Chapter 2:
Findings of the Appraisal Standards Review
This chapter of the report addresses commendations, findings and recommendations from the appraisal standards review of the San Augustine CAD. A draft of the ASR report was sent to San Augustine CAD for review. After two extensions, no comments were received from the CAD.
Key Findings and Recommendations
As part of the review process, PTAD makes recommendations to address challenges identified during its review of a CAD. Below are recommendations addressing key challenges associated with San Augustine CAD's appraisal activities.
FINDING
San Augustine CAD staff does not have a comprehensive appraisal manual that provides adequate property classification definitions, instructions and directives.
The IAAO Standard on Mass Appraisal of Real Property Section 3.3.2.3, Data Collection Manuals, states that:
A clear, thorough, and precise data collection manual should be developed, updated, and maintained. The written manual should explain how to collect and record each data item. Pictures, examples and illustrations are particularly helpful. The manual should be simple yet complete, with a high degree of standardization for uniformity. Data collection staff should be trained in the use of the manual and updates to maintain consistency. The manual should present guidelines for personal conduct during field inspection and, if interior data are required, should outline procedures to follow when the property owner has denied access or when entry might be risky.
The CAD provided an appraisal manual for residential property that included its classification system, subdivision listings, abstracts and cost schedules. The CAD appraises all property in-house with the exception of utility and complex industrial property accounts, which are contracted to an outside appraisal firm.
The CAD has not developed a comprehensive appraisal manual for all property, including residential, commercial, business personal property, land and agricultural property. In lieu of a comprehensive manual, the CAD relies on the personal experience of the chief appraiser and appraiser. The CAD has three full-time employees and one part-time mapper. The chief appraiser has been with the CAD since inception. The appraiser has about 25 years of service. The appraiser is responsible for most field work and bookkeeping, while the chief appraiser values commercial property and makes schedule changes. The secretary performs deed work, data entry and administrative support. The chief appraiser and appraiser perform all appraisal functions for property appraised in-house.
Residential home classifications used in the CAD are:
- Single-Family Residence (RS), Low Quality (05), Frame
- Single-Family Residence (RS), Fair Quality (06), Frame
- Single-Family Residence (RS), Average Quality (07), Frame
- Single-Family Residence (RS), Good Quality (08), Frame
- Single-Family Residence (RS), Fine Quality (09), Frame
- Single-Family Residence (RS), Excellent Quality (10), Frame
- Single-Family Residence (RS), Low Quality (05), Masonry Veneer
- Single-Family Residence (RS), Fair Quality (06), Masonry Veneer
- Single-Family Residence (RS), Average Quality (07), Masonry Veneer
- Single-Family Residence (RS), Good Quality (08), Masonry Veneer
- Single-Family Residence (RS), Fine Quality (09), Masonry Veneer
- Single-Family Residence (RS), Excellent Quality (10), Masonry Veneer
The classifications have general descriptions for items such as design materials and workmanship, and standard descriptions for foundation, exterior walls, roof, floors, millwork and typical features including electric outlets, fixtures, number of baths, garage, heating/cooling, fireplaces and square footage. The classification system uses condition ratings of very good, above average, average, below average and poor. The classification system includes a depreciation table with depreciation amounts based upon the effective age and classification of the property. The system also includes descriptive codes for exterior walls, quality class, structure and heating/cooling system.
The on-site reviewer examined 84 properties within the Broaddus and San Augustine ISDs, including 42 Category A, SingleFamily Residential; 10 Category C, Vacant Lots; 17 Category D, Rural Real; 10 Category F, Commercial Real; and five Category L1, Commercial Personal property accounts.
With the assistance of the CAD appraiser, the reviewer conducted an on-site inspection of each property. The reviewer checked property characteristics and data on appraisal cards, such as the age, condition and size, for accuracy and reasonableness. Using descriptions of property classifications found in the CAD's appraisal manual, the reviewer examined accounts for consistency in classification.
Exhibit 1 shows results associated with the review of the individual parcels using the CAD's existing manual, if available.
As a result of missing information, the reviewer was unable to replicate the CAD's property appraisal values. Exhibit 1 shows that the appraisal cards for the sample property consistently lacked important basic characteristics such as year built, condition and any indication of appraisals conducted using scheduled costs. The condition of some homes appeared different than the condition represented on the appraisal card. This could be the result of inconsistent judgment by field appraisers or of not completing a current inspection of the property in the sample.
