Real Property

Valuation of Real Property

What is real property? Real property is defined by the Utah State Tax Commission as The interests, benefits, and rights inherent in the ownership of real estate.

How does the Assessor’s Office determine the value of real property? The initial phase is a site visit when a new structure is being built, or a change has been made to the existing building. When a change is made to an existing structure, a site visit is performed to update the county record with the new information. This information is gathered to ensure that the county records are as accurate as possible. The valuation stage comes after the initial collection segment.

Sales Comparison

The Sales Comparison approach is the most common approach to valuing residential properties. In this approach, the appraiser compares the property being appraised to similar properties that have recently sold. Similarities and differences must be noted in detail such as: date of sale, location of property, physical characteristics, and conditions of the sale.

real_property_sales_comparison

Before an appraiser can use home sales as comparables, the sale must be verified. The sales are analyzed to determine if they are "arm’s length" transactions. An arm’s length transaction is defined as “a transaction between unrelated parties under no duress. There are multiple reasons for a home to sell under duress. These reasons include, but are not limited to: foreclosure, short sales, estate sales, job transfer, divorce, etc. Because duress sales typically don’t sell for market value, these sales are removed from the analysis.

The appraiser makes adjustments to the sale prices of the comparable properties for different variables such as location, size, quality, condition, amenities, etc. Appraisers generally use a Paired Sales Analysis to determine market differences for different features. 

Below is an example of a Paired Sale

Home "A"Home "B"
1,000 Sq. Ft.1,000 Sq. Ft.
2 Car Garage2 Car Garage
Full-Finished BasementFull-Finished Basement
2 Bedroom 2 Bathroom2 Bedroom 2 Bathroom
1 FireplaceNo Fireplace
Sold 1/10/2010Sold 1/12/2010
Sold Price $100,000Sold Price $98,500


There is a $1,500 difference in sales price. The only difference between the two homes is that Home "B" does not have a fireplace. The $1,500 shows that, all things the same, a buyer is willing to pay $1,500 more for a fireplace.

Income Approach

The Income Approach is the most often used approach in the appraisal of commercial or industrial properties, or properties which are bought and sold by investors primarily because of their income producing potential. This approach to value depends on reliable and detailed information on the income and costs of doing business for a particular business or enterprise.


real_property_income_approach

This is referred to as the "income stream" of the property. The income approach defines value as "the present worth of future benefits of owning a property." These are composed of the annual income for an estimated number of years (called the economic life of the property) plus a capital amount representing land value or land value plus some remaining worth of the improvements. This approach emphasizes investment components rather than physical components of a property.

The steps in the income approach are:

  1. Estimate potential gross income (PGI)
  2. Add miscellaneous income
  3. Deduct vacancy and collection losses to derive effective gross income (EGI)
  4. Deduct operating expenses to derive net operating income (NOI)
  5. Select appropriate capitalization rate and method
  6. Develop an estimated value


Here is an example of the Income Approach: 


Income

  1. Potential Rental Income (Small Office Condo)
  2. Add: Misc Income (if any, coin operated vending machine, parking, etc)
  3. Less: Vacancy/Collection loss

Amount Description
$19,200.00 $800/month * 12 months * 2 units
$0.00 No Misc Income
$960.00 5% in Vacancy Losses
$18,240.00 Effective Gross Income

Expenses (Based on Effective Gross Income)

  1. Fixed (does not vary with use)
  2. Variable (vary with use)
  3. Others

Amount Description
$800.00 Insurance
$2,000.00 Taxes
$960.00 Management Fee (5%)
$220.00 Painting
$100.00 Exterminating
$600.00 Repair/Maintenance
$1,880.00 Total Variable Expenses
$680.00 Other Expenses: Replace Reserves
$5,360.00 Total Expenses


Net Operating Income = Effective Gross Income - Total Operating Expenses 
Example: $12, 880 = $18,240 - $5,360

