This is really MA specific, but tagging @frugalannie and @quietann since both of you mentioned interest. Maybe there are some other assessors or residential appraisers on the board who can lend their knowledge too.
In MA, the market right now is very hot. It’s been in a steady uptick for years, and saw a big swing up over the summer. Most property owners in MA that are in a settled area can expect to see an increase in their home values on January 1st – you(g) actually should be receiving your impact notices (which are your new proposed values) over the course of the next few weeks, if your local Assessor’s Office has not been severely compromised by the staffing shortage or COVID. The impact notices are not final - they are notifying you of your home’s proposed value, which the DOR has to finalize and you have time to appeal it. As a home owner, you have the right to appeal it if you feel the assessment is wrong (note: in MA you have a very small window to make your appeal - Appeal forms are not released until January 2nd, and must be returned by March 1st).
How is your home’s value established?
All towns in MA use a cost-basis approach to establishing the values of homes. Most – if not all – towns and cities use a software program like Vision to establish values; this cost approach is based on what it would cost in that present year’s market to make that home/residence/structure. These software programs are even more powerful than Excel in their versatility; they can denote things that diminish a home’s value like functional obsolesces and things like being near a highway, a train depot, a beach, etc. They are also often recalibrated and updated over the course of the year, keeping in mind market value and inflation.
Your local Assessor’s office also pulls in all arms-length sales (those within the neighborhood or zoning district) from the year prior into this figure; if a similar home in your neighborhood sold for significantly more than assessed value, that will factor into that home’s value – next year.
An Assessor has a good idea if their values are FMV by pulling their own subjects and comps; they should be in line with exactly what their assessed values were when done by software/cost basis approach.
Once your home’s value is established, the DOR vets it. All real property (taxable property) values are uploaded to the DOR – which then vetoes or approves the valuations based on their own software program and independent manual appraisal system, where they pull random subjects in your town and vet them against similar homes (called comparables). Yes – someone (multiple people) from the DOR goes over every municipalities’ published values, every year.
In MA, Assessed values must fall within 10% of Fair Market Value of that year. In more affluent towns, I see a better correlation between FMV and AVs; in towns where there is not much movement or sales, there tends to be a higher +/- disparity because there’s fewer sales to draw examples from.
In better funded towns, external appraisers (govt officials) are hired to work in conjunction with the assessor and verify their records are accurate and reflect FMV.
Remember that all AVs are published only once a year - they are a snapshot in time (Jan 1st of the year prior) based on sales from the year before and reflect the year before’s FMV. This is really important to remember when you are looking at your residence’s current value in the middle of the year.
Appraisers
Appraisers take sales prices of similar homes (comps) – ideally within the last six months and the more recent the better – and compare them to their subject property. They are working with recent data, whereas the Assessor’s office is pulling in year old data.
I will admit professionally I much prefer government/official municipality trained appraisers over non-gvt appraisers. The reason for this being that in my professional experience, many of the non-govt appraisers come to our counties or towns with outrageous appraisals, rile up the residents with their results, get the residents to submit an appeal, and then when we or the Appellate Tax Board review the appraisal, find out that the appraisers used ineligible comps, miscounted rooms, and my personal favorite, counted basements and unfinished attics in the living space. This happens regularly in my municipality. We have had no approved ATB appeals in the last 5 years, because not a single appraiser has been accurate in their appeal.
Some things that are important to know about appraisers – in affluent towns they almost always over-appraise because they pull from higher end comps, and in towns where there are very few sales, they have to pull from ‘noncomps’ which means it can be very difficult to establish an accurate value.
One thing I see often in my area when it comes to appraisals versus assessed values (AVs) is that appraisals factor in some extraneous values that AVs do not. A major thing my town in particular (and many in MA) does is it does not factor basement area or unfinished attics into the living area. Anything below grade is not factored into living area. So we will have 3,000 SF homes and an AV of 1.8 million-- and the appraisers will come along and count both basement and unfinished attic into the living area, say the home is a 4,000 SF home, should be worth 2.5 million, and then the residents want to appeal. This leads to a lot of confusion that really could have been avoided if the appraisers were held to a uniform standard and understood how municipality assessments operated.
Appraisers in general are generalists - they appraise a wide swath of residential communities or towns; Assessors generally tend to be niche specialists, who have been in that community a long time, and know the pulse of the community’s current market.
Not sure if that answered any questions, or opened more.
Where did they get these two rooms? Did they get it from original site plans of the house circa the BOH? That’s not okay - and is another semi-common thing I see and hear about. I’m sorry that happened to you and very glad it got fixed.