If I list my Kansas house for sale, can the county appraiser use my asking price as the property's taxable value?

Plain-English summary

Homeowners often assume that putting a house on the market tells the county what it is worth, and that the asking price will become the assessed value. This directive says a Kansas county appraiser may not do that: the appraiser "shall not use the listing price of property as the sole criteria for determining the fair market value of property for Kansas property tax purposes."

The reason is that a listing price is an asking price, not a market transaction. Kansas defines taxable value by K.S.A. 79-503a as "the amount in terms of money that a well informed buyer is justified in paying and a well informed seller is justified in accepting for property in an open and competitive market, assuming that the parties are acting without undue compulsion," and requires the appraiser to consider the three approaches to value -- sales, cost and income -- "when data to perform each approach is readily available."

The directive is careful not to say listing prices are irrelevant. Because K.S.A. 79-503a requires the appraisal process to "conform with generally accepted appraisal procedures, when applicable," and USPAP Standards Rule 1-5 requires an appraiser to "consider and analyze any current Agreement of Sale, option or listing of the property being appraised, if such information is available to the appraiser in the normal course of business," a listing is something an appraiser should look at.

The line the Division draws is between considering a listing and substituting it for an appraisal: "it is wholly inappropriate for an appraiser to complete an appraisal simply by assigning the amount, or a percentage of the amount, of the listing price as the taxable value of a property. The listing price is simply one factor to consider when it exists; it is by no means the sole criteria of market value or the strongest indicator of market value."

What this means for you

Kansas homeowners selling or thinking about selling

Listing your home does not automatically reset your assessment to the asking price. If your valuation notice tracks your listing price -- or a flat percentage of it -- this directive is the standard your appraiser was supposed to meet, and it is worth raising at the informal meeting.

The protection runs both ways. An aspirational listing price well above market does not have to become your tax value; equally, a low asking price in a quick sale does not automatically lower it. What the appraiser owes you is consideration of all the statutory factors.

Owners who listed and did not sell

This is where the directive matters most. A property that sat unsold at a given price is evidence that the market did not meet that price -- which is precisely why an unexamined listing figure is a poor value indicator. The appraiser must still work through the statutory approaches rather than anchoring on the number you advertised.

Real estate agents

Clients sometimes ask whether listing high will raise their taxes. The accurate answer under this directive is that the listing is one input an appraiser is expected to consider under USPAP Rule 1-5, but it cannot be the sole basis of the taxable value, and assigning the listing price or a percentage of it is "wholly inappropriate."

Accountants and tax professionals

Note that USPAP Rule 1-5 as quoted also requires the appraiser to consider and analyze prior sales of the subject property within one year for one-to-four family residential property and three years for all other property types, and to "consider and reconcile the quality and quantity of data available and analyzed within the approaches used." The authority chain mirrors the companion building-permit directive: In re Tax Appeals of Andrews, 18 Kan. App. 2d 311, 317-18 (1993), citing Board of Johnson County Comm'rs v. Greenhaw, and Sunflower Racing, Inc. v. Board of Wyandotte County Comm'rs, 256 Kan. 426, 442 (1994), for the proposition that compliance with K.S.A. 79-503a is a vital factor in whether an assessment is uniform and equal.

Common questions

Q: Will listing my house raise my property taxes?
A: Not by itself. The county appraiser cannot rely solely on a property's listing price as the basis for its fair market value.

Q: So the appraiser just ignores my listing?
A: No -- the opposite. Generally accepted appraisal procedures "do provide that an appraiser should consider a listing price when determining the fair market value of property," and USPAP Rule 1-5 requires considering and analyzing any current agreement of sale, option, or listing available in the normal course of business. It is one factor among several.

Q: Can the appraiser use a percentage of my asking price, say 95%?
A: The directive forecloses that specifically. It is "wholly inappropriate for an appraiser to complete an appraisal simply by assigning the amount, or a percentage of the amount, of the listing price as the taxable value of a property."

Q: What is the appraiser supposed to do instead?
A: Consider all the factors in K.S.A. 79-503a, which comprise the sales, cost and income approaches to value, and apply them where the data to perform each approach is readily available.

Q: Does an actual sale of my home set the new value?
A: This directive addresses listing prices, not completed sales, and does not decide that question. A sale price is different evidence from an asking price; the statutory factors still govern.

Q: Can I cite this directive in an appeal?
A: You can point to it as the Division's standing instruction to county appraisers. It is not a ruling on your property and creates no taxpayer remedy by itself. It is also a 1998 document that cites the USPAP edition then in force, so check the Division's current directive list.

Citations and references

Kansas statutes and constitution:

• K.S.A. 79-503a (fair market value; required factors; conformity with generally accepted appraisal procedures)
• K.S.A. 79-501 (appraisal at fair market value)
• K.S.A. 79-1439 (classification)
• K.S.A. 79-5100 et seq. (certain motor vehicles)
• Kan. Const. art. 11, § 1 (uniform and equal); art. 11, § 12 (agricultural use land)

Appraisal standards cited: Uniform Standards of Professional Appraisal Practice ("U.S.P.A.P."), Standards Rule 1-5 (as quoted in the 1998 directive).

