Annual Assessments and You! Presented by: Stacey O Day, Allen County Assessor & Laura Boltz Rental Specialist

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1 Annual Assessments and You! Presented by: Stacey O Day, Allen County Assessor & Laura Boltz Rental Specialist Data & Information provided also by: Department of Local Government Finance; The Annual Adjustment Process; Dave Schwab; 10/13/09

2 Why are assessments adjusted through trending? Indiana Constitution requires fair & equitable property tax assessments Indiana Supreme Court ruled that the current method was unconstitutional and ordered that a different standard be used. General Assembly ordered property assessed using Market Value-In-Use Data Source: DLGF; Annual Adjustment Process, Dave Schwab, 10/13/09

3 What is reassessment? Assessors physically inspect each property to ensure that records are correct Inspection accomplishes the gathering of data appropriate to value the property Does this property still have a free-standing garage and an in-ground pool? Is the building on this property still 1,200 square feet or has it increased/decreased in size? Data Source: DLGF; Annual Adjustment Process, Dave Schwab, 10/13/09

4 What is trending? Trending (i.e. annual adjustment) Property values are adjusted (the adjustment can be positive or negative) on an annual basis to bring them closer to market value-in-use. The assessing official uses sales of properties in a neighborhood, area, or class of property from the previous two (2) years to determine the adjustment factor. In the past, assessed values were adjusted only after a reassessment, which came as far apart as 10 years. Trending now occurs every year. Data Source: DLGF; Annual Adjustment Process, Dave Schwab, 10/13/09

5 Reassessment vs. Trending Trending was implemented to supplement, not replace, the reassessments, which current law calls for every 5 years. Without trending, reassessments resulted in dramatic shifts in assessed values because the values of properties were typically only adjusted during a reassessment year. Trending requires the assessor to annually adjust the value of the property based on market value-inuse, which is primarily determined from sales. Data Source: DLGF; Annual Adjustment Process, Dave Schwab, 10/13/09

6 How does trending work? Each year, the assessed value is multiplied by an adjustment factor. Values can go up assessed value: $100,000 Neighborhood factor: x assessed value: $110,000 Data Source: DLGF; Annual Adjustment Process, Dave Schwab, 10/13/09

7 How does trending work? Each year, the assessed value is multiplied by an adjustment factor. Values can go up or down assessed value: $100,000 Neighborhood factor: x assessed value: $90,000 Data Source: DLGF; Annual Adjustment Process, Dave Schwab, 10/13/09

8 How does trending work? Whether values go up or down depends on recent sales prices: Prices rise Factor rises Prices fall Factor falls Data Source: DLGF; Annual Adjustment Process, Dave Schwab, 10/13/09

9 The Adjustment Factor All properties in a county are divided into distinct neighborhoods. A neighborhood contains similar properties: Property class Construction type Condition The sold properties in your neighborhood are what determine the adjustment factor that is applied to your property. Data Source: DLGF; Annual Adjustment Process, Dave Schwab, 10/13/09

10 Final points on trending: In most years, property is trended, not reassessed. Property is only compared to sold properties in the same neighborhood. The median ratio of properties in a particular neighborhood determines the adjustment factor for all properties in that neighborhood. Data Source: DLGF; Annual Adjustment Process, Dave Schwab, 10/13/09

11 Market Value-in-Use & Rentals IC The gross rent multiplier method is the preferred method of valuing: (1) real property that has at least one (1) and not more than four (4) rental units.

12 Allen County Gross Rent Multiplier Allen County uses a monthly gross rent multiplier. Formula: (sale price / gross rent) / 12 (months) Ex: ($24,000 / 600) / 12 (months) = GRM 40/12 (months) = GRM 3.33 = GRM

13 Rental Data Collection #1 Resource the Landlords! Rents lease agreements, etc. Expenses schedule E s, receipts, etc Field checks determine actual property condition Phone Calls we periodically call landlords & property management firms to verify rental information on properties. Newspapers classified ads, etc. Internet property management sites, realty sites, etc. Mailers postcards, rental questionnaires, etc. Sales Disclosures checking that the property will be a rental property. This information is confidential under IC

14 Gross Rent Multipliers applied to Neighborhoods Step 1 Sort properties by type (Single family, Duplexes, etc.) Step 2 Determine median multiplier by neighborhood using sales and known rents Step 3 Combine neighborhoods into Classes based on these multipliers. Currently, Allen County uses 10 multipliers for Single Family Homes and 5 each for duplexes, 2-unit rowtypes, and 1-unit row-types.

15 Rehabilitation Investment Properties These are properties purchased for investment purposes to rehabilitate and either sell or rent. These properties may qualify for Rehabilitation deductions Form 322 These properties must be over 50 years old and have more than $10,000 in repairs. Contact the Assessor s office to schedule a field check prior to repairs and after. This may qualify a property for a deduction of 50% of the increase in the assessed value of the improvements for 5 years.

16 Landlord Resources Allen County Assessor s Office Laura Boltz (260) Wayne Township Assessor s Office Rob Williamson (260) Rental Questionnaires Field Checks/Visits used to confirm condition of investment properties. Some properties may qualify for Rehabilitation Deductions. PATI Public Access Tax Information, GRM maps, questionnaires, calculators, and more.

