Why are values adjusted?
Adjustments are made to bring property values in line with the current real estate market.
We do this because Article IX, Section 8 of the Maine Constitution requires that, “All taxes upon real and personal estate, assessed by authority of this State, shall be apportioned and assessed equally according to the just value thereof.” The Maine Supreme Court has written in multiple rulings that just value is synonymous with market value.
This does not mean that properties are assessed according to the price paid. Market price and market value are not synonymous. Market price is a factor in determining market value, but it is not the sole factor used.
When adjusting values, we study recent sales, average the results, and extrapolate those results to all similar properties, sold and unsold.
Maine assessors use a valuation methodology called mass appraisal. In mass appraisal we build a database of sales by collecting recently sold properties into like groupings. The largest group is the entire town. Then we divide the entire town into three sub-groups: residential properties, commercial properties and land.
We continue dividing into more and more finely detailed groupings until we no longer have enough sales with which we can make useful conclusions. For example, we further divide residential properties into single-family, multi-unit, mobile homes, condos and timeshares. We break each of these groups into waterfront and non-waterfront. We break down waterfront into salt and freshwater. And so on.
We come to valuation conclusions by applying basic statistical analysis techniques to discover the central tendencies within each grouping. Central tendencies are the median average, the mean average and weighted mean average. In assessing, we lean most heavily on the median average because it is less affected by outlier sales.
The first thing we do when reviewing sales is determine whether or not a sale is Qualified. A qualified sale is a typical market sale, which is generally described as, “The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.”
A few examples of undue stimulus would be family sales, divorce sales, bank sales, estate sales, multi-parcel sales, abutter sales, and any sale where the motivations of the buyer and seller may be influenced by atypical market considerations or cannot be reliably discerned. These sales types do not exhibit conditions requisite to a fair sale. In any given year half of all sales are qualified.
All qualified sales are sorted into appropriate groupings for analysis using sales ratio studies.
Sales ratio studies, “are the primary administrative tool for establishing or reviewing municipal assessments.” The sales ratio study measures assessment quality by comparing assessed values against recent real estate sales. The more recent the sales the more reliable the study. We typically use sales from the past two years, but the current real estate market has been so active we’ve been able to use the optimum twelve-month perspective.
Between October 1, 2020 and September 30, 2021 (the most recent past twelve months for which we had data at the time the study was performed for this adjustment), town wide, we had 168 qualified sales. The median ratio for those sales was 75%. http://www.krtappraisal.com/dist/camden.html Follow this link to review sales.
Typically, the lowest acceptable ratio is 91% (more on this in the next section). To discern what adjustments are needed to bring the 75% up, we divide the sales into their proper groupings, as mentioned earlier.
Since single-family dwellings is the largest grouping within the town, I’ll isolate them for this illustration. Of Camden’s 168 qualified sales, 79 were single-family dwellings.
We first calculate each sale’s A/S ratio, that’s the Assessed value divided by the Sale price. An assessed value of $350,000 divided by a sale price of $350,000 has an A/S ratio of 1.0 or 100%. If that same property sold for $400,000, its A/S ratio would be .875, or 88%.
Once all 88 ratios have been determined, they are sorted in ascending order. We next locate the median average. The median is the middle ratio. That middle ratio was .75. Therefore, the median ratio for single-family dwellings was 75%.
Step 3 – Making Adjustments
Targeting a 91% ratio would leave us vulnerable to the continuing robust real estate market. Like everything else in assessing, the date of reckoning is April 1. The study we conducted for this update took place in November and December and used sales from the twelve-month period of October 1, 2020 to September 30, 2021. If we were to establish a ratio of 91% now, there’s no doubt it would be below 91% by April 1, 2022. In order to certify at 100% our ratio needs to be at or above 91% for all qualified sales that took place for the twelve-month period that ends on April 1, 2022.
I settled on 93% as the target ratio. This would allow our ratios to erode a further 2% between January 2022 and April 1, 2022. Everything I see, read and hear indicates real estate will continue to increase in value in 2022.
We need to bring each grouping up to 93% or so. In the case of single-family dwellings, the aggregate number has to move from 75% to 93%.
We accomplish this by adjusting the square foot value of each single-family dwellings building style until the ratio for each type – ranch, Cape, colonial, etc. – is as near to 93% as possible. In this way all groupings are individually equalized at or close to 93% and the single-family dwelling grouping averages out to 93%.
We adjust land values in a similar manner, balancing one adjustment against the other to ensure the final outcome is correct so that all ratios having to do with any individual property is as close to the target ratio as is possible.
To be at market value, the ratios for all groupings need to average out at, or be close to, 100%. In mass appraisal we work by averaging the ratios. In all groupings, some sales will be below 100% and others will be above. As long they average out close to 100%, we’re doing okay.