Value

Value = Net Operating Income / Capitalization Rate 
Example:$135,579.00 = $12,880 / 9.5 % 

In this example the Small Office Condo is worth $135,579.00

Cost Approach


The Cost Approach is based upon the proposition that an informed buyer would not pay more than the cost of producing a substitute property with equal utility as the subject property. The Cost Approach works best for new residences, specialty buildings, large commercial units, and when little market data is available.
real_property_cost_approach

The steps in performing the Cost Approach are:

  1. Estimate the land value, as if vacant
  2. Estimate the replacement cost new of the improvements
  3. Estimate cash amount of accrued depreciation due to loss in value, physical deterioration, and/or obsolescence
    1. Physical – Deterioration due to weathering, wear, tear, etc.
    2. Functional – Depreciation resulting from deficiencies or super adequacies in the structure
    3. Economic (external) – Obsolescence due to factors outside of the subject property (being next to the dump or train tracks)
  4. Deduct the accrued depreciation
  5. Estimate the present depreciated value of any other improvements
  6. Add estimate of land value to the depreciated value of improvements to get the value of the subject property.

Sample use of Cost Approach:

  1. Land value, as if vacant: $50,000
  2. Replacement Cost New (RCN): $180,000
  3. Physical deterioration: $35,000
  4. Functional obsolescence: $15,000
  5. Economic obsolescence: $5,000
The total accrued depreciation is $55,000 ($35,000+$15,000+$5,000) 

The depreciated value of improvements is $125,000 ($180,000-$55,000) 

Value indicated by the Cost Approach: $175,000 ($125,000+$50,000) 

In this example, our house is worth $170,000.

Click on the links below to read the current and prior years annual reports.

In this annual report you will see changes in values by cities and property types, sales trends, new construction trends, information about appeals and much more.

Reappraisal involves a detailed review of property characteristics of at least one fifth of the county’s property inventory each year (Five Year Review of Property Characteristics Plan). Reappraisal looks at all physical components of properties to ensure all characteristics are correct. Reappraisal is identified with physical inspections or updated aerial photographs when possible.

Physical Inspections

Remodeling, expansion, and renovation projects are sometimes completed without building permits. Various other changes can occur to land and improvements which the Assessor’s Office may not detect without an on-site inspection of the property. Utah State law requires a detailed review of property characteristics for each property at least once every five years. (59-2-303.1)

Aerial Photographs

Regular updates of aerial photographs provide an excellent means for reappraisal collection. Discovery of new, or modifications to, structures and developments are readily detected when the new photographs are compared to the old. In addition, aerial photographs may make it possible to inspect areas of the county that are otherwise inaccessible.

In order to ensure that the Davis County Assessor’s Office has the correct information, a review of physical characteristics occurs every five years. 

What is the Assessor’s Office role in the Board of Equalization?

The Davis County Assessor’s Office reviews valuation appeals that have been accepted through the Board of Equalization. An appraiser in our office reviews the pertinent market information, performs an analysis, and then estimates the market value and, if warranted, recommends a value change to the Board of Equalization. Pertinent market data includes information submitted by the appellant, as well as other information available through data sources such as the Multiple Listing Service (MLS). The Assessor’s Office also represents Davis County in Board of Equalization hearings at both the county and state level.

People often ask, “What does it take to successfully appeal the market value of my property?” Here are some tips to navigate through the appeal process.

Keys to a Successful Valuation Appeal

Davis County works hard to ensure that the assessed value of all properties accurately reflects a fair market value. Despite our best efforts, sometimes there is an error in the valuation or in our records. With almost 100,000 parcels in the county we rely on property owners to help bring errors to our attention through the appeal process.

Frequently Asked Topics

Established by Utah State Code, a valuation appeal is the legal right of a property owner. This right can be exercised if they disagree with the market value the Assessor’s Office has placed on their property.
 
