Chapter 2
Findings of the Appraisal Standards Review
This chapter of the report addresses findings, commendations and recommendations from the appraisal standards review of Montgomery CAD in two sections:
- 2.1 Generally Accepted Appraisal Practices
- 2.2 Other Recommendations
2.1
Generally Accepted Appraisal Practices
There are three general appraisal methods or approaches–cost, income and market–that a chief appraiser must consider in determining the market value of property. The appraiser must use the method most appropriate in appraising a particular property.
Additional information about the approaches to determining or appraising value may be found in appraisal textbooks and IAAO Standards. Appraisers usually determine the value of producing mineral deposits–such as oil, gas and coal–and the value of many utility and commercial properties by using the income approach to value. Most appraisal districts contract with consultants to appraise mineral and utility properties. The chief appraiser can provide information that helps the contractor decide the proper method to use to appraise mineral and utility properties.
Montgomery CAD developed local manuals for the appraisal of real and personal property. The manuals and accompanying classification guides help to promote consistency and uniformity in the appraisal of property.
Montgomery CAD performs ratio studies several times a year to determine how well it is appraising property at current market value. The ratio studies are stratified by a variety of property characteristics, such as location, class, use and value.
FINDING
Montgomery CAD addressed deficiencies identified in the 2004 PVS by reappraising property and aggressively gathering and analyzing land sales in both Montgomery and Willis ISDs.
According to the chief appraiser, in fall 2004, Montgomery CAD began reappraising land countywide. Appraisers identified areas in their respective regions for physical inspections and began an aggressive program of gathering and analyzing land sales. Montgomery CAD mailed out sales questionnaires to buyers and sellers of both vacant and improved land. Appraisers contacted realtors, fee appraisers and "knocked on doors," according to the chief appraiser. Results of the appraisers' inspections and sales analyses indicated that land schedules, specifically residential lots around Lake Conroe, needed to be adjusted to reflect current market conditions. Both Montgomery and Willis ISDs include portions of Lake Conroe.
Montgomery CAD also took into account that the 2004 PVS indicated possible appraisal weaknesses in Montgomery and Willis ISDs that contributed to the schools receiving invalid findings. Single-family residences (Category A) and vacant lots (Category C) were not being appraised at market value. The ratio for Category A in Montgomery ISD was 94.51 percent of market value and 93.90 percent of market value in Willis ISD. Vacant lots in Montgomery ISD were being appraised at 92.37 percent of market value and 91.75 percent of market value in Willis ISD. The acceptable ratio levels of appraisal for purposes of the PVS range from 95 to 105 percent of market value.
Exhibit 6 presents a sample of how some of Montgomery CAD's land values changed in 2005.
Exhibit 6
Montgomery CAD
Sample of Land Values
2004 & 2005
| Land Table | 2004 Price | 2005 Price | Percent Change |
|---|---|---|---|
| 0450.1.G2 | $35,000/lot | $59,450/lot | 69.86% |
| 0450.2.G2 | $49,500/lot | $61,000/lot | 23.23% |
| 0450.0.G2 | $75,000/lot | $117,000/lot | 56.00% |
| 0450.3.G2 | $99,500/lot | $135,000/lot | 35.68% |
| 0725.2.S3 | $0.19/sq. ft. | $0.65 sq. ft. | 242.11% |
| 0725.2.S1 | $1.85/sq. ft. | $6.50/sq. ft. | 251.35% |
| 0725.1.S3 | $0.25/sq. ft. | $0.40/sq. ft. | 60.00% |
| 0725.1.S1 | $2.00/sq. ft. | $4.00/sq. ft. | 100.00% |
| 0146.5.S3 | $0.10/sq. ft. | $0.17/sq. ft. | 70.00% |
| 0147.0.S3 | $0.17/sq. ft. | $0.21/sq. ft. | 23.53% |
| 0146.5.S3 | $0.18/sq. ft. | $0.26/sq. ft. | 44.44% |
| 0146.6.S1 | $1.03/sq. ft. | $1.66/sq. ft. | 61.17% |
| 0147.0.S1 | $1.66/sq. ft. | $2.08/sq. ft. | 25.30% |
| 0146.5.S1 | $1.80/sq. ft. | $2.55/sq. ft. | 41.67% |
| 0161.2.S3 | $0.10/sq. ft. | $0.20/sq. ft. | 100.00% |
| 0161.2.S1 | $1.00/sq. ft. | $2.00/sq. ft. | 100.00% |
| 0557.2.A1 | $35,000/acre | $70,500/acre | 101.43% |
| 0532.1.A1 | $17,000/acre | $30,000/acre | 76.47% |
| 0561.3.A1 | $20,000/acre | $30,000/acre | 50.00% |
| 0533.7.A1 | $40,000/acre | $79,000/acre | 97.50% |
| 0699.4.A1 | $12,000/acre | $19,000/acre | 58.33% |
| 0699.3.A1 | $15,000/acre | $23,000/acre | 53.33% |
| 0699.2.A1 | $25,000/acre | $39,600/acre | 58.40% |
Source: Montgomery CAD, March 2006.
Montgomery CAD's efforts to correct its appraisal weaknesses were successful. By increasing land values of both vacant and improved properties, Montgomery CAD achieved better appraisal ratios in single-family residences and vacant lots. Results of the 2005 PVS indicate that appraisal ratios for single-family residences in Montgomery ISD increased from 94.51 percent to 95.03 percent of market value and from 93.90 percent to 97.35 percent of market value in Willis ISD. Vacant lot ratios increased in Montgomery ISD from 92.37 percent to 98.87 percent of market value and from 91.75 percent to 100.87 percent of market value in Willis ISD. Improvement in the levels of appraisals for these two school districts resulted in valid findings for the 2005 PVS.
The CAD took a number of steps to improve appraisal practices after having two school districts identified as eligible in the 2004 Property Value Study (PVS). This initially resulted in all school districts achieving local value in the 2005 PVS. But, the preliminary 2006 PVS shows two school districts still receiving invalid local value at the time of this report, even after the school districts had protested the 2006 PVS findings.
RECOMMENDATION 1
Continue to correct land tables, improve market analysis and boost property inspections to correct appraisal weaknesses identified in 2004.