Exhibit 1
San Augustine CAD Sample Property Inspected
Noted Problems
| Property Category | Total Number of Properties Inspected | Description of Problem | Number of Properties With Problem |
|---|---|---|---|
| A: Single Family Residential | 42 | Land segment flat-valued. | 22 |
| A: Single Family Residential | 42 | Property condition/effective age not on card. | 40 |
| A: Single Family Residential | 42 | No age listed for main improvement. | 40 |
| A: Single Family Residences | 42 | Depreciation not supported for main improvement or depreciation not according to depreciation table. | 42 |
| D3: Rural Real |
17 (8 with improvement) |
Property condition/effective age not on card. | 8 |
| D3: Rural Real |
17 (8 with improvement) |
No age listed for main improvement. | 3 |
| D3: Rural Real |
17 (8 with improvement) |
Depreciation not supported for main improvement or depreciation not according to depreciation table. | 8 |
| C: Vacant Lots | 10 | Lot is flat-valued. | 9 |
| C: Vacant Lots | 10 | Had improvements that were not on the appraisal roll. | 1 |
| F1: Commercial Real | 10 | No age listed for main improvement. | 10 |
| F1: Commercial Real | 10 | Non-descriptive property classification (flat value). | 10 |
| F1: Commercial Real | 10 | Land segment flat-valued. | 10 |
| F1: Commercial Real | 10 | Did not provide any supporting documentation for appraisal. | 10 |
| L1: Commercial Personal | 5 | Non-descriptive property classification (flat value) on card. used renditions. | 5 |
Note: Problem categories listed are not mutually exclusive.
Source: San Augustine CAD appraisal cards, April 2008.
The San Augustine CAD appraisal manual does not provide detailed guidance for classification of property, and it is unlikely that someone without extensive appraisal experience could use the appraisal manual without written instructions. An attempt by the on-site reviewer to recalculate/reconstruct the parcel appraisals was unsuccessful due to a combination of flat appraisals, incomplete appraisal cards, depreciation procedures and a lack of details regarding the land classification system.
For example, the appraisal manual does not have instructions for estimating accrued depreciation or for using land class definitions, schedules, neighborhood information or personal property procedures. It does not contain written procedures for measuring homes or for engaging with the homeowner while on-site. The CAD provided no appraisal manual or procedures for Category F property – sample properties were all flat-valued with hand calculated appraisals. All are critical items in developing consistent field procedures and classification guidelines. When combined, these items can result in the misclassification of homes or incorrect measurement techniques, resulting in inconsistent appraisal data and ultimately inaccurate appraisals. Consistency in classification of property and accurately estimating depreciation are key factors to appraisal accuracy. A comprehensive manual will include details for appraising residential property, appraisal procedures for valuing land and commercial property and clear definitions and descriptions of land classes.
Lack of a detailed appraisal procedures manual may cause a lack of uniformity among appraisals and may cause property values to deviate from market value. This market value deviation may cause ISDs in San Augustine CAD to receive invalid PVS findings, placing them in a position to possibly lose state formula funding. If the level of appraisal (percentage of market value) varies between property categories or between taxpayers, some taxpayers may also bear more than their fair share of the local tax burden. Instructions on how to use the CAD's appraisal manuals will help taxpayers to better understand the appraisal process.
Lack of a detailed, comprehensive appraisal manual may also lead to inconsistent classification of property by field appraisers and irregular field procedures and varying property characteristic definitions. Lack of a manual can also result in the CAD relying heavily on senior personnel, and in the event of senior staff member changes, the remaining staff members have few guidelines and limited locally developed knowledge. A comprehensive appraisal procedures manual can help the CAD comply with Property Tax Code Section 23.01(b), which mandates that the market value of property be determined by using appraisal methods and techniques of generally accepted mass appraisal standards. The CAD's manual must also comply with USPAP Standard 6, requiring similar appraisal methods and techniques to be applied to same or similar properties.
A comprehensive appraisal manual will contain local procedures for all property appraised in-house and will include items such as the following:
- estimating accrued depreciation;
- recording property characteristics;
- field procedures such as measuring;
- procedures to access property or deal with property owners; and
- well-defined land classifications, schedules and characteristics.
Jefferson CAD, for example, has extensive appraisal procedures manuals for the appraisal staff. To increase efficiency and aid appraisal equality, each appraisal staff member has an appraisal procedures manual. The manual includes local procedures and practices for each type of property the staff appraises.
RECOMMENDATION 1
Expand the current appraisal manual to include comprehensive procedures, instructions and protocols for appraising property in-house.