Maine Revenue Services allows us to add 10% to the actual ratio for state certification purposes. This means a ratio at or higher than 91% can certify at 100%. Here’s the math: 10% of 91 is 9, and 91 + 9 = 100. This means we can set our target ratio below 100%, which is a way to minimize the increase in values.
When we certify at 100% you get the full benefit of the homestead exemption. The exemption reduces a property’s taxable value by $25,000. At the current mil rate of $15.35 everyone with a homestead exemption saw a reduction of $383.75 on their 2021 tax bills.
The state calculates our ratio each year. I work with the state to make sure we agree on which sales are qualified and which are not. Once we’re both comfortable with the list I receive a report from the state with our declared ratio. It is that number to which I can add 10%.
I conduct my own ratio studies so as to anticipate, and serve as a check on, the state’s calculation. Because the state’s number lags the market by two years and my studies only lag the market by a few months we are able to forestall the negative repercussions of a ratio that’s too low by preemptively adjusting our values to the market. That is what we are doing now.
The more precise answer is: adjustments are made to bring property values in line with the current real estate market while maintaining a certified ratio of or close to 100%. We look to make adjustments anytime our values fall below our ability to certify at 100%. The 10% tolerance level also applies to the upper end – 110%. When ratios rise above 110% we reduce property values.
Rising property values don’t necessarily mean higher tax bills. With the increased valuation, the mil rate will decrease. Properties whose values decreased or rose very little will see a decrease in taxes. Properties whose value rose modestly should see a small or no increase at all. Properties who saw a larger increase will see a higher tax bill. A rising real estate market means the investment you made in your property is appreciating.
All Camden residents will be given the opportunity to schedule a hearing. If you received a letter with a new value there was a phone number provided for you to call to make an appointment. During normal times all meetings would take place in person, but these are not normal times; the meetings will take place on the telephone.
If we don’t resolve your dispute at a hearing you can file for an abatement after receiving your tax bill, just like any other year, stating reasons and providing evidence as to why you think your property is not correctly valued. If you are denied an abatement, you can appeal that decision to the Board of Assessment Review (BAR). If the appeal is denied, the next venue is Superior Court.
It has been my goal, in writing this, to make the process as transparent as possible. It has always been our belief, Assistant Assessor Caitlin Thompson and me, that you have a right to understand how your property is valued and, therefore, how your property taxes are calculated.We also want to make sure you are aware of the tax relief programs available to you. Please read the following section for that information.
If your Camden residence is your permanent address you should apply for a Homestead Exemption, if you have not already done so. The exemption reduces a property’s taxable value by $25,000 if we are able to certify at 100%, less if we certify at a lesser ratio. In 2021 this reduced tax bills by $383.75. We need to have your application by April 1, 2022.
Residents who served in the armed forces and were discharged in any manner other than dishonorable and are at least 62 years old or 100% disabled due to that service, may also be entitled to a Veteran Exemption. This will further reduce a property’s taxable value by $6,000. If both homeowners are veterans both may apply and the property value would be reduced by $12,000.
And finally, legally blind residents are eligible for an additional $4,000 reduction in value.
All exemptions must be applied for by April 1, 2022. Exemption applications are available at the Assessing Department section of the town’s website, or at the Town Office Building.
Senior Tax Deferments
The Legislature has created a program, the State Property Tax Deferral Program, for senior citizens and residents whose documented disability renders them unable to work, that will defer tax payments until the property is no longer owned by the applicant. Once the property transfers, the state will be reimbursed for the amount of taxes deferred, plus interest.
To be eligible, participants’ annual income cannot exceed $40,000 and their liquid asset holdings cannot be greater than $50,000 for a single applicant or $75,000 for joint applicants. As long as the resident(s) remains eligible, they will not be responsible to pay a property tax bill.
Applications and eligibility details are available online www.maine.gov/revenue/taxes/tax-relief-credits-programs/property-tax-relief-programs/deferral-program. Applications must be submitted to the assessor’s office between January 1 and April 1 for the year in which the applicant is first requesting deferral.
To be eligible for tax payments that will be due in October 2022 and April 2023 applications must be submitted by April 1, 2022.
What Happens Next?
Taxpayer hearings will continue for a few more days, for those that had made an appointment with KRT.
For those that did not receive their Impact Notice in time to schedule a hearing and speak with a KRT representative are welcome to contact this office by phone or email with any questions or concerns about assessments.
At this point the Assessing Office will be following up on annual construction permits. This will take most of the summer.
Commitment is projected for the end of August followed by tax bills in early September.
Once you receive your tax bill and have questions about your assessment please feel free to contact us or file an abatement. You cannot file an abatement before you receive a tax bill.