Realtor | Corey Dwan

The Assessment and Valuation Process

The assessment process involves discovering and listing information about properties and determining property values. It also involves analyzing the values to ensure they meet the standards of fair assessment, and certifying the assessment roll to the appropriate taxing authorities.
To ensure equalization, the assessor must determine residential property values by using only appropriate market information. Values for most other properties are determined from relevant cost, market, and income data.

Information Collection
The first step in the assessment process is to gather information on ownership, location, use, sales, building measurements, construction type, construction costs, and rental income.
Primary sources for this information are real property deeds and declarations, subdivision maps, building permits, and local building contractors. Other primary sources are declarations filed by owners of taxable personal property and appraisers who conduct on-site inspections to gather land and building characteristics.
The assessor stores, updates, and maintains this information for current and future use in the assessment process.

Appraisal – Estimating Value
Real property is re-appraised by the assessor’s office every odd numbered year. The value determined by the assessor for the year of reappraisal is generally used for the intervening year also. The actual value of real property is based on its value as of the appraisal date, which is June 30th of the year prior to the reappraisal year.
The three approaches for appraising property are the cost approach, the income approach, and the market approach. To appraise property using these methods, the assessor and staff must review information gathered on individual properties, know what similar properties are selling for, and how much it would cost for replacement. Other factors that influence value may be location, availability of services, and rental rates.
The cost approach estimates the material and labor costs to replace a building with a similar one. If the building is not new, the appraisal must consider its age and how much it has depreciated over time.
The income approach may be considered for income producing properties such as stores, office buildings, and warehouses. This method considers the landlord’s income and operating expenses, and the financial return most people would expect from a given type of investment property.
The market approach is the most direct method of appraisal. Market value is the most probable price, expressed in terms of money, that a property would bring if exposed for sale in the open market in an arm’s length transaction between a willing seller and willing buyer, both of whom are knowledgeable concerning all the uses to which it is adapted and for which it is capable of being used.
Residential properties, by law, must be valued solely by the market approach, using comparable verified sales from the study period.
A property’s value may alter over time due to physical changes, such as new rooms finished in the basement or extensive remodeling and modernization. Changes made to maintain your property’s current value, such as painting your home, replacing your roof or making repairs would not necessarily increase the value of the property. But, if these tasks were not performed, the condition of the home would deteriorate which could adversely affect the value.

Mass Appraisal
When a fee appraiser values your property for financing or other purposes, you typically receive an appraisal consisting of three sales that indicate the market value. The sales selected are generally similar in design type, size, age, garage type and size, basement type and size and within the immediate location of your property. In addition, the sales have all occurred within a time frame of 1 – 3 months. Adjustments are made to the sales, either positive, negative, or none, based on differences with your property. An indicated market value as of that date is given.
When the Assessor’s office values your property for taxation purposes, an analysis consisting of three sales for each property is not an efficient method. The lack of effectiveness is due to time constraints for the number of properties that have to be valued, the number of sales that are used and the resources available.
In addition, the law states a specific time frame that the sales must occur. The minimum requirement is 18 months, and depending on the number of sales available for the property type, a maximum of 5 years. Residential and vacant land parcels are valued with 24 months of sales in Gunnison County. Because the market can change gradually or dramatically during that time frame, the law requires that before any values can be calculated, the sales have to be analyzed and adjusted to one point in time, which is the end of June 30th, of each even numbered year prior to the reappraisal year. Therefore, before values are calculated, the sales are adjusted for the time from the date of the sale to the reappraisal date of June 30th of the even numbered year before the reappraisal.
After the sales are adjusted for time, a technique called Multiple Regression Analysis (MRA) is used to determine market value. MRA is appropriate for mass appraisal purposes because it is essentially an automated application of the sales comparison approach that uses all similar property type sales in geographic areas, not just three. MRA determines the proper adjustment for property characteristics that are important to the market. This is done through an algorithm designed to fit the sale prices as closely as possible. The sales are separated by property types (Single family, Condominium, Townhouse) and regional location (economic areas). Then, different value models are used for each property type and their respective economic area. The property characteristics included in the value models are design type, quality, living area size, age,garage size, basement type and size, as well as the neighborhood location. Some characteristics have been collected but are not adjusted, such as bedroom count, because other features, such as total living area and quality type, account for it.

Economic Areas
Property types are generally self-explanatory, but economic areas and neighborhoods, when used for mass appraisal valuation, are not always so clear. An economic area is a grouping of neighborhoods that have similar economic forces or geographic location. Economic forces are identified as physical and man-made features that are common to the area. Rivers, mountain passes, shopping centers, employment and entertainment centers are features that can be a uniting feature for different residential neighborhoods. A neighborhood consists of similarly valued properties in similar areas. Neighborhoods will typically contain homes of several filings of the same or similar subdivision. Economic area and neighborhood maps are available below.

