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How does the Assessor determine Market Value?

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Understanding Your Property Assessment In Minnesota, property taxes provide most of the funding for local government services. Todd County collects the taxes and distributes the money collected between the county, townships/cities, school districts and special districts. Each property’s share of taxes is determined according to its value, use, and the property tax levies. Assessors are responsible for estimating property values and setting property classification for tax purposes. What does the Assessors Office do? Accepts Applications Many of the duties of the Assessor can be found in Minnesota Statutes 273.01 through 273.08. The Minnesota property tax law provides certain credits or forms of tax relief; one of the most common is the Homestead Credit. Applications for Homestead Classification (owner occupied & relative homestead), Special Agricultural (actively farming) Homestead Market Value Exclusion for Disabled Veteran, 2c Managed Forest Land are among programs of interest to property owners. Please call the Assessor’s Office to inquire (320)732-4431. Estimates Market Value Minnesota Statutes specifically requires that assessors view each parcel of real estate to appraise its market value. Property values change continuously with changing economic conditions. In addition to market changes, physical changes affect the value of land and buildings. All factors that may influence value must be considered when estimating the value of property. This task requires a physical inspection of all property subject to assessment. Approximately every fifth year, an assessor will view the property. In addition, all new construction, alterations or improvements will be viewed in the current year. Classifies Property on Primary Use The assessor also determines the classification or primary use of each parcel. Some of the most common classifications are agricultural homestead, residential homestead, commercial/industrial, seasonal recreational residential, rural vacant land. Each classification is taxed at the percentage set by the State Legislature. Some of the classifications also receive a credit. Two of the most common are the homestead credit and agricultural credit. The credits are also set by the State Legislature. What is market value? Market value is the price that would prevail under competitive, open-market conditions at the time of assessment. An “open market” sale is one in which the buyer and seller are acting prudently, and the price is not affected by undue stimulus. The price obtained at a forced sale shall not be considered. How does the Assessor determine market value? State law requires that the value and classification of real estate be established as of January 2 each year. The market value estimated by the assessor should be at, or very close to, the amount the property would sell for if placed on the open market. The State Board of Equalization requires the overall level of assessment to be between 90% and 105% of market value. Minnesota Statute 270.12, sub. 2 paragraph 8 states that in equalizing value pursuant to this section, the board shall utilize a 12-month assessment/sales ratio study conducted by the Department of Revenue containing only sales that are filed in the county auditor’s office under section 272.115, by November 1 of the previous year and that occurred between October 1 of the year immediately preceding the previous year and September 30 of the previous year. This language requires the State Board of Appeal and Equalization to utilize a 12 month study in evaluating assessment performance for each county. This 12 month period begins October 1 of the year prior to the year before the assessment date and extends to September 30 of the year preceding the assessment date. For assessment year 2014 this means sales are considered from October 1, 2012 to September 30, 2013. For the 2015 assessment it would mean sales from October 1, 2013 through September 30, 2014 are considered. This is the data used by the Department of Revenue to measure and evaluate the assessment for each county. Assessors are distinguished from other appraisers in that the historical data they are permitted to consider is limited by statute. The result of this is that assessments are based on sales that occurred as many as 15 months prior to the assessment date. In times of escalating real estate values, such as the past decade or so, this causes assessed value to be less than the actual value on the date of assessment. Seldom does anyone find this to be problematic. When market values are declining, assessed values can be greater than the actual value on the assessment date because values have declined since the sales used in the analysis. This does strike some as unfair, although the prior situation does not. This however is the law, and as stated earlier, any appraisal is limited by the timeliness of the historical data used. A Valuation Notice is mailed each spring to every property owner in Todd County. The value and classification as determined by this office forms the basis for the following year’s real estate taxes. That is, the value and classification set by the Assessor on January 2, 2014, is used to calculate the taxes payable in the year 2015. The sales ratio period used to establish values on January 2 are those that occurred between October 1, 2012 through September 30, 2013.

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