 
When assessment notices for property are sent to taxpayers near the beginning of August there is always a form attached with instructions for taxpayers on how to appeal the assessment. It is important to remember that it is only possible to appeal the assessed value of a property, not the estimated taxes due.
Art. XIII Sec 2(1) of the Utah State Constitution provides that "all tangible property in the state shall be assessed at a uniform and equal rate in proportion to its fair market value." This means that an appeal may be based on either: 1) the estimate of value in the assessment that is higher than the actual market value of a property, or 2) the estimate of value is out of line with other assessed values of similar properties. 

If you choose to submit the appeal application provided in your valuation notice, be sure to:

  • Answer each question thoroughly.
  • Provide your estimate of value.
  • Sign the appeal application.
  • If using a representative, include a signed authorization form.
  • Return your appeal application to the Davis County Tax Administration Office, along with all supporting evidence and documentation, postmarked on or before the September 15th deadline.
  • File a separate application for each parcel. If the properties are contiguous and the appeal information is the same, you can file one application for all parcels.

Applications without sufficient documentation to support the opinion of market value will be returned with a request for more evidence. If no further evidence is received, the Board may dismiss the appeal.

Applications with sufficient documentation will be forwarded to the Assessor’s Office for review. Once a decision is reached, the property owner will be notified. If you are dissatisfied with the appraiser’s decision, you can proceed to a hearing where your evidence will be reviewed by an independent third party Hearing Officer.

State law dictates that an appeal of a property tax assessment must be filed within 45 days of the day valuation notices are mailed or September 15th, whichever is later.
An appeal of a property tax assessment should include adequate evidence that the assessed value is either incorrect or that it is out of line with assessments of properties similar to the subject in location, style, quality, size, and condition. Unless valid evidence is provided the law assumes that the county assessment is at or below market value and the appeal will be dismissed. Types of evidence that would be considered adequate in an appeal include: 

Example:

  • Comparable Sales – Recently sold properties similar to the subject property may effectively indicate the value of the subject property based on the principle of substitution. A good rule of thumb for evaluating the quality of comparable property sales as evidence in an appeal is to consider if potential buyers of those properties would have considered the subject property as a competing listing similar to those that sold. Try to look for sales which closed as close as possible to the tax lien date (January 1).

  • Recent Purchase of Subject Property – If the subject property was purchased within 12 months of the lien date the sale of the property should be considered as evidence in an appeal. It is important to remember that a sale that wouldn’t be considered an arm’s length transaction may not be good evidence.

  • Recent Appraisal Report – An appraisal of the subject property dated within 12 months of the lien date can be a significant piece of evidence in an appeal.

  • Income/Expense Information – If the parcel in question is an income producing property (commercial, industrial and residential 5+ units) the most effective evidence of its value will be income and expense data from the property together with a capitalization rate indicative of market investment demand. This evidence effectively makes a case for what a typical investor would pay for the subject property if it were available on the market.

  • Factual Error In Assessor Information – Errors in the description of a subject property maintained by the assessor’s office may result in significant errors in assessments. If the Assessor’s Office has incorrectly listed the square footage of a building on a property or has not correctly considered the legal zoning of a parcel (or if there is any other possible error in assessor data) an appeal with information regarding the error will allow the county to correct their description and assessment of that subject property.

There are two reasons appeals are dismissed or denied.

  • Lack of Evidence

    By law, the property owner is required to provide evidence that the county has valued the property higher than the property could be sold for on the open market. If no evidence is provided, the law assumes the county assessment is correct and the appeal is dismissed.

  • Inadequate or Poor Evidence

    Property owners often appeal their property value using information that does not show what the appealed property would actually sell for. For example, information for properties that are very dissimilar to the subject property in either physical characteristics or location. Also, distressed sales (short sales, repossessions, etc.) are not typically representative of market value.

The Appeal process can be confusing and intimidating without the proper information and guidance. We are happy to assist you.

