2009 REAPPRAISAL INFORMATION

GENERAL

In 2009, each county assessor will be conducting a biennial reappraisal of all of the locally assessed property in the state. On or before May 1, taxpayers will receive a Notice of Valuation (NOV) which will provide the current taxable value of their property. Unless the taxpayer successfully protests the assessor’s valuations, the 2009 and 2010 property tax amounts will be based on the NOV values.

RESIDENTIAL – 7.96% RATE OF ASSESSMENT

Real property in Colorado is reappraised by the county assessor every odd numbered year. Homes are valued solely by the use of the market approach, which means that the value assigned to a home is based upon the sale of similar properties in arms length transactions during the 24 month period beginning July 1, 2006 and ending June 30, 2008. Therefore, the effective date of these appraisals will be June 30, 2008. Sales data will be “trended to the endpoint”, which means that more importance will be attached to sales that occurred in June, 2008 than those from July, 2006.

Since the foreclosure crisis peaked late in 2007, we may assume that foreclosures, and the depression in the real estate market caused by so many foreclosed houses being on the market, will be reflected in the value assigned to houses by the county assessors. However, it must be mentioned that real estate values are highly localized and some counties in Colorado have not experienced the downturn in the market and the high number of foreclosures that have been seen in the Front Range. In fact, most mountain and western slope counties will be increasing valuations.

In a normal real estate market, appraisers do not typically use foreclosure sales as comparables. However, when the number of foreclosure sales increases and the entire market is affected, they should be considered. It is up to each of Colorado’s 64 assessor’s offices to determine what effect, if any, foreclosure sales have on the overall market in their counties. The law does not allow assessors to use data more current than June 30, 2008 because most assessors aren’t able to process and analyze sales subsequent to that date in time to produce equalized values by May, 2009. Equalized values are important because every county and, more important, every school district in the state needs to play by the same rules in valuing property. Those values determine how much state support for education goes to each school district and it would be unfair if different data collection periods were used in different counties.

NON-RESIDENTIAL – 29% RATE OF ASSESSMENT

Commercial property is valued on a more complicated basis than residential. Commercial property is valued using the cost, market and income approaches to value. Cost means cost to replace or reproduce. Market means what similar property sells for in a typical free market. Income means the income generating capacity of the property.

What is most significant about the current recession is this: commercial property normally loses value first in a recession. That may not be the case this year. Since the economy took its steepest declines after the data collection period for valuation by assessors, business owners are more likely than homeowners to experience a value increase this year when they receive their assessments from the county assessors.

SUMMARY

Again, assessors can only consider sales activity that occurred during the 24 month data collection period. Assessors cannot consider any market activity after the June 30, 2008 date. Assessments of all property, other than agricultural land, must reflect actual market value based on the sales that occurred during the data collection period. All assessors’ offices are annually audited by the state to ensure that the assessments are in compliance with this requirement. In other words, assessors have no choice but to issue assessments that reflect the market activity from the data collection period.