Assessing Real Estate in Indiana

Posted by on Oct 22, 2013 | 0 comments

Assessing Real Estate in Indiana

A significant percentage of your local government is funded by property taxes, not just your city or town but your library and parks, your county and township, your fire district and local schools too.    Indiana Code (IC 6-1.1-31-6(c)) provides that “with respect to the assessment of real property, true tax value does not mean fair market value.  Subject to this article, true tax value is the tax determined under the rules of the department of local government finance.”

For the most part I will try not to use a bunch of government lingo to explain how things work, it seems they either try to confuse, or just don’t want to say it outright in case there is a case over-ruling their opinion later.   Let’s be blunt:  Farm land, all agricultural land is valued by specific guidelines from DLGF.   The rest of our properties, your house or your office, the shopping center or hospital, all lean on a fancy term:  Market Value in Use.   Defined as “… may be considered as the price that would induce the owner to sell the real property, and the price at which the buyer would purchase for a continuation of use of the property for its current use.”

Short example.  If you own farmland, it is valued as farmland.  If you own an empty lot, it is valued as an empty lot.  If you own an industrial building it is valued as one.   Assessed value is not assigned for future “potential” use of property, it is valued for current use.  This protects all of us from county or township assessors who decide to start guessing at what we might do with our property down the road.

Your property, will be assessed as of March 1st every year.   In some years this assessment will be based on a full three part assessment:  cost approach, sales comparison approach, and income approach.  The plan right now is for 1/4 of all county properties to be fully assessed (reassessed) each year.   The remaining 3/4 will be “trended” or adjusted slightly up or down in response to sales disclosures that are filed with the county.  Anytime a property is sold or changes title, such a form is required to be signed.  These forms are used to collect information about real estate transactions for these annual adjustments or trending factors.   Either way, you can basically count on your property changing, perhaps only slightly, every year.

  • During a recession, if property sales are slowing or decreasing, your trending factor may reduce your value to reflect less buyers and less sales
  • During a run up in home prices, your property may be reassessed higher or trended higher with your neighborhood again reflecting the overall general market conditions
  • If you add a deck, finish the basement, change your landscaping, remodel or upgrade the property, then you should expect an increase in your value at the following year’s March 1st valuation
  • If you demolish a building therefore you should expect that value to be reduced to just the land value at the following March 1st valuation.

In Indiana we pay taxes in arrears.  Your value is set as of March 1st, and the taxes are due the following year.   This year you are paying for last year’s value, next year you will pay taxes for this year’s value.   This can get highly confusing when you sell or buy real estate and often the title company has to handle some escrow estimating to make sure these taxes get paid.

So let’s shoot as straight as possible, your property is worth generally what someone would be willing to pay you and your would be willing to accept for the property as it’s currently being used.   But since we don’t actually adjust your property assessment to the sales price when you sell it, called sales chasing, we use mass appraisal techniques to take your properties characteristics and assign a neighborhood factor for the area in which it is located.

You may have bought your home for $150,000 in 2010.   It may have been valued during the recession for as low as $140,000 and is slowly moving back up with the market.  This year has been a good year for home sales, and a lot of sales disclosures are being used to begin making revisions to 2014 values.   You can expect your value to increase along with the entire market.   You can expect your office building and farmland to do the same.

For a basic overview, roughly 6 hours, of property assessment in the State of Indiana see the Level One certification process and documentation on the DLGF website.   It’s free!   (Will be adding to this post over the next few days as I am personally completing the certification process)

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