FINDING
San Augustine CAD does not conduct local ratio studies and lacks detailed procedures and policies that outline and define the analysis and implementation of ratio study results.
The IAAO Standard on Ratio Studies points out that two major aspects of appraisal accuracy are level and uniformity. Level refers to the overall ratio of appraised values to market values, while uniformity refers to the degree to which different property is appraised at equal percentages of market value. The standard also provides "recommendations on the design, preparation, interpretation and use of ratio studies for equalization, the evaluation of appraisal performance and the quality control operations of an assessor's office." Finally, the standard provides design considerations and outlines the six steps generally involved in ratio studies:
- defining purpose and objectives;
- collecting and preparing market data;
- matching appraisal and market data;
- stratification;
- statistical analysis; and
- evaluation and use of results.
While the San Augustine CAD 2007 and 2008 reappraisal plan, approved Sept. 15, 2006, outlines performance tests, it does not define content, scope, required variances or when and how often staff should run ratio studies. The CAD does not have any definition of purpose and objectives of the ratio studies, which is the first step in any ratio study.
The chief appraiser did not provide any ratio studies and stated that neither she nor any staff member conducts ratio studies. The CAD's CAMA system has the ability to perform ratio studies. The CAD enters any sales data gathered into the system. The chief appraiser stated, however, that she relies on her local knowledge of values in the area and market characteristics for different locales in the CAD to adjust schedules.
Exhibit 2 illustrates the need for the CAD to conduct ratio studies and apply the results to appraisals in the CAD. PVS results varied widely from 2003 to 2007 indicating property has been inaccurately appraised for a number of years. For example, Category A results in both San Augustine and Broaddus ISDs vary from 0.5491 to 0.9554, and most are well below the 0.95 confidence interval, suggesting that property is appraised at less than market value. Category D results in both ISDs indicate all ratios fall either below or above the 0.95 to 1.05 confidence interval, suggesting property in this category is improperly valued. Based on five years of PVS results, San Augustine CAD has one ratio within the confidence interval, suggesting that property appraisal is neither level nor uniform as required for appraisal accuracy.
Exhibit 2
San Augustine CAD
Property Value Study Ratios
| Year |
San Augustine ISD Category A |
Broaddus ISD Category A |
San Augustine ISD Category D |
Broaddus ISD Category D |
|---|---|---|---|---|
| 2003 | 0.8966 | 0.8605 | 0.8662 | 0.7409 |
| 2004 | 0.8411 | 0.7340 | 1.1020 | 1.1129 |
| 2005 | 0.8649 | 0.7912 | 1.1092 | 1.2304 |
| 2006 | 0.9554 | 0.7393 | 0.7813 | 1.0653 |
| 2007 | 0.7529 | 0.5491 | 0.8443 | 0.8787 |
Source: 2003-07 Property Value Studies.
By conducting ratio studies and developing formal policies and procedures, the CAD could improve consistency when analyzing sales, developing schedules and adjustment factors, modifiers, time adjustments and depreciation factors. Frequent ratio studies and appraisal maintenance enable a CAD to keep its values at or near market level. By applying ratio study results in an inconsistent or inappropriate manner, the CAD runs the risk of not properly recognizing and adjusting schedules for market changes and unequally valuing market areas, thus jeopardizing uniformity and accuracy of appraised values.
Brown CAD, for example, uses an automated appraisal system that produces ratio studies on demand. The ratio studies used for property reappraisal and appraisal maintenance are adequate and conform to standards established by IAAO. The CAD groups residential property by neighborhoods. Staff conducts a ratio study at the end of the appraisal season each year and conducts additional ratio studies following implementation of changes. The ratio studies help identify areas of increasing values and declining neighborhoods. The CAD uses ratio studies to identify land and improvement appraisal problems. Brown CAD conducts ratio studies by ISD, subdivision, property class, sale date and sale type.
RECOMMENDATION 2
Conduct ratio studies, update property schedules and develop comprehensive, written ratio study policies and procedures, as recommended by the IAAO Standard on Ratio Studies.
FINDING
San Augustine CAD has not conducted a complete and full reappraisal of the entire county at least once every three years as required in Property Tax Code Section 25.18.
