By Ivan Raconteur
WRIGHT, McLEOD, AND CARVER COUNTY, MN Each spring, property owners in Minnesota receive notices showing their property’s estimated market value and classification.
The notices also include information about local board of review and equalization meetings which will soon take place in communities across the state.
Despite the fact that the meetings take place annually, some property owners are still confused about the meetings and about how their property is valued.
Before looking at the appeals process, it may be helpful to first understand how assessors determine the value of real estate.
The estimated market value of a property is the price that would prevail under competitive open-market conditions.
Minnesota state law requires that the value of real estate be established as of Jan. 2 each year.
Assessors across the state work throughout the year to prepare estimates of the value of properties in their jurisdiction.
In Wright County, 15 staff members in the assessor’s office and eight local appraisers work year around on preparing assessments for the 65,000 parcels within the county.
“It’s not just something we pull out of a hat,” Wright County Assessor Greg Kramber commented.
Carver County has about 39,000 parcels, according to Carver County Assessor Angela Johnson.
Johnson said her staff has a very good handle on what is going on across the county because they see all the properties in the county. Carver County does not use any local assessors.
In addition to Johnson, there are eight residential appraisers, one deputy assessor who handles all agricultural properties, and two clerks in the office.
McLeod County, by comparison, includes only about 20,000 parcels, according to McLeod County Assessor Sue Schulz.
In addition to Schulz, her staff includes six appraisers and one clerical person.
The nature of the parcels valued by the assessors varies significantly.
Kramber explained that he has to assess values for everything from vacant lots to the Monticello nuclear plant and the Albertville outlet mall.
There is also a lot of waterfront property in the county.
“There are 298 lakes and three rivers in Wright County, and 12 to 13 percent of the properties border water,” Kramber said.
How is market value determined?
Approximately every five years, appraisers physically inspect each property inside and out.
If the owner is not home, the inspector will inspect the exterior, and leave a door tag explaining the inspection process.
Assessors base their assessments on multiple factors, including the property’s size, age, condition, quality of construction, and other features such as the number of baths and fireplaces.
When the information has been compiled, it is entered into a computer program that helps the appraiser determine the market value.
Information about actual sales in the property’s market area is used in this process.
A value notice is mailed to each property owner in the March or April.
According to Kramber, the 2009 notification of valuation and classification reflects market values determined as of the Jan. 2, 2009 assessment date.
This valuation uses statistical data compiled from property sales that occurred between Oct. 1, 2007 and Sept. 30, 2008.
These valuations will be used for taxes that will be paid in 2010.
Kramber pointed out that the assessment is “a snapshot in time,” and during periods when real estate prices are rapidly changing, assessment values often lag behind what is occurring in the current market.
Kramber, who has worked in the appraisal and assessment field for 20 years, said this is especially true under current market conditions.
“It is very important that values of similar properties are equalized with one another so that even in challenging markets, valuations of similar properties will be treated fairly in the taxation process,” Kramber noted.
He added that his office is staffed by highly-trained professional appraisers who are fully aware of conditions affecting the current real estate market.
“Every attempt was made to analyze this very volatile market, and we will continue to follow the trends into the future,” Kramber said.
One of Kramber’s primary concerns is getting information to property owners.
In anticipation of a high number questions about the estimated market value of individual properties under the current market conditions, Kramber is sending a note along with property tax statements this year to help property owners understand the process.
Johnson said another thing people need to be aware of is that, under Minnesota statute, assessors use only qualified sales when determining market value.
“We don’t use foreclosures or bank sales because these are not considered “arm’s-length” transactions,” Johnson said.
Prices obtained in forced sales cannot be considered under Minnesota law.
Another factor that causes confusion, according to Johnson, is that people mis-interpret some of the information that they read or hear in the media.
“Carver County is very stable compared to a lot of other counties. People are reading what happens in the metro area or nationally, and hearing that prices are dropping 10 percent per year, but that is not true here,” Johnson said.
Schulz said one of the biggest challenges she sees is that, because of the time frame specified under Minnesota law, the sales studies that are done to establish values are basically a year old by the time the valuation statements come out.
“It is nice to have that one- year lag when prices are going up rapidly, but people have a hard time understanding that when prices are going down,” Schulz said. “It does go both ways. We are not penalizing people when the market is going down. They are also getting the benefit when it goes up, but sometimes, people forget that.”
Schulz also said that she has talked to many people are confused about why their valuation has not changed as much as values that have been reported on the news.
“Values in McLeod County have been holding pretty steady,” Schulz commented.
The state board of equalization requires that the overall assessment be between 90 and 105 percent of market value.
Johnson said in order to be as accurate as possible, her office applies the data specific to each jurisdiction.
“Each city has its own study,” she said. Values on the west side of the county may be suffering, she added, but the east side of the county is still very strong.
Three-step appeal process is available
Property owners in Minnesota have access to a three-step appeal process if they disagree with their property’s estimated market value or classification.
The first step is the local board of review at the city or township level.
According to the Minnesota Department of Revenue, “The purpose of the local board of appeal and equalization is to provide a fair and objective forum for property owners to appeal their valuation and classification.”
In Wright County, all of the local boards of review are conducted in the cities or townships.
In Carver County, all of the township boards of review are handled at the township level, and the boards of review for all of the cities are handled at the county level through an “open book” process.
If a city does not have council members who have completed the required training to allow the city to conduct its own board of review, the process reverts to the county.
Some Carver County cities conducted their own boards of review in the past, but in recent years, all have turned the process over to the county.
Johnson said that the open book process gives property owners more flexibility. Instead of having to attend the meeting that is conducted in the city on only one night, property owners are now able to schedule appointments with the assessor within a two-week period.
Most property owners won’t notice any difference in the process, Johnson said, because even when the meetings were conducted in each city, the assessor’s staff still had to go out and inspect the property and review comparable sales before any adjustment could be made.
In McLeod County, Schulz said that only the cities of Plato and Stewart use the open book process. All other cities and townships in the county conduct their own local boards of review.
Changes to a property’s valuation must be made based on facts, not because a property owner is unhappy with the valuation.
“We are more than happy to come out and look at a property, to see if an adjustment is warranted, but we cannot adjust for market changes,” Schulz said.
If a property owner still wants to challenge the property’s valuation after the local board of review, the next step is to take it to the county board.
Johnson said she gets about 200 calls from property owners during the two months surrounding the mailing of valuation statements.
Of these, she said, a small percentage challenge their valuation at the local board of review, and very few carry appeals forward to the county board.
Kramber and Johnson also said most questions can be answered at the local level and few people carry their appeals beyond the local board.
In the rare instances where a property owner is still dissatisfied after going through the county board, the third step is to take the appeal to tax court.
There are two divisions in Minnesota tax court.
Cases involving properties with a market value of less than $300,000 can be heard in the small claims division. All other cases go to the regular division.
The small claims division is more informal, while property owners taking cases to the regular division are usually represented by an attorney, according to the Minnesota Department of Revenue.
Cases heard in the regular division of tax court may be appealed to a higher court, but those heard in small claims court may not.
In all counties, the first step is to contact the assessor’s offices with any questions or concerns. Most issues can be resolved at this level without the need for the property owner to enter the formal appeal process.
The staff at county assessors’ offices is available to answer questions about the valuation and appeals process.
In Wright County, call (763) 682-7367 or go to www.co.wright.mn.us/.
In McLeod County, call (320) 864-1254 or go to www.co.mcleod.mn.us/mcleodco.cfm?pageID=9&sub=yes.
In Carver County, call (952) 361-1960 or go to www.co.carver.mn.us/departments/prts/propassess.asp.