Here is a quick overview of how residential properties are assessed in our 3 closest counties: Polk, Dallas and Warren.
The State of Iowa requires that all real estate property be reassessed every two years on the odd numbered year. But your home could be reassessed more often if your county assessor determines your home's assessed value needs to be adjusted to reach market value.
So, what is the difference between market value and assessed value? Market value is defined by Iowa law as the “fair and reasonable exchange in the year in which the property is listed and valued between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and each being familiar with all the facts relating to the particular property”. So, the market value of a home is considered to be how much that home would sell for on the open market.
The assessed value refers to the estimation of your home’s value used to calculate property taxes.
Many times, people use these terms interchangeably and they are not the same thing BUT what's further confusing is that in the state of Iowa, market value is supposed to be assessed value. I will get to that in a minute but first....the when and the how:
The assessed value of your home is determined as of January 1st of every odd year by your county’s assessor.
The assessor uses a blend of a market approach by analyzing recent sales and a cost approach by calculating the replacement cost (the amount it would cost to rebuild the property) less depreciation.
In Iowa, residential property is assessed at 100 percent market value. Therefore, sale prices and assessed values must stay in sync. How they try to stay in sync and comply with the 100% market value rule is by determining what’s known as a “median sales ratio” for any reassessment year.
How they determine the “median sales ratio” is each county’s Assessor examines all the sales data from homes sold in their county from the previous year. They calculate the sales ratio for each of those homes sold by dividing the home’s assessed value by its sales price. These percentages are then ordered to find the median sales ratio for all the homes sold in that county in that year.
If the median sales ratio in any given area deviates from the statutory 100 percent level by a difference of more than plus or minus 5 percent, the Iowa Department of Revenue steps in and mandates an across-the-board adjustment to bring things back into compliance. This is called equalization, and is generally not a good thing because it means all property values are affected, when usually only some are causing the problem.
So, what they are saying, is if my homes’ assessment is $350,000, I should be able to sell my home for that fair market value of $350,000. And if my home recently sold for $400,000, but the assessed value is $350,000, then my counties sales ratio is not compliant because the sales ratio is 87% (dividing the assessed value by the sales price). And the state of Iowa requires the sales ratio to be between 95-105% of fair market value. So, my home could be reevaluated based on the sales ratio being not compliant.
Each county assessor I spoke with did let me know that there are several factors that can trigger a reevaluation of a home such as pulling a permit for a home improvement, like building a garage or deck, or finishing the basement. A sale of a home can cause a reassessment of a home. Supply and demand may also change the value.
If you feel your assessed value is not a reflection of market value, you have the right to appeal your assessed value to the local board of review for your county.
Protest forms are available on each county’s assessor’s website with instructions on the process. And make sure you notice the due date for these forms, most are due at the end of April.
But before protesting your value, ask yourself these two questions: 1. What is the actual market value of your home? 2. How does the value of my home compare to similar properties? If you don’t know how to find your market value, contact your local friendly Realtor who will be happy to help!
Which county is the least expensive to live in regarding property taxes? The winner is Dallas County!
Here is how much of your assessed value is going toward property taxes:
Dallas County collects, on average, 1.42% of a property's assessed fair market value as property tax.
Warren County collects, on average, 1.47%.
Polk County collects, on average, 1.6%.