Market Approach Methods for Mass Appraisal
Colorado State Statutes [39-1-103 (5) (a) and (8) (a)] require all county assessors to value residential real property solely by the market approach. There are several methods used to determine values by the market, such asPaired Sales and Multiple Regression.
• Paired Sales Method: Paired Sales is the primary method of single-property appraisal. This methodology measures one property sale against a similar property sale to determine a specific adjustment for specific amenities. An example would be two ranch style home sales. Both have the same square footage and age, but one has a garage and the other does not. It is generally impractical in mass appraisal due to the quantity of sales to individually analyze each attribute adjustment.
• Multiple Regression Analysis Method: Multiple Regression explores and quantifies the relationship between two or more components of known and available data (sale prices and property characteristics) to generate a market value. In essence this methodology uses aspects of both the paired sales and cost approach methodologies by determining which property characteristics are the primary contributors (Cost approach) and the amount they contribute (Paired sales). Regression does not require strict similarity between property sales because it estimates the value contribution (coefficient) for each attribute using a "goodness of fit" or error-minimizing technique. This methodology produces statistics about the quality of the attribute contribution that the other methods cannot provide. These statistics help evaluate the predictive accuracy of the regression equation, or essentially, the ability to predict sales price.

Value Models
The value models used forGunnison County are the result of many MRA iterations. We review the data on a county-wide basis to review market trends. We also review the value models used in previous reappraisals for trends and consistency. This global model can then be used as a reference when specific neighborhoods don’t have many sales. Each economic area and property type (Single Family, Condominium, Townhouse) have different value models. Before values are finalized, we review each neighborhood for any uniqueness that is not handled with the economic area value model. We test for statistical compliance and equitable valuation. Overall, the goal is to provide a value model that best reflects market value.

Value Accuracy Tests
To ensure market level values within economic areas, the sale prices are compared to actual values. The middle or median sales ratio of all the sales in an economic area must be between .95 and 1.05.
Another test for market equity includes the amount of difference between all the sales ratios and the median sales ratio. A COD, or coefficient of dispersion, is used for this. It basically is a percentage of the average difference (absolute deviation) of all ratios with the median sales ratio. The COD indicates the amount of homogeneity or sameness there is in the market place. Some areas have a lot of variety, thereby having a higher COD, while others may have more similarity, indicating a lower COD. The law requires different COD levels, depending upon the property type. All residential property must have a COD less than or equal to 15.99. All other property, including vacant land must have a COD less than or equal to 20.99.

Notice of Valuation
The assessor is required to send a Notice of Valuation to property owners by May 1 of eachyear for real property.The notice describes the property you own, gives the actual value for both the prior and current year, and provides an opportunity for you to present your objection to the assessor. When you receive a Notice of Valuation, study it carefully! The value shown on the notice will affect the amount of taxes you will pay the following January. The deadlines for appeal are statutory and enforced. If you feel the value the assessor has placed on your property is incorrect, you may wish to file a protest.
An assessment appeal is not a complaint about higher taxes. It is an attempt to demonstrate that your property's estimated market value is inaccurate. You have the right to appeal your property value or its classification. Procedures for appealing your assessment are provided on this website, including deadlines for filing your appeal.

Uniformity of Assessment
After properties have been appraised, the values are analyzed to ensure accurate and equitable assessments. Colorado law requires all assessors to value property at a specific level and within certain uniformity standards. This provides equity in distribution of state school funding, local tax burden, and assessments that cross county lines.
The Assessor’s Office is audited annually by an independent auditor hired by the State Board of Equalization to ensure each county complies with the standards adopted by the State Board of Equalization for assessment level and uniformity. Colorado utilizes the Standards on Sales Ratio Analysis as adopted by the International Association of Assessing Officers (IAAO) for the criteria to measure compliance regarding assessment quality and uniformity. Penalties for noncompliance require the Assessor to reappraise the affected properties again, with state supervision, and to pay the state for their costs of supervision. In addition, the county must levy taxes to "payback" any inappropriate school aid funding due to the inappropriately appraised properties.

Certification to Authorities
In August of each year, the Assessor certifies the total assessed value of all properties located within the boundaries of each taxing authority. Assessed values are calculated by multiplying the actual value by 29% for all property except residential. The residential assessment percentage is subject to change by the Colorado Legislature each odd numbered year. By Constitutional mandate, the change in percentage maintains the present balance of the tax burden between residential and all other taxpayers. The assessment rate is currently 7.96% on residential property.
These figures are used by the taxing authorities to determine their mill levies. If there is any change in the assessed value due to Board of Assessment Appeal decisions, abatements or any other reason, these values are re-certified to the affected taxing authorities in early December to get them the most current figures for their calculations.

Tax Warrant
The figures provided to the taxing authorities are used by the authorities to determine their individual mill levies, which are then submitted to the Board of County Commissioners for review by December 15th. The mill levies are approved by the Board of County Commissioners and certified to the Assessor by December 22nd.
Upon the receipt of the certified mill levies from the commissioners, the Assessor enters the mill levies, extends the calculations against the individual assessed values and forwards the resulting tax warrant to the Treasurer by January 10th for collection.