Local governments and schools reap billions of dollars from property taxes that depend in part on the value of real estate. For the tax burden to be distributed fairly, county appraisers must accurately determine the value of that real estate. The Atlanta Journal-Constitution wanted to know: Are appraisers accurately valuing residential property?
Since 2009, the newspaper has compared official tax values with sale prices in metro Atlanta counties. This year, the AJC analyzed appraisals in 11 metro counties: Cherokee, Clayton, Cobb, DeKalb, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Henry and Rockdale.
The AJC analyzed hundreds of thousands of tax records and tens of thousands of sales. The newspaper analyzed the data using a method similar to the one appraisers use to check their own work — comparing the appraised value of homes that sold with the actual sales prices.
The newspaper compared the sale prices of residential properties that sold in the first three months of 2013 with their 2013 county values. We used only sales that counties identified as valid, arm’s length transactions under state law.
For each property, we divided the county appraised value by the sale price to produce a ratio. If the county valued a property at $200,000 as of Jan. 1, 2013, but it sold for $175,000 on Feb. 1, 2013, the ratio would be about 1.14 (200,000/175,000=1.14). That means the county’s value was 14 percent over market value, as determined by the sale price.
After calculating a ratio for properties that sold in the first quarter of 2013, we eliminated outliers using standards set by the International Association of Assessing Officers. The newspaper then determined the median ratio for each county and for various ZIP codes within the counties. For example, in Gwinnett County, the median ratio was .95, indicating that the typical county appraisal was 5 percent under market value.
This ratio analysis is the generally accepted method for comparing county appraisals to sales. The state Department of Audits and Accounts uses this method when checking the accuracy of county appraisals annually.
Some county officials objected to using early 2013 sales to judge the accuracy of their appraisals. They said their appraisals are supposed to be accurate as of Jan. 1. They use 2012 sales to make that determination. The appraisers said comparing their Jan. 1 values to early 2013 sale prices says more about the direction of the real estate market than it does the accuracy of their appraisals.
However, the state Department of Audits and Accounts this year is using 2013 sales when it checks the accuracy of county property appraisals. In the past, the department has used prior year sales to check appraisals. But because of a new state law that requires values to be automatically adjusted down to the sale price, those sales are no longer a good measure of the accuracy of county appraisals generally, audit department officials say.
In addition, some county officials objected to the newspaper giving sales from banks and government agencies the same weight as other sales in its analysis. In the past, those sales have not been viewed as fair-market transactions, and appraisers traditionally have not given them the same weight as person-to-person sales. However, under a 2010 state law, those sales are legally defined as fair-market sales. Supporters of the law say that, for better or worse, those sales now account for a majority of transactions in many areas and define the fair-market value of real estate. The newspaper used only sales considered fair-market transactions under state law.
For this report, the newspaper also interviewed county appraisers, real estate professionals, tax consultants and homeowners. We reviewed county tax digests and statistics on appeals, foreclosures and other relevant data.
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