For information regarding your property, please contact the Assessor’s Office at 801-451-3250.

For information regarding your appeal, please contact the Clerk/Auditor’s Office at 801-451-3332.

Residential properties that serve as the property owner’s or a tenant’s primary residence for a minimum of 183 days per calendar year receive an exemption of 45% of fair market value. As a result, the primary residence is only assessed and taxed based on the remaining 55% of its fair market value. The Assessor shall grant the exemption to the first acre of land. If a qualifying property is not currently receiving the exemption, the owner will need to make application with the County Assessor.


Lisa M. Manning
Chief Deputy Assessor
Office: 801-451-3252
Fax: 801-451-3134
Email: lmanning@daviscountyutah.gov
The residential exemption is limited to one primary residence per household. “Household” means the association of persons who live in the same dwelling, sharing its furnishings, facilities, accommodations and expenses; and “household” includes married individuals, who are not legally separated, that have established domiciles at separate locations. To qualify, a property does not need to be owner-occupied. Apartments and other rental housing used as a primary residence qualify for the exemption. An owner of multiple properties may receive the primary residential exemption on all properties for which the property is the primary residence of the tenant.

Criteria for Determining Primary Residential Status

  • Length of continuous residency in the place claimed as primary (owner-occupied) or a long-term (yearly) lease to a tenant.
  • The place of residence of the claimant’s spouse.
  • Location of vehicle registration.
  • The nature and payment of taxes in another state or county.
  • The address used on such things as:
    • State and Federal Tax Returns
    • Driver’s License
    • Voter Registration
    • County Tax Rolls
    • Utility Billings

There is no exemption given for Commercial Properties, Vacant Land, Secondary Homes, Vacation Homes, Cabins, Time-Shares, or other types of transitory housing. These properties are taxed at 100% of the market value.

When applying for the primary residential exemption, be sure to include at least two forms of supporting documentation:

  • Copy of Driver’s License (preferred)
  • Copy of Voter Registration
  • Copy of Utility Bills
  • Copy of Tax Returns
  • Copy of Motor Vehicle Registration

The Primary Residential Exemption Application can be printed and submit by mail or in person.

Return completed applications to:
Davis County Assessor’s Office
Attn: Primary Residential Exemption
PO Box 618
Farmington, UT 84025

Instructions: Click on a question to view and/or hide the associated questions answer.

Frequently Asked Questions

  • The assessor is required by Utah Law to list and value all property for "ad valorem" ("according to value") taxation on an assessment roll each year.

  • The Lien Date or date of value is January 1. This means that what the property looks like on January 1 is how the property is valued for that tax year. For example, if a house is under construction and is 50% complete on January 1, the tax amount would be 50% of the total market value.

  • The assessor’s office is responsible for valuing real property, ensuring the equity of real property values, reviewing Board of Equalization appeals, valuing personal property, and greenbelt
  • The Assessor’s Office does not set the tax rate or collect taxes that are due.

  • Tax rates are set by taxing entities within each tax district (ie, city, county, school district, water district, etc).

  • The Davis County Treasurer’s Office collects and disperses real and personal property taxes.
  • Utah has a law called Truth in Taxation. This law is revenue-driven, not rate-driven. When property values rise property tax rates fall. The adjusted rate each year is called the Certified Tax Rate. Certified Tax Rate is that rate which will yield the taxing entity the same property tax revenue that it budgeted in the previous year, excluding new growth. When a taxing entity (city, county, school district, water district, etc.) proposes to increase its property tax revenues above what was budgeted the previous year a public hearing and public notice is required by law. A Truth-in-Taxation hearing allows tax entities to explain reason for the proposed increase and allows the citizens to comment on the proposed increase.
  • State law requires that county assessor’s value all taxable properties at market value. Market value is the amount of money that a willing buyer is willing to pay a willing seller. This type of sale between willing buyers and sellers is also called an arm’s length transaction.