Property Tax Code Section 25.18(b) calls for the periodic reappraisal of property in a CAD at least once every three years. The IAAO Standard on Mass Appraisal of Real Property defines a reappraisal as "the mass appraisal of all property within an assessment jurisdiction accomplished within or at the beginning of a reappraisal cycle." A reappraisal cycle is "the period of time necessary for a jurisdiction to have a complete reappraisal." Appraisers use a ratio study to evaluate appraisal performance. As defined in the IAAO Standard on Ratio Studies, a ratio study is "a study of the relationship between appraised or assessed values and market values."
The IAAO Property Appraisal and Assessment Administration, Chapter 13, Mass Appraisal, states that the three basic functions of a mass appraisal system are reappraisal, data maintenance and value updates. Steps in a reappraisal include the following:
- performance analysis – determines whether values are equitable and consistent with the market;
- reappraisal decision – requires planning and commitment of resources;
- analysis of available resources – includes staff, budget, existing systems, data processing support, existing data and maps;
- planning and organization – most important aspect of a reappraisal. identifies target completion date, performance objective, action plan and schedule;
- system development – produces procedures, methods, manuals and software;
- pilot study – tests new procedures in one or two areas of the jurisdiction;
- data collection – the quality of the available data will, more than anything else, determine valuation accuracy;
- production of values – begins with market analysis, model development and calculation of preliminary values;
- preparation of the appraisal roll – final values are listed on the roll and valuation notices are mailed; and
- final performance analysis – a final ratio study is conducted to measure and evaluate the accuracy and uniformity of the new values.
The CAD appraiser stated that residential field work is generally accomplished by pulling hardcopy records and driving the county to re-inspect property and discover new improvements. The county and cities in the CAD do not have a permitting process; all property is discovered through field work or word-of-mouth. The appraiser stated that she drives the county annually for property discovery. It was unclear when the last complete and thorough reappraisal of the CAD took place. The CAMA system contains a field for the last inspected/appraisal date. Exhibit 3 summarizes the review of the inputs to this field on the appraisal cards in the group of sample property reviewed.
Exhibit 3
San Augustine CAD
Analysis of Category A Property Reappraisal Dates
| Sample | Broaddus ISD | San Augustine ISD |
|---|---|---|
| No Inspection Date | 8 | 0 |
| Inspection Date Before 2003 | 7 | 9 |
| Total Sample Reviewed | 22 | 20 |
| Percentage of Sample that Lack Documentation of a Current Inspection | 68% | 45% |
Source: San Augustine Appraisal Cards from Sample Property.
The table indicates that a large percentage of accounts in the sample did not have a current inspection date, which is part of the reappraisal process. Category F property in the sample had appraisals dating back to 1987.
The San Augustine CAD 2007 PVS Summary Worksheet indicates the need for the CAD to conduct frequent and complete reappraisals. The median ratio for each property category appraised in-house was under 0.8000, indicating poor appraisal performance. The COD for Category A was 25.65 and 39.53 for Category C property, indicating a lack of uniformity among appraisals in these categories. A reasonable COD for Category A property is generally around 15 or less and 20 or less for Category C.
Not planning for and completing regular reappraisals and the associated model calibration contributed to the CAD falling outside the confidence interval in the 2006 PVS and to the consistently low ratios for single-family residential property. Outdated property records can lead to unequal appraisals among residential classifications and inconsistent appraisal data, resulting in poor appraisal performance.
RECOMMENDATION 3
Hire a qualified, independent third-party to conduct a study using IAAO standards to determine whether a complete reappraisal of all property in San Augustine county is warranted and update all appraisal cards with the last year reappraised.
FINDING
San Augustine CAD lacks written neighborhood or market area analysis to assist in consistent and proper land appraisal and classification.
USPAP Standard 6: Mass Appraisal, Development and Reporting states that "a mass appraisal includes defining market area of consistent behavior that applies to properties." USPAP Standard 6 lists seven criteria that a mass appraisal must include, three of which read as follows:
- defining market area of consistent behavior that applies to property;
- identifying characteristics (supply and demand) that affect the creation of value in that market area; and
- developing a model structure that reflects the relationship among the characteristics affecting value in the market area.
In addition, the IAAO Standard on Automated Valuation Models (AVMs) states that "market areas are broad, somewhat homogeneous geoeconomic areas that appeal to buyers in similar economic brackets."
The IAAO Standard on Mass Appraisal of Real Property definition for an economic area or market area is "a geographic area, typically encompassing a group of neighborhoods, defined on the basis that the properties within its boundaries are more or less equally subject to a set of one or more economic forces that largely determine the value of the properties in question." The IAAO Property Appraisal and Assessment Administration, Chapter 7, Land Valuation, states that "the first step in land valuation is market analysis: stratification, determination of units of comparison, and data analysis."
