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Mecklenburg County - Revaluation of Real Property

The Mecklenburg Board of County Commissioners received the revised Schedule of Values at their regular meeting on September 21, 2010.  This was in preparation for the County-wide reappraisal of all properties effective January 1, 2011, as mandated by NC General Statute 105.  A short video was shown, explaining the revaluation process (click here for text).  Below are some typical questions and answers on revaluation.

What is a revaluation?

          Revaluation is the re-appraisal of the market value of each parcel of real estate in the County.  It is required by North Carolina law, and must be done at least every eight years.  The last revaluation of property in Mecklenburg County was done in 2003.

Why must a revaluation be done?

 Revenues used to fund schools, police, fire protection, libraries, parks and other public services are derived from the tax rate applied to the estimated market value of your property.  Over time, the real estate market changes – up or down, depending on location and other factors.  As time elapses some property’s assessed values are farther from the true market value than others.  Such occurrences create inequities among assessments.  In order for properties to be assessed equitably, reappraisals are needed to reflect the current fair market value of all properties.

What is “fair market value”?

Fair market value is the price, in terms of money, that a property will bring if exposed on the open market, between a willing seller and buyer, both of whom are fully informed of all the uses, advantages and disadvantages of the property, and assuming each party acts in a prudent manner.

Finding the market value of your property involves estimating the price a typical buyer would be willing to pay for it in its present condition.  The process of estimating that value is called an appraisal. 

How is property appraised?

To find the value of any piece of property the assessor must first know what properties similar to it are selling for, what it would cost to replace it, how much it takes to operate and keep it in repair, what rent it may earn, and many other factors affecting its value. Using these facts, the assessor can then go about estimating the property value in three different ways.

    Sales Comparison Approach 
          The first method compares your property to others that have sold recently.  These prices, however, must be analyzed very carefully to get the true picture.  One property may have sold for more than it was really worth because the buyer was in a hurry and would pay any price.  Another may have sold for less money than it was actually worth because the owner needed cash right away.
       When using the sales comparison approach, the assessor must always consider such overpricing or under-pricing and analyze many sales to arrive at a fair estimation of your property’s value.  Size, quality, condition, location, and time of sale are also important factors to consider.  The assessor groups properties sharing similarities in these characteristics into neighborhoods for analysis – and some like neighborhoods may be grouped together to expand the range of sales available for comparison.

    Cost Approach 
         A second method used to support the estimate of your property’s market value is based on how much money it would take, at current material and labor costs, to replace your structure with an exact replica.  These costs are then depreciated based on the age and condition of the structure.  The estimated site value is included in the estimate.

    Income Approach 
       The third way is to evaluate how much income might be produced by commercial or residential rental properties.  The net income can be capitalized for commercial properties or factored for residential properties to provide an estimate of value.  The assessor must consider operating expenses, taxes, insurance, maintenance costs, and the return most people would expect on such kinds of property.  This appraisal approach is limited to income-producing properties.

Why do appraised values change?

Market values change due to changes in the property itself, and/or due to changes in the economy.  If an addition or remodeling is done to a property, this will alter its marketability.  Changes in the real estate market have a major impact on property values.  The assessor’s staff monitors sales activity in every neighborhood of the County to see the trends.

What about the recent decline real estate values, and foreclosures? 

 The assessor’s staff is acutely aware of the effects on property value by the dramatic changes in the real estate market over the past two years.  Current sales are continually analyzed to monitor trends in each neighborhood.  While foreclosures are not considered arm’s length transactions under the definition of market value, their impact on neighborhoods is nevertheless taken into account.  By state law, the assessor must reflect the market value of properties according to the direction the market takes.   

Are foreclosures taken into account?

Yes.  The International Association of Assessing Officers recommended that foreclosures be taken into account if they comprise 15% or more of the number of sales in a neighborhood.  Some jurisdictions choose not to consider foreclosures since they don’t meet the strict definition of market value.  However, because foreclosures have increased throughout the Mecklenburg County, we are calculating their regressive effect on the market value of all properties in neighborhoods where they are found.

There are a number of vacant houses in my neighborhood that have not sold.  How does the revaluation account for them?

Inactivity of sales speaks as loudly as high activity.  County appraisers check listings for unsold properties on-line to see what the asking prices are, how long they have been on the market and the number of price reductions that have been made.  These factors help gauge the market for a neighborhood with limited sales data.

Will my new assessed value be lower than the current assessment?

 That will depend on sales activity in your neighborhood.  The assessor’s staff looks at the most recent sales in order estimate market value.  There will be some neighborhoods where sale prices have fallen below 2003 prices.  However, the majority of neighborhoods will see a net increase in value – though certainly not as high as the peak values of 2007-08 before the market declined.

Doesn’t the Assessor’s Office simply raise values to increase the tax base?

 No.  By statute the assessor must appraise your property at its current market value.  If that turns out, for example, to be lower than the previous assessment, then that is what the new assessment will reflect.  Changes in assessed value are neither arbitrary nor set to meet a particular target.  To do otherwise would violate of the North Carolina General Statutes and standard appraisal ethics and practice.

No one came by my property.  How can they know its true market value?

 The assessor’s staff has the task of reappraising over 360,000 parcels of real estate.  It is not possible to re-visit every property.  However, every new house or building that has been constructed over the years has been visited and inspected by the assessor’s staff.  The same applies to all properties that were remodeled or renovated.  At some point in time – perhaps many years ago – your property was listed by a member of the assessor’s staff.   Changes in property records are indicated by building permits, and the records are maintained and reviewed.  The staff then uses current sales data to get a picture of the market in your neighborhood.

But my house is unlike others in my neighborhood.

 The assessor’s listing of your property takes into account its individual characteristics.  Consider the following example:
 Sandra and Sam own houses with the same floor plan in the same neighborhood.  The two houses are of similar quality and were constructed the same year.  Yet, Sam’s assessed value came in over $8,000 higher than Sandra’s.  How can this be?  An examination of the property records reveals that Sam’s property includes additional detached structures that Sandra’s house does not have; hence, the difference in the assessments.

How much will my value increase?

 That will depend entirely on the sales in your neighborhood.  Until the review process is completed at the end of this calendar year, it is impossible to say how much an individual property will increase/decrease in value.

How much will my taxes increase?

The assessor's office is not involved in determining the amount of taxes collected.  The assessor's responsibility is to estimate the fair market value of your property so that you pay only your fair share of the taxes.

The amount of tax you pay is determined by a tax rate applied to your property's assessed value.  The tax rate is determined by all the taxing agencies – city or county, school districts, and others – and depends on what is needed to provide all the services you enjoy.  The Board of County Commissioners sets a rate for all County property owners; the councils of the various towns in the County set their own rates. 

When will I receive notice of my new assessment?

The effective date of the new value estimates is January 1, 2011.  The new notices will be mailed to residential property owners in early February; commercial property owners will receive their notices in March. 

When will I see my new tax bill?

 Tax rates are set (adopted) in June of each year by the Board Of County Commissioners, the City of Charlotte, and the Towns within the County.  These actions must precede the fiscal year start on July 1.  The rates will be reflected in tax bills sent to property owners in the fall of 2011.

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