How does Maryland determine . . . . . . value of your home?

January 17, 1993|By Adriane B. Miller | Adriane B. Miller,Contributing Writer

Ever wonder how the state calculates how much your home is worth?

You should -- since your July tax bill is based on what the state comes up with. The higher the value, usually, the higher your tax.

Once a value is determined, 40 percent of this becomes your assessment. Your assessment is multiplied by the tax rate to figure your property taxes.

William W. Saltzman, assistant to the director of the Maryland Department of Assessments and Taxation, says the total market value -- the value of the land plus all buildings -- is not a best guess. It is calculated by a state assessor trained and approved by the International Association of Assessing Officers.

Who is an assessor?

An assessor is not the same as a fee appraiser. A fee appraiser enters a home to determine its worth for sales purposes. A state assessor may conduct mass appraisals, evaluating entire communities at once, without going into each home.

"We do 2 million parcels of property every three years," Mr. Saltzman said. "That works out to more than 600,000 every year, and we couldn't afford the staff it would take to go in each home." About 442,500 of the properties evaluated for 1993 were residential.

The state employs about 230 field assessors. Each reviews, on average, 3,000 properties during each yearly assessment period.

Mr. Saltzman acknowledged that assessors don't always look at each home, particularly in a neighborhood where houses all look alike from the outside.

New kitchen will cost you

All additions or extensions, kitchen remodels and basement build-outs -- improvements that add value to a house -- require construction permits. Permits describe the approximate cost of the addition. And the Department of Assessments and Taxation gets copies of those permits.

Likewise, whenever a property is sold, its description and sale price are submitted to the tax department.

How are homes assessed?

Using a work sheet, an assessor first determines the land value based on the square-footage. This requires two sets of calculations.

First, a minimum lot size is assigned to every type of property. For example, for a four-bedroom suburban home, it may be 7,500 square feet. The assessor multiplies this figure by an assigned rate -- in 1992 it was $6.15 -- to arrive at the basic homesite dollar value.

Second, if the lot size is bigger than the minimum size, the additional square-footage is multiplied by another rate, usually lower than the first. On the suburban home, it was $0.10 per square foot in 1992.

Combining the basic homesite value with the excess land value gives the total land value.

The type of home and the location determine the above two rates.

The assessor then turns to the buildings. To calculate value of buildings and improvements, the assessor notes square-footage of the house, its condition, and additional items such as decks, extra bathrooms, fireplaces or air conditioning.

The structure itself has a basic cost to build, which is published in building cost manuals. That cost is noted on the work sheet. Then, each improvement, which also has a published cost to build, is added to the work sheet. A depreciation rate is applied to each improvement. All figures add up to the total cost of the building.

Next, the assessor adjusts the building cost with a "cost index" to update the building cost manuals for more recent changes in the cost of building.

Finally, another adjustment is made to the value of the building to reflect current real estate market conditions. That adjustment is known as the "MVI," or market value index.

The land value plus the building value equals the total market value of the property.

What data is used?

To figure 1993 property values, assessors used data from 1991 property sales, and sales for most of 1992.

"It's been our practice, at least in the rising market in the past years, to cut off the consideration of what values were for the previous January, so a homeowner would not be charged with a rising market in the year we were getting out notices," Mr. Saltzman said.

"But in a declining market, we want to be as accurate as we can. So we looked at 1992 sales up until the time we sent notices."

State law allows the new market value to be phased in for three years. That protects owners from huge increases in property taxes.

For example, property that increased in value from $100,000 at the last assessment in 1990 to $130,000 at the 1993 assessment would be phased in at $110,000 this year, $120,000 in 1994 and $130,000 in 1995.

Assessments are based on 40 percent of the total market value, and taxes are based on assessments multiplied by the tax rate. The state property tax rate in 1992 was 21 cents per $100 of assessment. In Baltimore, the rate was $5.90, and in Baltimore County it was about $2.87.

(If you occupy your own home, taxable assessment increases cannot exceed 10 percent per year for the state property tax.)

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