The only documented reference to conducting a neighborhood or market analysis is located in the San Augustine CAD reappraisal plan. It describes in several areas how a CAD conducts land, area, neighborhood and market analysis, but does not define or illustrate any local land uses or categories of land in the CAD. The reappraisal plan contains general information about processes used in the development of market areas and neighborhoods, but not specific information about land or market area analysis in San Augustine CAD.
The CAD assigns a specific identifying number to each subdivision and abstract and maintains hardcopy files for each. The CAD does not have a written analysis of neighborhood characteristics that influence market values, such as lake frontage, deed restrictions or amenities.
The southern portion of the county, part of Broaddus ISD, borders the Sam Rayburn Reservoir. Lake front property typically varies in value when compared to non-lake front property. Exhibit 4 compares property in the group of sample property and illustrates the need to perform a more thorough market area analysis. A same size tract with no lake front can vary from $1,200 to $1,500 with no explanation for the variance. The same size lake front property is valued at $1,500, indicating no influence on the lot value for the lake front characteristic.
Exhibit 4
San Augustine CAD
Comparison of Lot Values
| Property ID Number | Description of Property | Lot Value |
|---|---|---|
| 20330-00043-00092-000010 | 1 Acre, No Waterfront | $1,300 |
| 20330-00013-00078-000010 | 1 Acre, Open Waterfront Lake Lot | $1,500 |
| 20330-00262-00106-000020- | 1 Acre, No Waterfront | $1,500 |
| 20330-00041-00081-000020 | 1 Acre, No Waterfront | $1,400 |
| 20330-00231-000001-000010 | 1 Acre, No Waterfront | $1,200 |
| 20330-00251-00017-000010 | 1 Acre, No Waterfront | $1,300 |
| 20330-00010-00064-000021 | 1 Acre, No Waterfront | $1,400 |
| 20330-00567-00033-000011 | 1 Acre, No Waterfront | $1,300 |
| 20330-00004-00016-000011 | 1 Acre, No Waterfront | $1,300 |
Source: San Augustine Appraisal Cards and Sample Property Photos.
Subdivision lots in the CAD are typically flat-valued in the CAMA system. The CAD has not developed computerized schedules for lots, which once developed, would allow for neighborhood or subdivision factors to be applied in a uniform and convenient manner as market changes occur.
By not having market areas clearly defined, analyzed and documented, the CAD relies heavily on the local market knowledge of the chief appraiser and appraisal supervisor when warranted updates to appraised values are necessary. The CAD does not have any documentation showing which subdivisions share similar characteristics, land characteristics, land uses or areas considered to be in the same market.
Not clearly identifying market areas can lead the CAD to inconsistently update values in a given market area and can lead to unequal values among similar land and residential classes. Clearly defining market areas allows the CAD to make schedule changes across similar subdivisions or market areas, not only when sales are available in a specific subdivision.
Brown CAD, for example, has acquired a GIS that depicts various attributes that influence value, including overlays of flood zones, urban zoning, rural water systems, railroad and historic maps. Of particular importance is the system's ability to define market areas used in the appraisal of land or of land with improvements.
RECOMMENDATION 4
Clearly identify, define and analyze neighborhoods and market areas within the CAD, incorporate the results into the reappraisal plan and appraisal manual and use the data to update schedules as needed.
FINDING
The San Augustine CAD reappraisal plan for tax years 2007 and 2008 lacks specific local information and does not comply with the requirements of Property Tax Code Section 25.18.
Property Tax Code Section 6.05(i) requires the CAD board to "develop biennially a written plan for the periodic reappraisal of all property within its boundaries, according to the requirements of Section 25.18." Section 25.18 also states the following:
(a) Each appraisal office shall implement a plan for periodic reappraisal of property approved by the board of directors under Sec 6.05(i).
(b) The plan shall provide for the following reappraisal activities all real and personal property in the district at least once every three years:
(1) identifying properties to be appraised through physical inspection or by other reliable means of identification, including deeds or other legal documentation, aerial photographs, land-based photographs, surveys, maps and property sketches;
(2) identifying and updating relevant characteristics of each property in the appraisal records;
(3) defining market areas in the district;
(4) identifying property characteristics that affect property value in each market area, including:
(A) the location and market area of property;
(B) physical attributes of property, such as size, age and condition;
(C) legal and economic attributes; and
(D) easements, covenants, leases, reservations, contracts, declarations, special assessments, ordinances or legal restrictions;
(5) developing an appraisal model that reflects the relationship among the characteristics affecting value in each market area and determines the contribution of individual property characteristics;
(6) applying the conclusions reflected in the model to the characteristics of the properties being appraised; and
(7) reviewing the appraisal results to determine value.
