What is a Revaluation?

WHAT IS A REVALUATION? 

A revaluation is a program undertaken by a municipality to appraise all real
property within the taxing district according to its full and fair value.

WHAT IS MEANT BY FULL AND FAIR VALUE?
Full and fair value is the price at which the tax assessor believes a property would sell at a fair and bona fide sale by a private contract on October 1 of the pretax year. The sale must be between a willing buyer and a willing seller. For example, the buyer is not obligated to buy, and the seller is not obligated to sell.

WHY IS THERE A NEED FOR A REVALUATION?
A revaluation program seeks to spread the tax burden equitably within a municipality. Real property must be assessed at the same standard of value to ensure that every property owner is paying his or her fair share of the property tax. For example, two properties having essentially the same market value should be paying essentially the same amount in property taxes. Inequitable assessments
result from the following situations:

1. changes is characteristics in areas or neighborhoods within the
   municipality and within individual properties;
   
2. fluctuations in the economy (inflation, recession);
   
3. changes in style and custom (desirability of architecture, size of house);
   
4. changes in zoning which can either enhance or adversely effect value;
   
5. delays in processing building permits which delay tax assessments on
   new construction.
   

WHAT HAS TO BE DONE DURING A REVALUATION PROGRAM?
Both the interior and exterior of each property are usually physically inspected, and building dimensions are noted during the revaluation process. In addition, recent sales of properties are studied and may be adjusted to estimate the value of property that has not been sold. Property typically purchased for investment purposes is analyzed in terms of its income-producing capability. In short, all information believed to have an influence on value will be gathered, reviewed and analyzed in order to make a proper determination of each property's full and fair value.

WILL A REVALUATION INCREASE TAXES?

• Although revaluation will result in an increase of nearly each individual assessment, it does not mean that all property taxes will increase. You might now be thinking, “How can my assessment increase and my taxes not go up?” Remember, assessments are merely a base used to apportion the tax burden. The tax burden is the amount that your municipality must raise for the operation of county and local government and support of the school system.

• True value assessments, the goal of a revaluation program, would have decreased the taxes for the property owner in our example by $1,984. This is based on assumptions within the same tax year. An actual tax rate, however, cannot be determined with any certainty until the new assessments are filed and operating costs for schools, county and local government are fixed. (Budgets are not completed until several months after the date for filing a tax list.) Although a tax rate cannot be calculated until budget requirements are determined, one thing is certain regarding the taxpayer in our example. He will continue to pay more than his fair share of the property tax burden if a revaluation is not undertaken.

• Generally, taxpayers of the most severely under assessed properties before a revaluation will pay a greater share of the tax burden after a revaluation. This means that their property taxes will increase even if operating costs remain the same. 

• Likewise, taxpayers of the over valued properties will pay a smaller share of the tax burden after the revaluation. This means their property taxes will decrease if the total amount to be raised from taxes remains the same. In reality, municipal, county and school budget costs generally increase each year. 

WHAT IS EXPECTED OF PROPERTY OWNERS?

A prospective buyer would not be expected to purchase a property without first making a careful inspection. Similarly, an individual ordering an appraisal expects that a thorough inspection will be made before a market value estimate of the property is rendered. Equitable revaluation depends on the cooperation of taxpayers. Property owners have a stake in the outcome of the revaluation program.

Interior inspections, especially, require that residents cooperate with the property listers. The validity of the market value estimate depends on the collection of accurate data. Any assistance a taxpayer can provide will aid greatly in the total data collection process. The municipality and the company assisting in the program will make every effort to cause taxpayers the least possible inconvenience. Failure to allow an internal inspection will most likely result in a higher then actual assessment since the inspector must assume there has been improvements or upgrades since the last successful inspection.

Remember, the people making the inspections are not necessarily responsible for developing the market value estimate. Their job at the time an inspection is being made is not to make an instant judgment as to valuation but rather to collect pertinent information to be used in the valuation process. Examples include the number of bathrooms; verifying measurements; interior finishes; and the observed condition of the property to determine effective age.

WILL TAXPAYERS BE INFORMED OF THEIR PROPOSED ASSESSMENT? 
The revaluation firm is required to mail each taxpayer a notice advising him of the new appraised value prior to the new value being officially listed on a tax list.
This usually occurs after November 10 and prior to December 31.

WHAT IF A TAXPAYER IS DISSATISFIED WITH THE PROPOSED ASSESSMENT? 
The notice that includes the appraised value will also explain how to arrange for a personal informal hearing to review the proposed assessment. A taxpayer planning to attend the review should be prepared to support any disagreement regarding the appraised value of his property. For example, recent sales of similar or comparable properties are an indication of value. A recent purchase price of the property may also help to support a view as to value. Also, the cost of recently constructed comparable buildings could support a belief of fair market value. The taxpayer will also want to verify such things as the square footage of the property, the number of bathrooms, attached porches, decks, garages, etc.

WHAT CAN A TAXPAYER DO IF HE IS UNSUCCESSFUL IN HAVING THE VALUATION OF HIS PROPERTY REVISED AS A RESULT OF ATTENDING THE INFORMAL HEARING?
The assessor will file the new tax list with the County Board of Taxation on January 10 of the tax year. If the matter of valuation is not resolved prior to filing and certification of the tax list, an appeal may be filed with the County Board of Taxation on or before April 1 or 45 days after Notice of Assessments are mailed, whichever is later. In a taxing district where a municipal-wide revaluation or municipal-wide reassessment has been implemented, a taxpayer or taxing district may appeal on or before May 1 to the County Board of Taxation by filing with it a petition of appeal or, if the assessed valuation of the property subject to the appeal exceeds $1,000,000 by filing a complaint directly with the State Tax Court. 

