Findings of the Appraisal Standards Review
This chapter of the report addresses findings, commendations and recommendations from the ASR of Uvalde CAD in two sections:
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. Texas Property Tax Code Section 23.0101 requires that the chief appraiser use the method most appropriate in appraising a particular property.
Additional information about the approaches to determining value may be found in appraisal textbooks, such as Property Appraisal and Assessment Administration published by IAAO. 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 concerning the method used to appraise mineral and utility properties.
Uvalde CAD lacks a reappraisal plan that is in compliance with Property Tax Code Section 25.18.
The chief appraiser indicated that, while the CAD lacks a written reappraisal plan that complies with the Tax Code, it has had meetings with the appraisal department staff to discuss Texas Property Tax Code Section 25.18, which requires the CAD to implement a plan for periodic reappraisal of property. Texas Property Tax Code Section 6.05(i) requires the board to approve such a plan. For 2006, the CAD is concentrating on the cities and towns as well as the northern portion of the county for reappraisal. The CAD will use city of Uvalde building permits in this process. Building permits provide the CAD with information of improvements to property; it is a means to flag changes in property for a follow-up physical inspection.
The chief appraiser developed a "tentative appraisal schedule" for 2006 that outlines the completion dates for specific items or projects. For example, the items for May 1 include:
- complete all data entry;
- complete renditions;
- overlap agreements; and
- gather all pertinent information for properties/rolls (homestead applications, ownership, agriculture info).
The appraisal schedule does not give any information associated with plans and goals. The schedule does not list specific procedures the CAD will use to determine the need for reappraisal in each market area. The schedule does not discuss how to group market areas for appraisal model analysis and development.
Lack of a sufficient reappraisal plan may result in property values that deviate from market value.
Property Tax Code Section 25.18 requires appraisal districts to implement a plan for reappraisal. The appraisal district board is required to approve a plan by Sept. 15 of even-numbered years. The plan for reappraisal must provide for reappraisal of all real and personal property in the CAD at least once every three years.
Sec. 25.18, Periodic Reappraisals, requires that:
(a) Each appraisal office shall implement a plan for periodic reappraisal of property approved by the board of directors under Section 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 property 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.
A reappraisal plan is a roadmap for performing the work. It is also a communication tool that shows the appraisal district board how the CAD staff plans to accomplish its appraisals.
According to USPAP Standard 6, which can be found on the Web at (http://commerce.appraisalfoundation.org/html/2006%20USPAP/std6.htm), 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.
Jefferson CAD, for example, has adopted a comprehensive reappraisal plan that ensures the execution of timely and accurate reappraisals on an annual basis. The CAD reviews the plan each year and updates it as needed. Furthermore, the reappraisal plan is a part of the CAD's policy and procedures manual adopted by the board. The plan gives details regarding the steps to perform, staffing levels, workflow and the costs associated with plans and goals. In addition, the CAD links the plan to its budget, training, contracting, market analysis, field inspections and data processing. The board adopted or reviewed the reappraisal plan and makes changes as necessary. The Uvalde CAD could use the Jefferson reappraisal plan as a model when they develop their reappraisal plan.
Adopt a reappraisal plan that complies with Texas Property Tax Code Section 25.18.
Uvalde CAD lacks an updated and comprehensive appraisal procedures manual.
The CAD relies on a variety of documents, memos and manuals, including an outdated 1982 appraisal manual. The manual includes classification systems for various properties located in the CAD that has had little updating since its development. In addition, Uvalde CAD has a document entitled "USPAP Summary Report for the 1999 Appraisal Year of the Uvalde County Appraisal District." The CAD relies on generally accepted cost handbooks for residential and commercial properties as well as outdated state appraisal publications.
In addition, the CAD has other in-house documents and procedures the staff follows, such as procedures for processing an agricultural application, address update form and various appraisal software procedures. The CAD also has several long-term employees who rely on personal knowledge of the CAD and market area.
Lack of a single, consolidated appraisal procedures manual may have contributed to the Uvalde CAD values being inconsistent and deviating from market value. Adequate appraisal procedures help ensure that values in the county's school districts are valid in the PVS, thereby avoiding the possibility of the school districts receiving less than the expected amount of funding from the state.
For example, Nueces CAD has developed several policy and procedure manuals for appraisal: Real Estate Procedures and Operations, Personal Property Procedural Manual, Records Exemptions and Information Procedural Manual and a Policy Manual. These manuals address the CAD's appraisal procedures or policy regarding items such as market analysis, appraisal review board, appraisal notices, schedules, board's duties, open records requests, records retention and records management. The Nueces CAD will be a good reference for developing policy and procedure manuals specific to the needs of the Uvalde CAD.