According to USPAP Standard 6, a functional mass appraisal includes the following activities:
- identifying properties to be appraised;
- defining market areas;
- identifying property characteristics that affect property value in each market area;
- developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area;
- calibrating the model to determine the contribution of the individual property characteristics affecting value;
- applying the conclusions reflected in the model to the characteristics of the properties being appraised; and
- reviewing the mass appraisal results.
The reappraisal plan for San Augustine CAD states that the CAD "prepared and published this reappraisal plan and appraisal report to provide our Board of Directors, citizens, and taxpayers with a better understanding of the district's responsibilities and activities."
The reappraisal plan includes the following sections:
- Introduction – lists scope of responsibility, personnel resources, staff education and training, data, information systems, shared appraisal district boundaries and independent performance test.
- Appraisal Activities – describes appraisal responsibilities, appraisal resources, appraisal frequency and method summary, data collection/validation, sources of data, data collection procedures, data maintenance, field review and performance test.
- Residential Valuation Process – addresses scope of responsibility, appraisal resources, land analysis, area analysis, neighborhood and market analysis, highest and best use analysis, cost schedules, sales information, statistical analysis, market and cost reconciliation and valuation, homesteads, field review, office review, sales ratio studies and management review process.
- Commercial Property Valuation Process – addresses appraisal responsibility, appraisal resources, market study, land value, area analysis, neighborhood analysis, highest and best use analysis, market analysis, data collection manuals, sources of data, cost schedules, income models, sales comparison approach, final valuation schedules, statistical and capitalization analysis, field review, office review and sales ratio studies.
- Business Personal Property Valuation Process – addresses appraisal responsibility, highest and best use analysis, data collection procedures, sources of data, cost schedules, statistical analysis, depreciation schedules and trending factors, office review and ratio studies.
- Minerals (Oil and Gas Reserves) Valuation Process.
- Reappraisal Plan developed for CAD by the outside appraisal firm for Real Mineral and Industrial and Utility Properties.
The plan states that a physical examination of residential property is conducted every three years, commercial property is observed annually and business personal property is observed annually.
While the plan does address general functions and steps taken during a reappraisal, it does not clearly identify property characteristics that affect property values in each market value as listed in Property Tax Code Section 25.18 (b). Specifically, the following items in 25.18(b)(4) are not adequately identified and defined in the plan:
- the location and market area of property;
- legal and economic attributes; and
- easements, covenants, leases, reservations, contracts, declarations, special assessments, ordinances or legal restrictions.
The plan also lacks a clear definition of market areas as required in Property Tax Code Section 25.18(b).
Exhibit 5 shows how the CAD's periodic reappraisal plan complies with Property Tax Code Section 25.18(b) and which activities were followed in 2007.
Exhibit 5
Required Elements of a Reappraisal Plan
Versus San Augustine CAD's Reappraisal Plan
Property Tax Code Section 25.18(b) Requirement
| The plan shall provide for the following reappraisal activities all real and personal property in the district at least once every three years: |
Activity in Plan? Yes/No |
Extent to Which Activity Performed |
|---|---|---|
| identifying properties to be appraised through physical inspection or by other reliable means of identification, including deeds or other legal documentation, aerial photographs, land-based photographs, surveys, maps, and property sketches; | Yes, general description of CAD area and San Augustine County. | The CAD appraiser stated that the county is driven annually, areas/properties not specifically identified in plan. |
| identifying and updating relevant characteristics of each property in the appraisal records; | Yes, provides a general explanation for field and office procedures. | Specific relevant characteristics not defined. |
| defining market areas in the district; | Yes, provides a definition of how a neighborhood and market analysis might be conducted. | Local information not documented. |
| identifying the location and market area of property; | Yes, provides a general explanation, but fails to explain how San Augustine CAD will accomplish this task. | Plan does not define or reference any specific market areas or neighborhoods. |
| identifying physical attributes of property, such as size, age, and condition; | No, not defined. | CAD gathers size, age, condition on some parcels, inconsistent. |
| identifying legal and economic attributes; | Yes, provides a general explanation. | The appraisal cards contain a legal description but no other attributes are identified. |
| identifying easements, covenants, leases, reservations, contracts, declarations, special assessments, ordinances, or legal restrictions; | No, not defined or characterized in the plan. | None provided. |
| developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area and determines the contribution of individual property characteristics; | Yes, provides a general explanation. | The plan does not define relationships in or among the neighborhoods located in the CAD. |
| applying the conclusions reflected in the model to the characteristics of the properties being appraised; and | Yes, provides a general explanation. | The CAD uses cost based schedules. |
| reviewing the appraisal results to determine value. | Yes, provides a general explanation, but fails to explain how results are analyzed. | No documentation showing analysis of ratio study results and analysis of changes to cost schedules. Staff stated that ratio studies are not conducted. |
Sources: Property Tax Code Section 25.18(b) and San Augustine CAD 2007-08 Reappraisal Plan dated Sept. 15, 2006.
