Ohio Administrative Code › Title 5703 - Department of Taxation › Chapter 5703-25 - Equalization - Appraisals › Section 5703-25-12 - Valuation of buildings, structures, fixtures and improvements to land

Current through all regulations passed and filed through July 1, 2024
(A) General - The
			 true value of improvements may be determined by either the market data, income
			 or cost approach. Regardless of the approach used the total of the depreciated
			 value of the improvements to land and the "true value" of the land should be
			 the "true value" of the property as a whole, as defined in rule
			 5703-25-05 of the Administrative
			 Code. While the cost approach will generally be used one of the other
			 approaches should be used as a check on whether the determination of
			 depreciation or obsolescence is correct.
In arriving at the value of the depreciated improvements by the
				market data approach the value of the entire property is estimated by the use
				of comparable sales after allowing for variations. The land value determined
				according to rule
				5703-25-11 of the Administrative
				Code is then subtracted to arrive at the value of the improvements in their
				present or depreciated condition.
The building residual technique is used to estimate improvement
				values by the income approach. After land value is arrived at the value of the
				improvements is estimated by capitalizing the net income remaining after
				deduction for all expenses including interest on the land value.
In the use of the cost approach to estimate improvement value
				the replacement cost new is first estimated. From the cost new deductions are
				made for depreciation including physical deterioration, functional and economic
				obsolescence to arrive at the value of the improvements in their present
				condition.
(B) When a
			 general sexennial reappraisal is being made by the county auditor under the
			 provisions of section
			 5713.01 of the Revised Code, all
			 prices used in determining the replacement cost of buildings, structures,
			 fixtures and improvements to land will be prices prevailing during the year immediately
			 preceding the tax lien date of the year the reappraisal is to be effective for
			 tax purposes.
The county auditor is directed and ordered to prepare, or have
				prepared under the auditor's supervision, schedules of all building costs that
				will be used in appraising buildings, structures, fixtures and improvements to
				land in the county. The auditor will prepare separate schedules for residential,
				commercial, industrial and farm buildings. Building cost schedules
				will be
				based on the prices of labor, materials, architects' or engineers' fees, plus
				contractors' overhead and profit, and other charges for the class, type or
				grade of building in the area to be appraised prevailing during the period
				specified by the preceding paragraph
Residential building cost schedules will include at
				least six grades of construction. Each grade
				will be
				identified by number or letter. Additional grading may be obtained by adding or
				deducting a percentage for each grade by using a plus or minus sign, followed
				by the per cent used.
Farm building cost schedules will include all
				farm buildings (exclusive of the farm dwelling which will be priced
				according to the residential schedule) including general and special type
				barns, milk houses, machinery sheds, granaries,
				corn cribs, silos, hog houses, and other miscellaneous farm buildings.
The various schedules are to be used in estimating the
				replacement cost of each building, fixture or improvement to land thereto. In
				the third calendar year following the sexennial reappraisal each value
				will be
				updated, either by percentage or otherwise so that it accurately reflects
				current market value in the county as of January of the current tax year. The
				selection of the method of updating values will depend on the manner in which
				the triennial update or equalization of true and taxable values required by
				rule 5703-25-06 of the Administrative
				Code is performed. The method selected should be one that will insure that the
				taxable values of new buildings, etc. will equal thirty-five per cent of the
				current true value in the same uniform manner as all other real
				property.
One set of all building schedules of every class, type and
				grade will be kept on file in the county auditor's office
				and open for public inspection during the regular office hours
(C) Building inspection - Each
			 building will be measured to determine the number of square or
			 cubic feet it contains, and a sketch will be drawn on
			 the property record card. Major buildings such as dwellings and barns
			 
								will be
			 sketched on the property record card with other minor buildings to be numbered,
			 the number encircled to appear in the space for the sketch of buildings in its
			 proper relation to the dwelling and barn, etc.
The exterior, and if possible, the interior of each building
				will be
				inspected with notations being made on the record card of construction
				features, physical conditions, and other factors that would affect value. Each
				building will be graded according to quality of
				construction.
Each county auditor will describe in
				detail on the record card or sheet, and will itemize,
				the precise industrial and commercial property that the auditor is valuing as
				"real property" as distinguished from "personal property." In questions of the
				classification of property as real or personal the county auditor
				will be
				guided by rule
				5703-3-01 of the Administrative
				Code.
(D) Estimation of
			 depreciation and obsolescence - When the cost approach is used in appraising
			 the buildings an estimate will be made of depreciation including all types of
			 obsolescence that 
								are to be deducted from replacement cost new of
			 the improvements so that the total value of depreciated improvements and the
			 land will be equal to the true value of the entire property
			 as defined in rule
			 5703-25-05 of the Administrative
			 Code.
(1) In arriving at the true value, among
			 other factors, the utility of the improvements to the land
			 will be
			 considered. In the appraisal of commercial or investment type property the
			 county auditor is directed to consider the terms of all outstanding leases and
			 the amount, quality, and durability of income that the property would produce
			 under normal management and the actual amounts being currently returned on
			 similar investments, and to reflect these factors in the final determination of
			 true value in money in any uniform logical way that the auditor may see
			 fit.
(2) Depreciation and
			 obsolescence will depend upon the following three factors:
(a) Physical depreciation is a loss in value
			 resulting from physical deterioration due to age, wear and tear,
			 disintegration, and the action of the elements. The amount deducted for
			 physical depreciation will reflect
			 loss in value due to general deterioration and the need for
			 rehabilitation.
(b) Functional
			 obsolescence is a loss in value resulting from poor planning, overcapacity or
			 undercapacity, due to age, size, style, technological improvements or other
			 causes within the property. There are two types of functional obsolescence:
(i) Curable functional obsolescence which may
			 be estimated at the amount it would cost to modernize the
			 improvements.
(ii) Incurable
			 functional obsolescence which may be estimated by considering the amount it
			 would cost to replace the improvements with a modern structure suitable for the
			 same purpose, or by the capitalization of the loss of income due to the degree
			 of in-utility or extraordinary operating costs related to the
			 structure.
(c) Economic
			 obsolescence is a loss due to external economic forces, such as changes in the
			 use of land, location, zoning or legislative enactments that might restrict or
			 change property rights and values and other similar factors.
(3) In arriving at the rate of
			 depreciation and obsolescence to be applied to buildings, structures, fixtures,
			 and improvements to land, the auditor will consider,
			 among other things, the following:
(a) The
			 rental income and sale prices in the current market for properties of similar
			 type and condition.
(b) Type of
			 construction.
(c) Type and extent
			 of replacements, restorations, or modernizations
(d) Type and extent of replacements,
			 restorations, or modernizations.
(e) Age.
(f) Actual use compared to use for which
			 constructed.
(g)
			 Location.
(h) Rapidly changing
			 technological improvements in construction methods.
(i) Rapidly changing technological changes in
			 manufacturing processes.
(j)
			 Changes in consumer demand and other external economic forces.
(k) Any other recognized factor which may
			 have a particular applicability in a given case.