Why Your Tax Office Needs Geo-tagged Photos

geotag

If a picture is worth a thousand words, then geo-tagged images are worth a lot more.

Most assessing officers use some sort of image capturing technology to shoot and store photos of the real property in their jurisdiction. However, few of those counties are using the additional convenience of geo-tagging their images.

For those of you who are unfamiliar, the term “geo-tagging” refers to the process of adding geographical identification to a photo. Geographical identifiers include the latitude and longitude coordinates of where your photo was taken.

Geo-tagging can happen automatically on modern digital cameras or smartphones with built-in GPS by capturing GPS information at the time a photo is taken. Or, geo-tagging can involve a process of using an image capturing technology along with a standalone GPS and later attaching those images to coordinates using mapping software.

Many counties fear that geo-tagging technology is too complicated or too expensive to use with parcel maintenance, but neither is true. GPS chips are now built into most smartphones, so if you have ever taken a picture on one, then you have already conquered the first step of the geo-tagging process, at no extra cost to you!

Easy to Store, Save, & Find

Once a photo is geo-tagged, it’s as if you have given it a permanent address. Much like typing in an address on your GPS and following the directions it gives you, geo-tagged images have their own “address” to show the exact location of where they were taken.

The coordinates of geo-tagged images are embedded within the photo itself and never change.

If a geo-tagged image gets mislabeled or files get scrambled on your computer, you don’t have to worry about the confusion of whose property the picture belongs to. The photos themselves can tell you where they belong. Even if you change property tax systems, software vendors or switch CAMA systems, your photos and their coordinates remain intact.

Time Savers

With the right photo mapping software, ESRI can link to or integrate with your geo-tagged photos, granting easy access and retrieval of your images.

You can even archive pictures from years past and make comparisons, allowing for better record keeping.

Powerful Appeal-Fighting Tools

As your images are uploaded, geo-located, and combined with GIS software you get a more complete and accurate map for optimal appraisal results. Geo-tagged images are then a powerful resource for county officials to call on when it comes time for revaluation and the appeals process.

Geo-tagged images, time stamped and easy to locate, can eliminate construction debates and other issues you face with property tax assessment. Fewer debates lead to fewer appeals.

As you can see, geo-tagged images can be an inexpensive and powerful tool for your tax office and parcel maintenance. Read our blog, Geo-tagging Technology on a Shoestring Budget, to find out more.

*Special thank you to Mark McClintock, Real Property Supervisor for Rockingham County and Eric Funderburk, GIS Analyst of Guilford County for agreeing to be sources for this article.

Income Capitalization: When & How to Use it in Your Valuations

income capitalization

 

Over the past three weeks, we have considered the pros and cons of two of the three valuation approaches that are accepted in North Carolina – the cost approach & sales comparison approach.

This week, we will discuss the third method of valuation – the income capitalization approach (ICA).

Income Capitalization Approach

ICA is used only with income-producing properties and is the most technical of the three approaches. ICA estimates true property value by evaluating how much income a commercial or residential rental property is capable of producing.

There are three principals behind this approach:

  • Principle of Anticipation– The buyer of a property bases their purchase on the expectation of the benefits to be received in the future. True value is defined as the present worth of future benefits, that is, how much one is willing to pay today for something that they think they will reap in the future.
  • Principle of Supply and Demand– The value of a property is a function of the supply of similar properties and the demand for that type of property. The rent levels that an owner can ask for often depend on the demand for the property in that area.
  • Principle of Substitution– Rent levels are also based in comparison to the rental rates of surrounding properties and the possibility that a tenant could easily and quickly choose another property over the property in question.

Calculating True Value using Income Capitalization

To derive the true value of a property using the Income Capitalization Approach, you must first determine the operating income, operating expenses, and purchase price.

The operating income is the total amount the property earns on rent, laundry money, tenant fees etc.  The operating expenses include taxes, insurance, maintenance, management, legal, supplies, utilities, etc. Purchase price is the amount that the property was paid for by the owner.

Armed with these figures, you can then use the formula below to calculate the true value:

First, determine the Net Operating Income:

Operating Income – Operating Expenses = Net Operating Income

Then, determine the Capitalization Rate:

Net Operating Income / Purchase Price = Capitalization Rate

Finally, use the Net Operating Income and Capitalization Rate to determine the True Value:

Net Operating Income / Capitalization Rate% = True Value

Since ICA converts the income potential of a property to find its real property value, slight changes in the net operating income or in the capitalization rate make a huge difference in the true value of the property under valuation.

This means that raising rents for tenants or finding ways to cut costs can dramatically change the overall value of the property. The higher the net income earnings are, the higher the property value will be. The higher the property value, the more tax revenue you are capable of collecting for your taxing authority.

Now that you know the advantages and disadvantages of each of the three approaches used in North Carolina, you can more easily make an informed decision about which approach to choose for your county when valuating different types of real property.

The Three Approaches to Value – Are You Using the Right One?

three approaches

You know that you must conduct a county-wide revaluation at least once every eight years. But how do you know that you are using the best method for valuation?