By not developing a detailed reappraisal plan, the CAD runs the risk of failing to identify market areas and changes to market values in the jurisdiction. A reappraisal plan is a detailed roadmap for the CAD staff to follow. A thorough reappraisal plan details which property to reappraise, who is going to do the work, how the work is done, and when it will be completed. The reappraisal plan will become a working guideline for staff to use throughout the tax year. A reappraisal plan can help ensure that appraised values are at market value.
RECOMMENDATION 5
Adopt a detailed reappraisal plan that complies with Property Tax Code Section 25.18.
FINDING
San Augustine CAD has not appraised Category F1, Commercial Real property using generally accepted appraisal techniques.
Property Tax Code Section 23.01 states that "the market value of property shall be determined by the application of generally accepted appraisal methods and techniques." Property Tax Code Section 23.0101 states that "the chief appraiser shall consider the cost, income, and market data comparison methods of appraisal and use the most appropriate method."
The CAD did not provide appraisal data or resources used to value Category F1 property. As part of the ASR, 10 Category F1 properties were reviewed in the San Augustine ISD; this category is not tested in the Broaddus ISD. The CAD provided CAMA generated appraisal cards and hardcopy appraisal cards for seven of the 10 accounts. All accounts were flat-valued, meaning that instead of using a cost schedule, a value was hand-calculated for each account. All land and improvement values for the accounts in the sample property group were flat-valued. The hardcopy appraisal card, if available, typically contained the following: owner name and address, legal description, date of appraisal, hand drawn building sketch and appraisal value. The schedules, methodologies or value sources used to arrive at the appraised values were not documented on the appraisal cards. The CAD did not provide documentation or methodologies used in the development of values for Category F1 property. The chief appraiser stated that at some point in the past, Category F1 property was appraised using a national cost service; however, these appraisals were deemed inaccurate and were not used.
Category F1, Commercial Real property PVS results for 2003-07, as seen in Exhibit 6 indicate appraisal results are deteriorating.
Exhibit 6
San Augustine CAD
Category F1 PVS Ratios
| Year | San Augustine ISD |
|---|---|
| 2003 | 0.9700 |
| 2004 | 0.9111 |
| 2005 | 0.9162 |
| 2006 | 0.8387 |
| 2007 | 0.7382 |
Source: 2003-07 Property Value Studies.
Ten Category F1: Commercial Real property accounts were reviewed in the San Augustine ISD. Exhibit 7 illustrates the last appraisal date and value as noted on the hardcopy appraisal card or appraisal card generated by the CAMA system. The appraisals for commercial property are calculated by hand and a value is input into the CAMA system.
Exhibit 7
San Augustine CAD
Analysis of Category F1 Property Values
|
Property Account Number |
Inspection/ Appraisal Date on Card |
Improvement Value at Inspection/ Appraisal Date |
Land Value at Inspection/ Appraisal Date |
Current Improvement Value |
Current Land Value |
|---|---|---|---|---|---|
| 00023-80000-00170-000000 | 01/30/03 | $23,810 | Data Not Available | $23,810 | $3,000 |
| 20333-70035-21173-000020 | Not Dated | Data Not Available | Data Not Available | $26,290 | $6,000 |
| 20333-70035-10123-000030 | 07/28/97 | $12,760 | $2,000 | $12,760 | $4,000 |
| 20333-00122-00018-000010 | 09/02/04 | $174,960 | $12,000 | $174,960 | $12,000 |
| 20333-70035-21145-000010 | 06/28/06 | $413,920 | $12,000 | $413,920 | $12,000 |
| 20333-70035-21147-000010 | 1987 | $30,780 | $5,000 | $30,780 | $6,000 |
| 20333-00035-00000-000001 | 1987 | $372,620 | $17,040 | $372,620 | $17,040 |
| 00032-82000-00010-000000 | 01/29/90 | $20,030 | $3,000 | $20,030 | $3,000 |
| 20333-70035-21148-000010 | Not Dated | Data Not Available | Data Not Available | $98,000 | $3,000 |
| 00015-08150-00011-000000 | 03/19/02 | $355,240 | Data Not Available | $280,640 | Data Not Available |
Source: San Augustine Property Appraisal Cards from Sample.
