the assessed value.
Option (3) is false because the assessed value of the property may either be a fraction of the full appraised market value or it may be the full market value.
Option (4) is false because legislative policy does not determine market value – legislation can set assessment ratios and define what is to be assessed, but it is the appraisal process that determines market value.
Option (2) is true.
An effective assessment system requires a strong legal framework that does NOT include which of the following features?
- Establish a framework of appraisal techniques to estimate the value of a taxable property
- Establish effective assessment notification, review and appeal.
- Mandate the disclosure to assessors of such market data as sales prices and terms, rents, and operating expenses.
- Require public notice of, and controls on, increases in tax levies made possible by reappraisals.
Answer : (1) Establish a framework of appraisal techniques to estimate the value of a taxable property.
All statements are a feature of the legal framework of an effective assessment system except for Option
(1). A framework of appraisal techniques to estimate value is one of the primary tasks performed by assessors working toward completion of an assessment roll.
An effective assessment system includes features for effective internal controls within the assessment process. These internal control features include which one of the following?
- Complete maps and property data that are updated regularly to show change in parcel boundaries or other physical characteristics
- Standards of practice manuals to establish work procedures and policies. These may incorporate laws, regulations, and policy memoranda.
- Accurate market data records that contain complete and accurate information about the sales prices and conditions of properties sold within jurisdiction.
- An active public relations program that includes talking to the public and the news media, and providing printed information and correspondence.
Answer :
2.Standards of practice manuals to establish work procedures and policies. These may incorporate laws, regulations, and policy memoranda.
Complete maps and property data, periodic ratio studies, and accurate market data are features of an effective assessment system, not of effective internal controls.
The market value of a property is $150,000
Property tax is $1,200 per year
The assessment ratio is 0.60 of the appraised value.
What is the effective rate?
- 0.48 percent
- 0.80 percent
- 1.33 percent
- Cannot be determined with the information provided.
Answer: (2) 0.80 percent
The effective tax rate is based on the market value of the property:
Effective Tax Rate = 1,200 ÷ 150,000 = 0.008 OR 0.80 percent
The nominal tax rate is based on the taxable value of the property:
Nominal Tax Rate = 1,200 ÷ (150,000 × 0.6) = 0.0133
Which of the following statements is FALSE regarding property taxation in Canada?
- In some provinces, the provincial government is responsible for the whole assessment function.
- In some provinces, charitable organizations are exempt from property taxation.
- Mandatory exemptions from property tax liability are stipulated by provincial legislation.
- Residential property typically bears at a higher tax burden than commercial property.
Answer : (4) Residential property typically bears a higher tax burden that commercial property.