Cases cited in the directive:

• In re Tax Appeals of Andrews, 18 Kan. App. 2d 311, 317, 318, 851 P.2d 1027 (1993)
• Board of Johnson County Comm'rs v. Greenhaw (cited in the directive's text as "241 Kan. 126-27"; the opinion begins at 241 Kan. 119)
• Sunflower Racing, Inc. v. Board of Wyandotte County Comm'rs, 256 Kan. 426, 442, 885 P.2d 1233 (1994)

Companion directive: Directive #98-035 applies the same reasoning to the value stated on a building permit.

Source

• Landing page: Kansas Property Tax Directives
• Original PDF: PVD Directive 98-033

Original ruling text

STATE OF KANSAS DEPARTMENT OF REVENUE
Bill Graves, Governor John D. LaFaver, Secretary

Mark S. Beck, Director
Kansas Department of Revenue (785) 296-2365
915 SW Harrison St. FAX (785) 296-2320
Topeka, KS 66612-1585 Hearing Impaired TTY (785) 296-2366
Internet Address: www.ink.org/public/kdor

                               Division of Property Valuation

                                    DIRECTIVE #98-033

   TO:               County Appraisers

   SUBJECT:        Listing Prices and Fair Market Value
   __________________________________________________________________________________

   A question has arisen as to whether the “listing price” of property that is for sale can be
   considered its value for Kansas property tax purposes. The county appraiser shall not
   use the listing price of property as the sole criteria for determining the fair market value
   of property for Kansas property tax purposes.

   By law, property other than land devoted to agricultural use, commercial and industrial
   machinery and equipment and certain motor vehicles must be valued based upon its fair
   market value for Kansas property tax purposes. (K.S.A. 79-501, K.S.A. 79-1439, K.S.A.
   79-5100 et seq., Kan. Const., art. 11, § 1, Kan. Const., art. 11. § 12) For Kansas property
   tax purposes, “fair market value” means:

         [T]he amount in terms of money that a well informed buyer is justified in
         paying and a well informed seller is justified in accepting for property in an
         open and competitive market, assuming that the parties are acting without
         undue compulsion.

         K.S.A. 79-503a.

   K.S.A. 79-503a also requires a county appraiser to consider several factors when
   determining the fair market value of property for tax purposes. These factors comprise
   the three approaches to value: the sales approach, the cost approach and the income
   approach. All appraisers must consider and apply the three approaches to value in
   order to determine the fair market value of property when data to perform each
   approach is readily available.

   When determining the validity of an appraisal for Kansas property tax purposes, the
   courts have repeatedly stated:

          [T]he essential question is whether the standards prescribed in K.S.A. 79-
          503a have been considered and applied by the taxing officials. The
          assessment of real property which takes into consideration only some of
          the pertinent statutory factors of K.S.A. 79-503a cannot be upheld where

                                             Page 1

Page 2

   evidence indicates there has not been a uniform and equal rate of
   assessment and taxation in the county.

   In re Tax Appeals of Andrews, 18 Kan. App.2d 311, 318, 851 P.2d 1027
   (1993), citing Board of Johnson County Comm’rs v. Greenhaw, 241 Kan.
   126-27. See also Sunflower Racing, Inc. v. Board of Wyandotte County
   Comm’rs, 256 Kan. 426, 442, 885 P.2d 1233 (1994).

The highest courts in Kansas have held that compliance with K.S.A. 79-503a is a vital
factor in the determination of whether a tax assessment is uniform and equal. In re Tax
Appeals of Andrews, 18 Kan App.2d 311, 317, 851 P.2d 1027 (1993).

The listing price of a property is not itself expressly mentioned as a factor that a county
appraiser must consider when determining the fair market value of property for tax
purposes. However, K.S.A. 79-503a does state that the appraisal process utilized for
property tax purposes should conform with generally accepted appraisal procedures,
when applicable. Uniform Standards of Professional Appraisal Practice (“U.S.P.A.P.”),
Standards Rule 1-5 provides:

   In developing a real property appraisal, an appraiser must:

   (a) consider and analyze any current Agreement of Sale, option or listing of the
       property being appraised, if such information is available to the appraiser in
       the normal course of business;

   (b) consider and analyze any prior sales of the property being appraised that
       occurred within the following time periods:

        (i) one year for one-to-four family residential property; and
        (ii) three years for all other property types;

   (c) consider and reconcile the quality and quantity of data available and
       analyzed within the approaches used and the applicability or suitability of
       the approaches used.

Generally accepted appraisal procedures do provide that an appraiser should consider a
listing price when determining the fair market value of property. However, it is wholly
inappropriate for an appraiser to complete an appraisal simply by assigning the amount,
or a percentage of the amount, of the listing price as the taxable value of a property.
The listing price is simply one factor to consider when it exists; it is by no means the
sole criteria of market value or the strongest indicator of market value.

A county appraiser must consider all the factors presented in K.S.A. 79-503a in order to
determine the fair market value of property. A county appraiser cannot rely solely on a
property’s listing price as the basis for its fair market value.

Approved: .
Mark S. Beck
Director of Property Valuation

                                     Page 2