By not developing a Category F1 appraisal method tailored for use in San Augustine CAD, the appraisal results will continue to deteriorate. Not updating the appraisal system with current data results in the value fields could cause San Augustine CAD to continue falling behind market movements. As seen in the preceding example, at least four or 40 percent, of the sample accounts have not been updated in at least 10 years.
Van Zandt CAD, for example, used a process management approach to efficiently and cost-effectively improve the CAD's commercial valuation process and procedures. The Van Zandt CAD chief appraiser hired an experienced appraiser for the appraisals director position to improve commercial real appraisal process and procedures. By applying the staff appraisers' experience in data collection, the new director conducted a reappraisal of neighborhood businesses and the CAD rebuilt the commercial real land schedules for 2006 using sale price per front foot as the unit-value comparison, which is helpful for appraising commercial sites that benefit from visibility to drive-by and other types of traffic. Acquiring needed appraisal expertise and using the appraisal staff to gather cadastral data with new work processes, the CAD was able to correct a systematic problem in its appraisal model.
RECOMMENDATION 6
Develop an appropriate local method for valuing Category F1 property using acceptable appraisal techniques and update appraisal cards accordingly.
The CAD must develop appraisal manuals, policies, methodologies, schedules and classifications for Category F1 property. The CAD should consider the benefits of developing computerized schedules for properties that are flat-valued.
FINDING
San Augustine CAD does not have written procedures for gathering and analyzing sales.
IAAO's Property Appraisal and Assessment Administration, Chapter 13, Mass Appraisal, describes the four components of a mass appraisal system as:
- Data Management System;
- Sales Analysis System;
- Valuation System; and
- Administrative System.
Each of these components is interdependent upon the other. The sales analysis component should have procedures for sales data collection; sales screening; and processing, ratio studies and sales reporting. The primary result of a sales analysis system is producing accurate ratio studies.
IAAO's Property Appraisal and Assessment Administration, Chapter 5, Data Collection Management, discusses the importance of gathering and analyzing sales data:
Sales data are needed for specifying and calibrating valuation models and for sales ratio studies. The reliability of any valuation model or sales ratio study depends on the quantity and quality of its data. Sales data must be collected, edited and adjusted to obtain valid indicators of market value. Ratio studies also require data on appraised (or assessed) values. Data on property characteristics are needed for stratification and the preparation of sales reports.
Sales letters are mailed to the grantor and grantee when a property is transferred from one owner to another. The returned sales data is gathered and entered into the CAMA system. The CAD does not record or maintain the number of sales letters mailed and returned with information. The sample properties for San Augustine ISD contained 20 Category A properties, seven of these had a sale recorded in the CAMA system. The CAD has no documentation or policy for the use of sales data in the appraisal process.
In addition to developing general sales procedures, a good addition to the policy would be to physically visit all sold properties and gather all property characteristics at the time of sale. For example, if a rural land sale contains areas with timber production, it is useful to know if the sales price included timber or if the property was native pastureland. The same argument can be made for residential property. It is important to recognize what property characteristics contributed to a sales price.
Inadequate sales data causes inaccurate results when calibrating appraisal models and calculating ratio studies. According to the IAAO Property Appraisal and Assessment Administration, Chapter 5, Data Collection and Management, "sales data must be collected, edited, and adjusted to obtain valid indicators of market value. Data on property characteristics are needed for stratification and the preparation of sales reports." It also states that "assessors should strive to improve the completeness and quality of the sales data on transfer documents." Areas the CAD could concentrate on include working with recording officials, title companies and real estate agents, and educating the public on the need for full disclosure of sales information.
Nueces CAD, for example, has a well-written Market Analysis Procedures Manual that describes the processes used to obtain and confirm sales information. Written procedures ensure the market analyses are done consistently regardless of personnel changes.
RECOMMENDATION 7
Establish and implement written procedures based on IAAO standards for gathering and analyzing sales data.