17 Allen County Assessor & Wayne Township Assessor 1 E. Main St City-County Building Fort Wayne, IN Allen County Rental Property Owners: Allen County, in an effort to ensure fair and accurate assessments, currently uses the Income Approach as well as the Cost Approach when assessing income-producing properties. Because income properties are purchased with investment as the intent rather than owner occupancy, the market is different. The Gross Rent Multiplier, whose use is mandated by the State of Indiana, creates a direct relationship between the gross rent generated by a rental property and the sale price, or market value, allowing for assessments based on the investment potential. When applying a mass appraisal technique, the first step is data collection. We are requesting information from all rental property owners in order to ensure the most accurate data possible. It is very important that owners provide the asking, or market, rent. If utilities are included with the rent, please include the average monthly amount and we will make the necessary adjustments. Please be assured that any information pertaining to income and expenses is constitutionally protected and will remain confidential as provided under IC Please fill out the attached questionnaire with the requested information. If the owner manages multiple rental properties, we can make arrangements to handle the information electronically as well. If you have any questions or concerns, please visit our webpage at to view GRM information, forms, etc, or contact your Township Assessor or the Allen County Assessor s office at the phone number(s) listed below. Thank you for your time and patience, The Allen County and Wayne Township Assessors of Allen County, Indiana Laura Boltz Rob Williamson Market Income Analyst/Sales Deputy Rental Income Specialist Allen County Assessor s Office Wayne Township Assessor s Office (260) (260)

18 9. REHABILITATED RESIDENTIAL PROPERTY (Form 322) A. Code Cites: IC through IC and IC B. Amount of Deduction: An amount not to exceed the lessor of-, The total increase in assessed value resulting from the rehabilitation; or Three thousand dollars ($3,000) per rehabilitated dwelling unit. Note: A general reassessment of real property, which occurs within the five-year period, does not affect the amount of the deduction. C. Qualifications: A single-family dwelling if before rehabilitation the assessed value of the improvements does not exceed $6,000; A two-family dwelling if before rehabilitation the assessed value of the improvements does not exceed $8,000; or A dwelling with more than two family units if before rehabilitation the assessed valuation does not exceed $3,000 per dwelling unit. Rehabilitation means repairs, replacements or improvements which are intended to increase the livability, utility, safety or value of the property and which do not increase the total amount of floor space devoted to residential purposes unless the increase in floor space is required in order to make the building comply with a local housing code or zoning ordinance. D. Filing Dates: Must be filed in person or by mail on or before May 10 or no later than thirty days after the notice of the increased assessment. This application requires verification by the township assessor. The owner is entitled to this deduction annually for five years. When real property is reassessed because it has been rehabilitated, the assessing official shall give the owner notice of the property tax deductions provided by IC and IC For repairs or improvements made to a particular building or structure, a taxpayer may receive either the deduction provided by IC or IC ; however, he may not receive deductions under both sections. If the deduction is not granted in full, the auditor shall notify the taxpayer by mail. A taxpayer may appeal a ruling that wholly or partially denies this deduction in the same manner that appeals may be taken under IC REHABILITATED PROPERTY (Form 322A) A. Code Cites: IC through IC B. Amount of Deduction: 50% of the increase in assessed valuation due to rehabilitation; however, the maximum deduction for a particular years is: $20,000 for a single family dwelling unit; or $100,000 for any other type property. C. Qualifications: Structures erected at least fifty years before the date of application and the owner has paid at least ten thousand dollars ($10,000) for the rehabilitation. Rehabilitation means the remodeling, repair or betterment of structures in any manner or any enlargement or extension of the structure. Within a given five year period, the enlargement or extension of the enclosed floor area of a structure shall be limited. The limitation shall be a total additional enclosed floor area equal

19 to the size of the enclosed floor area of the structure on the completion date of the first extension or enlargement completed after March 1, D. Filing Dates: Must be filed in person or by mail on or before May 10 or no later than thirty days after the notice of increased assessment. The owner is entitled to this deduction annually for five years. When real property is reassessed because it has been rehabilitated, the assessing official shall give the owner notice of the property tax deductions provided in IC and IC For repairs or improvements made to a particular building or structure, a taxpayer may receive either the deduction provided by IC or IC ; however, he may not receive deductions under both sections for repairs or improvements. If the deduction is not granted in full, the auditor shall notify the applicant by mail. A taxpayer may appeal a ruling that wholly or partially denies this deduction in the same manner that appeals may be taken under IC

20 Dear Property Owner: It has come to our attention that the property above may be a rental property. Allen County, in an effort to ensure fair assessments, uses the income approach for rental properties. This allows us to take into consideration the fact that income properties typically sell for different (often lower) values than owner occupied homes which have the advantage of a homestead exemption. Through the use of the Gross Rent Multiplier, mandated by the State of Indiana, we are able to allow for assessments based on the income potential of a property. We are requesting market, or asking, rent, and utilities included. Any information pertaining to income and expenses is constitutionally protected and will remain confidential as provided under IC If you have any questions or concerns, please visit our webpage at to view more detailed information or contact our office at the phone # s listed below. If this is not a rental property, please contact us as soon as possible. Thank you for your assistance, Laura Boltz Rob Williamson Market Income Analyst/Sales Deputy Rental Income Specialist Allen County Assessor s Office Wayne Township Assessor s Office (260) (260)