If the taxpayer is not satisfied by the decision of the County Board of Taxation, an appeal may be filed within 45 days of the County Board judgment to the New Jersey State Tax Court. 

Source: New Jersey Division of Taxation

WHAT ARE THE CRITERIA USED BY A COUNTY TAX BOARD TO CONSIDER ORDERING A REVALUATION?
NJ 18:12A-1.14 Revaluations; reassessments, compliance plans

1. (a)  Regarding voluntary revaluation, when a taxing district proposes to revalue real property in said district voluntarily, the taxing district must notify in writing the assessor and the county board of taxation of such intent and must obtain approval of the revaluation contract from the Director, Division of Taxation as prescribed by law (N.J.S.A. 54:1-35.35 et seq., N.J.A.C. 18:12-4 and N.J.S.A. 54:4-23 as amended P.L. 2001, c.101).
   
   
2. (b)  Regarding revaluation orders by a county board of taxation, when a board determines the need to order a taxing district to revalue its real property, it shall submit the proposed order to the Director, Division of Taxation, for his or her approval outlining the reasons that warrant such action. Upon approval of such order, the board shall take appropriate action to implement same.
   
   The criteria utilized by a board when it is considering a proposal to order a taxing district to conduct a revaluation shall include the following. However, a board may consider any other criteria that relate to the need for revaluation. The results of a board's findings with respect to these criteria and all other bases for issuing a revaluation order shall be attached to the written order when it is submitted to the Director of the Division of Taxation for approval:

• General coefficient of deviation: A coefficient of deviation greater than 15 percent generally indicates a need for revaluation. If it is 15 percent or less, then other factors must also be used to justify a need for a revaluation. This is an average deviation from the average assessment sales ratio expressed as a percentage of average assessment ratio for each taxing district, for all properties included in "usable sales." It is a measure of variation in assessment-sales ratio of all properties sampled without regard to property class, property size, or any other property characteristic. 

• Stratified coefficient of deviation: This is an average deviation of assessment sales ratios for all usable sales of each property class from the average assessment ratio for the class. It provides a measure of assessment uniformity for properties within each class, but provides no insight into comparability of assessment levels among property classes. A stratified coefficient of deviation of greater than 15 percent may indicate a need for revaluation.

• Segmented coefficient of deviation: This is an average deviation of assessment sales ratios for all "usable sales" of each property class from the average assessment ratio for all properties of all classes expressed as a percentage average assessment ratio for all properties of all classes. It provides a measure of uniformity or lack thereof of one property class compared to other property classes. A segmented coefficient of deviation of greater than 15 percent may indicate a need for revaluation. 

• In analyzing the coefficient of deviation, consideration should be given to the size of the sales sampling. For the above purpose, a coefficient of deviation above 15 percent generally denotes lack of uniformity in assessments. 

• Director's Ratio: The Director's Ratio is the average ratio of assessed to true value for each taxing district as determined by the Director, Division of Taxation, in the Table of Equalized Valuations promulgated annually pursuant to N.J.S.A. 54:1-35.1. A source of information for ascertaining assessment-sales ratios is the data gathered in the equalization program for the distribution of State school aid. A Director's Ratio of 85 percent or lower generally denotes noncompliance where, as is the norm, the adopted percentage level of assessment established by the county board of taxation is 100 percent. A continual decline of assessment-sales ratios in a district from the percentage level of taxable value established by a board is an indication of a lack of maintenance of the assessment list. However, a declining ratio does not provide any insight into the level of uniformity of assessment and in and of itself does not imply any automatic judgment with respect to lack of uniform assessments. 

• Individual assessment-sales ratios: The individual sales are listed in order of ratios from the lowest to the highest. A wide divergence of ratios as opposed to a clustering of ratios at a common level would be indicative of a lack of uniformity in assessments. Ratios above and below the common level range of P.L. 1973, c.123 (N.J.S.A. 54:1-35a.b) are also indicative of a lack of uniformity in assessments. 

• Class weighted ratios: The weighted ratio of a property class is found by dividing the total ratables of a property class by the total true value of that property class. Conformity in the class weighted ratios is an indication of uniformity between property classes. Wide variances in class weighted ratios are an indication of a lack of uniformity in assessments between property classes.

• District weighted ratio: The district weighted ratio is found by adding the total ratables for each of the four property classes and dividing the sum by the total true value for all classes of real property. A district weighted ratio, which is based on usable sales for the most recent sample period, is indicative of whether there is compliance with the adopted percentage level of assessment established by a county board of taxation.

• Neighborhood and zoning changes: The need for a revaluation program may be indicated by neighborhood and zoning changes which affect value in part or all of a taxing district. Changes in uses permitted by zoning may substantially increase ordecrease the value of property. A revaluation order citing changes in zoning as its basis must delineate the impact of zoning changes as the changes relate to assessments.

• Lack of adequate records: A lack of adequate records, such as property record cards, which cause difficulty for the assessor in arriving at a sound assessment, is indicative of the need for a revaluation. The absence of essential information which may affect assessments is detrimental to the valuation process and may impede the maintenance of an assessment list. The absence of information relating to changes made to improvements such as failure of property owners to secure building permits or copies of building permits not being furnished to an assessor is a contributory factor resulting in the lack of uniform assessments. 

• Year of last revaluation or reassessment: If a revaluation or reassessment has not taken place in a municipality for 10 years or more, this can be a factor in ordering a revaluation.

• Amount of revenue lost due to appeals. The county tax board can consider the amount of revenue a municipality has lost due to appeals as indicating a need for a revaluation. 

Source: NJ Division of Taxation

Source: NJ 18:12A-1.14 Revaluations; reassessments, compliance plans