All commercial properties are reviewed every year, but are reassessed at least every four years based on the quadrennial plan by the Department of Revenue as set forth in the KRS 132.690. Market conditions as of January 1^st each year dictate which properties will be reassessed for that year.  If assessments are significantly different than comparable sales prices, we will reassess to ensure that our assessments are in-line with sales prices.  Single site assessments are extremely time intensive, expensive, and not feasible for all assessment work. Therefore, mass appraisal techniques are used.

The primary duty of the Property Valuation Administrator (PVA) is to equitably assess the value of real and personal property.  Kentucky’s Constitution requires that “All property, not exempted from taxation by this Constitution, shall be assessed for taxation at its fair cash value, estimated at the price it would bring at a fair voluntary sale.”  This language has not been amended since the current (fourth) Constitution was adopted in 1891.

The terms “market value” and “fair cash value” should be considered synonymous.

The Kentucky Constitution and the statutes define fair cash value, or fair market value as:

“…estimated at the price it would bring at a fair voluntary sale…”

The Appraisal Foundation, in its Uniform Standards of Professional Appraisal Practice, defines market value as:

The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what they consider their best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and
5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Fair market value is defined as the most probable price expressed in terms of money that a property would bring in an “arm’s-length transaction” between a willing seller and willing buyer, both of whom are knowledgeable concerning all the uses to which it is adapted and for which it is capable of being used. There are several requirements for a sale to be considered an “arm’s-length transaction:”

1. A willing buyer and a willing seller. Neither may be acting under duress with no advantage being taken by buyer or seller
2. Property must be marketed for a reasonable amount of time to locate a willing buyer.
3. Both buyer and seller must be informed and knowledgeable about the property and its potential
4. No unusual circumstances may be present in the transaction.

In order to assess property at market value, the Jefferson County Property Valuation Administrator considers all three approaches to value: cost approach, sales comparison approach, and the income approach. Of the three appraisal approaches to value, we believe that the cost valuation approach is the best for commercial mass appraisal. The cost approach is based on the principle of substitution and a rational, informed purchaser would pay no more for a property than the cost of building an acceptable substitute with like utility. The cost approach seeks to determine the replacement cost new of an improvement less depreciation plus land value. The land value is most frequently determined by the market comparison approach. The result of using the cost approach assures that assessments are applied fairly and equitably to all properties.

Cost Approach

Embedded in the PVA CAMA software are cost tables from Marshall & Swift, the industry leader in building cost guides. Even though all properties can be assessed using the cost approach, older properties are more difficult and are more subjective because of depreciation for age, functional obsolescence, and economic obsolescence that have to be estimated.

Sales Comparison Approach

The sales comparison approach is based on the concept of value in exchange. The sales approach to value compares the property value being appraised with similar sales of like properties. The characteristics of the comparable sales are analyzed for their similarity to those of subject. The prices of the comparable sales must be adjusted for any differences between the properties and the subject. Value indications derived from the sales comparison approach are usually considered particularly significant because they express the reactions of buyers and sellers in the real estate market. The sales approach is suitable when the same type of property is being exchanged periodically in the market.

Income Approach

The income approach is typically used in appraising income-producing properties. The investor who purchases an income producing property is essentially trading their present dollars for an income stream of future dollars plus the return of their initial investment. This approach best relies on the “economic value” of real estate with regard to investment decisions and desires for income flow from operation of the property. The process of converting a series of anticipated income into present value is capitalization; capitalization transforms net operating income produced by a property into the property value.

A sample Income and Expense Form can be viewed here.

Property Inspections

The Jefferson County PVA office relies on its well-trained, professional property valuation Field Representatives to gather data necessary for accurate property assessments. On-site inspections occur when a building permit is issued, a sale is recorded, a property is damaged, when the quadrennial plan requires it, or at the request of the property owner.

PVA Field Representatives have the legal right to measure the exterior dimensions of a structure in the absence of the owner. While you are not required to let the Field Representative into your building, your cooperation helps assure that the assessment will be fair and based on complete and accurate information.

All Jefferson County PVA Field Representatives carry signed identification badges and wear shirts with the PVA logo. If you have a question about a Field Representative, please call the PVA office at 574-6380.