Definitions
Property Assessment
What is ad valorem taxation?
Ad valorem means according to value. Ad valorem taxation is a tax based on the value of your property and is governed by Florida Law. The tax is determined by multiplying your property’s taxable value by a tax rate (millage), which is set by the taxing authorities. The revenues generated are used to support government and public services.
Non-ad valorem taxation is a fee, which is not based upon the property value, assessed for roads, fire, garbage, lighting, drainage, water, sewer or other public services which may be levied by your county, city or any special district.
What is mass appraisal?
The property appraiser’s office must determine the values of over 172,000 real property parcels each year for ad valorem purposes. To do this, we must use a mass appraisal system. Mass appraisal differs from independent appraisals in the following ways:
- Purpose
- Quantity
- Method
- To determine values for ad valorem taxation.
- Many parcels are valued at a time.
- A computer aided mass appraisal system is used to establish the values for large groups of properties. Statistical analysis is then used to determine equitability among parcels within neighborhoods.
- To obtain mortgages, refinancing, or insurance.
- One parcel is valued at a time.
- Three to six parcels are chosen to compare to the subject property.
What is market value?
Market Value is synonymous with just value. Market value is the price at which a property is sold in the open market, with a reasonable time for the seller to find a buyer under prevailing market conditions. Both parties must have knowledge of the uses to which the property may be put with both seeking to maximize their gains and neither being in a position to take advantage of the urgencies of the other. Foreclosures and many short sales are not considered arms-length transactions and are not considered market value. To determine the market value, the property appraiser must also deduct for the cost of sale which includes items such as title insurance, Realtor fees, legal fees, etc.
What is assessed value?
Assessed Value is market value less any fractional assessment such as Save Our Homes cap, 10% cap, or agricultural classification.
What is taxable value?
Taxable Value is assessed value less any applicable exemptions.
How is property appraised?
Transactions occur each day in the marketplace that affect property assessments; for instance, property is bought or sold, built or renovated, rented or leased. There are many factors that an appraiser must consider when estimating the value of property: the recorded sales of similar properties; the replacement cost; the property’s location, size and condition; income from the property; operating costs; and net proceeds from the sale.
There are three approaches to value that an appraiser must consider when determining a property’s market value:
Cost Approach
This approach considers how much it would cost to replace a structure with one that has similar utility. Once this cost is estimated it is adjusted to account for the depreciation of the subject property due to wear and tear. Finally, the value of the land, as if it were vacant, is added to get the value of the entire property.
Sales Comparison Approach
This approach also known as the market approach considers the sales of similar properties to that of the subject property that occur in the year prior to the assessment date of January 1.
Income Approach
This approach applies mainly to valuing investment properties that are typically leased to tenants, such as apartment complexes, shopping centers and office buildings. The property’s value is determined by measuring the property’s annual income after expenses and comparing that to the rates of return for comparable investments.
How are property taxes determined?
Property tax in its simplest form is the product of the property value and the millage (tax) rate.
Property Taxes = Taxable Value x Tax Rate
The property value is determined by the Property Appraiser’s office. The tax rate is determined by summing each millage rate set by every taxing authority (i.e. cities, the unincorporated county and school board) that the property resides in. A change in either the property value or the tax rate will have an impact on the taxes.