Two weeks ago we examined using the cost approach to find the true value of properties in your jurisdiction. This week we will discuss the strengths and weaknesses of using the sales comparison approach (SCA) in contrast to the cost approach.

Sales Comparison Approach

The SCA estimates true property value by comparing the property in question to other very similar properties that have recently sold, making adjustments for differences between them as needed.

The trick is determining the comparable properties. To begin, you must first divide your county into market areas that are subject to the same economic influences. Once market areas are defined, you would then group parcels according to size, year built, design, lot size, land size, and a variety of other property features.

Compared to the cost approach, which often fails to reflect the ever-changing market, SCA is directly rooted in the current market conditions. However, if the data collected through comparison is inaccurate this approach will produce poor values.

This can happen when the data that you collect from a comp is skewed because of some factor unknown to you at the time, such as a motivated seller.

Therefore, finding sufficient and fair sale prices to compare to is a key component to the SCA. Reliable research is required to ensure that your data is correct. This means reviewing the property both in the office and in the field to guarantee that your comparables are in fact similar to one another and without inaccuracies.

When it comes to revaluation appeals in your county, you can rest assured that you have a good defense when using the SCA. It is hard to find a basis for argument when you determined the true value of the property in question based on direct sales comparisons in similar neighborhoods to the appellant.

Overall, the SCA is more appropriate for residential properties in large and mid-sized jurisdictions than smaller counties. The more data you have to collect and compare with, the closer your valuation assessments will be to the true market value.

Check back next week to compare these first two approaches to valuation with the Income Capitalization Approach.

Are You Using the Best Valuation Approach for Your County?

valuation approach

As you know, each taxing authority is faced with the challenging task of assigning property values to all parcels under their jurisdiction. However, the method used to determine the “true value” of each property is up to you.

NC recognizes three valuation methods:

Often, your taxpayers’ basis for appeal comes from their claim that their taxing authority is not using the appropriate valuation method to define their property’s true current value.

Over the next few weeks, we will list the strengths and weaknesses of each method. Make sure you check back and read over each of the methods to ensure that you are using the approach that best fits the needs of those in your jurisdiction.

The Cost Approach

The key to the cost approach is determining the cost to build a property equivalent to the one being valued.

The equation used here is:

Cost of Construction – Depreciation + Land = True Value

The most common taxpayer complaint related to the cost valuation method is its failure to reflect changing market conditions. If the housing market is low and the taxpayer can get only a fraction of what it originally cost to build their home if they put it up for sale, they feel that the valuation is unfair. Therefore, the cost approach is often viewed at the higher end of the value.

Taxpayers often protest the cost approach method when the market is down precisely for that reason. This method tends to be more accurate with new homes verses older homes as depreciation is a key factor in determining value and can be difficult to measure.

The benefit of this method is the steady tax value that the taxpayer can expect. The cost approach is less likely to fluctuate, either high or low, and remains fairly constant unless the property owners themselves make additions and/or changes.

Check back in two weeks to compare this method with the Sales Comparison Approach.

Life Without Property Taxes?

without property tax

As most of you know, the property taxes you collect are vital to the foundation of your community. The revenues collected are used to support local education, police and fire departments, local administration and courts, and community services including parks, civic centers, and libraries.

But have you ever considered what it would be like if there were no property taxes? For citizens in one state, this dreamy conjecture almost became reality.

Last month, North Dakota voted on a constitutional amendment that would completely eliminate property taxes in their state. Advocates for the tax ban argued that property taxes are in conflict with the basic concept of property ownership. However, the majority of voters in the state disagreed and the overall vote was to keep the property tax system in place, temporarily silencing those in support of the idea.

While the proposal is dead in North Dakota, at least for now, the idea has been tossed around in our own state. Paul Wright, a recent contender in the primary for NC governor, strongly supports the notion of abolishing local property taxes and instead adopting local income taxes or sales taxes.

Both sides of the argument present strong reasons for their beliefs. Below, we examine a few.

Eliminating Property Taxes

Central to the idea of abolishing property taxes is the concept of true home ownership. Many in support of discarding property taxes believe that you can never truly own your home if it can be taken from you at any point for failure to pay the taxes owed on it.

They argue that homeowners must pay rent to the government, even after their mortgages have been paid off. Further, they cite the unfairness of the system on those now living on fixed incomes, such as retirees.

In addition, they purport, property tax collections are vulnerable to changes in property values. Those in favor of property tax abolition site that sales or income taxes are a more stable and predictable stream of revenue.

Preserving Property Taxes

For those in favor of retaining the property tax system, local versus central control is the chief argument. They propose that local governing authorities are better able to plan and budget for the needs of their citizens. According to their view, the property tax system also allows for better fiscal accountability and gives voters more control over how money is spent within their community.

If property taxes were eliminated, they state, other taxes would simply increase to make up for the lost revenue. The only difference would be that citizens would have less say in how their tax dollars are spent locally.

Further, they argue that taking away the primary local government revenue stream would result in more time spent begging the state to allot money for programs, services, or education that the county’s citizens support. According to those in favor of keeping the property tax system in place, without property tax revenue, small counties and schools could be left in the dust with fewer of the resources and programs necessary for a thriving community.

What are your opinions?