  • The tax value is a percentage of "fair market value" or "use value" as prescribed by law. Property is assessed as follows: 
    • VACANT LAND – 100% of its "fair market value" or "use value"

    • COMMERCIAL PROPERTY – 100% of "fair market value"

    • RESIDENTIAL PROPERTY (excluding personal property) – 100% of "fair market value". However, the Utah Constitution allows a residential exemption or reduction in taxable value of 45%. The residential exemption is limited to one primary residence per household. This exception applies to the first acre of land in addition to the residence in the case of a single family property. 
      • EXAMPLE: 
        $100,000 (Assessed “Fair Market” Value 
        -$45,000 (Primary Residential Exemption) 
        $55,000 (Taxable Value)
For more information on the residential exemption click here.
  • First the county makes a site visit to each property. This is typically done when a home is being built, or there is a change to the existing structure. The county also regularly re-inspects existing properties throughout the county.

  • There are three approaches to value: Sales Comparison, Cost Approach and Income Approach.
    • SALES COMPARISON: The most common approach to valuing residential properties is the sales comparison approach. This method compares your house to others that have sold recently. The appraiser makes adjustments to the sale prices of comparable properties for different variables including but not limited to date of sale, location, size, quality, condition and amenities. The lien date is January 1, so home sales from the previous year are analyzed. The sales are carefully analyzed to determine if they were arms length transactions. An arms length transaction defined as "A sale between a willing buyer and a willing seller that are unrelated and are not acting under duress, abnormal pressure or undue influences, both seeking to maximize their positions from the transaction".
    • COST APPROACH: This method is based on how much money it would take, at current material and labor costs, to replace your property with one similar, plus the cost of the land. Then the appraiser needs to determine how much value has been lost due to depreciation. There are three forms of depreciation: physical depreciation, functional obsolescence, and external obsolescence.
    • INCOME APPROACH : This method uses industry-derived typical market income figures to determine how much income a property should generate and how much it should cost to maintain and operate that particular property. When these values are considered and a net operating income is derived, that figure is then capitalized at a rate based on market data in order to determine the market value for the property being analyzed.
  • For More information about the real property, click here
  • It is probably in the best interest of property owners to allow the appraiser to inspect the exterior and interior of their property and buildings. This will ensure the accuracy of the property assessment and the fairness of any resulting property taxes. Of course property owners have the right to refuse access to Assessor Office personnel. If access is refused, the appraiser will estimate the value of the property using whatever information they have available.
  • Newspapers often publish sales data in a summary format for large areas, such as by zip code, by city or by county. This information can show general trends in the market. However, these trends should not be compared to the percentage change in your January 1 assessed value. One reason for this is that the time period can fluctuate for the reporting of the data. The assessment office primarily relies on sales during the past calendar year within precise areas and of properties that are more similar in nature to your property.
  • The Davis County Assessor’s Office prides itself on maintaining accurate real estate data as the basis of the assessments for all property owners. Please notify us immediately if you note an error in our description of your property by sending an Email or by calling 801-451-3250.
  • Valuation notices are mailed out to property owners on approximately July 23rd. If you do not receive yours, please call the Davis County Auditor’s Office at 801-451-3329. The deadline to file an appeal is either 45 days after the notice is mailed or September 15th, whichever is later. The deadline is displayed on the valuation notice.
  • For more in-depth information on the appeal process click here.

Contact Information

Physical Address
Davis County Admin Building
Assessor's Office (Room 302)
61 South Main Street
Farmington, Utah 84025

Mailing Address
Davis County Assessor's Office
P.O. Box 618
Farmington, Utah 84025

Phone Numbers
(801) 451-3250 :: Real Property
(801) 451-3249 :: Personal Property
(801) 451-3134 :: Fax

Hours
Monday – Friday
8:00 a.m. to 5:00 p.m. (except county holidays)

Copyright © 2015 Davis County Government