Consolidate current appraisal procedures to create a comprehensive appraisal procedure manual.
Uvalde CAD lacks written procedures or policies for performing ratio studies or analyzing sales data.
The chief appraiser was unable to provide any previous ratio studies performed by the CAD. Staff who have been with the CAD for a number of years indicated that the former chief appraiser personally performed ratio studies. None of the analyses or studies has been found by the current chief appraiser.
The CAD converted to a new appraisal software vendor in late 2005. The new software provides an application that allows the CAD to analyze appraisals through ratio studies within different classifications or classes of property. CAD staff still need to determine the market areas to review, what sales information to include and how to input the data into the system.
According to IAAO's Standard on Ratio Studies:
Ratio studies provide a means for evaluating the accuracy of ... appraisals. Appraisal accuracy refers to the degree which properties are appraised at market value, as defined by professional standards, state, and provincial statutes, and administrative codes. A ratio study compares appraisals with indicators of market value (either sales or independent appraisals).
Section 4 of this standard lists the six basic steps in a ratio study. These steps are definition of purpose and objectives; collection and preparation of market data; matching appraisal and market data; stratification; statistical analysis and evaluation and use of results.
A good ratio study allows CADs to identify market areas and market changes that are taking place. The 2004 PVS indicated the CAD is not consistently appraising vacant lots in the Sabinal ISD and rural residences in the Sabinal ISD, Uvalde ISD, Knippa ISD and Nueces Canyon ISD. The CAD's invalid finding for the 2004 PVS was due in part to not recognizing market changes in the Sabinal ISD and not making necessary adjustments to reflect these market changes.
CADs use ratio studies to plan appraisal maintenance programs. The ratio study results indicate those market areas in the appraisal district where values no longer reflect the market. If the ratio study in a market area shows the appraised values do not reflect the market, the appraisal district analyzes the available sales to determine the market adjustment factor. The market adjustment factor is the percentage that the appraisal district uses to adjust the appraisal schedules to reflect the market value.
Lack of written policies and procedures for performing ratio studies can cause the CAD to value properties inconsistently. Frequent ratio studies and appraisal maintenance enable an appraisal district to keep its values at or near the market. CADs also use ratio studies to determine actual appraisal performance of the CAD.
In Brazoria CAD, for example, the CAD's automated appraisal system will produce ratio studies statistics on demand and in keeping with the CAD's market and data parameters. The ratio study results indicate those market areas in the CAD where values no longer reflect market value. If the ratio study in a market area shows the appraised values do not reflect market value, the CAD appraises or analyzes the available sales to determine the market adjustment factor. This factor represents a percentage the CAD uses to adjust the appraisal schedules to reflect the market.
Develop written procedures for performing ratio studies and analyzing sales data.
Conduct in depth analysis of ratio study results to eliminate unequal and misappraised properties to ensure that the CAD appraises all categories and classes of property at current market value.
Uvalde CAD has not fully integrated its mapping system with its appraisal software.
The IAAO points out that some of the advantages of an integrated system include the ability to:
- develop a routing plan for field inspections;
- identify improvements lacking information on characteristics such as square footage; and
- create a map that shows which parcels have not been physically inspected within a specified time;
- analyze property characteristics and assessed values to pinpoint underassessed parcels;
- sort by various characteristics for appraisal purposes;
- define and analyze neighborhoods; and
- use sophisticated spatial research in sales ration studies.
Uvalde CAD uses a stand-alone geographic information system (GIS) and aerial photo maps for mapping. The GIS is not integrated with the appraisal software. No written timeline is in place to integrate these two systems.
In mid-2005, the mapping license expired and the CAD stopped entering data. The previous chief appraiser asked the board to authorize a renewal of the license before it expired, but the board did not approve the request. The chief appraiser is talking with two companies regarding an analysis of the CAD's GIS program.
The CAD's appraisal software can pick up changes and new accounts created in the CAD and keep the GIS system updated and integrated with the appraisal software. Instead of fully utilizing the appraisal and mapping sytems, an appraiser currently obtains information separately from each system since the two are not integrated. This makes completion of an appraisal a longer and less efficient process.
A fully integrated GIS and appraisal system will allow appraisers to locate property faster, perform a more detailed review of the property and better document how a property is appraised. An integrated system also helps in the reappraisal process, by visually identifying areas in the county where sales are occurring. CAD staff can quickly perform ratio studies or other analysis by grouping or stratifying properties with similar physical characteristics.
Develop a written timeline and implementation plan for completing the GIS mapping and integration of the CAD's mapping and appraisal systems.