Differences Between Property Tax Assessment & Market Value in Florida

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Florida law requires that tax assessed home values are based on the "just value." The just value reflects the market price of a home or its replacement cost. However, the just value reflects the market price of a home on Jan. 1 each year, whereas true market values can change on a daily basis. Additionally, Florida law caps the amount that tax assessed home values can rise from one year to the next, which leads to long-term price discrepancies.

Just Value

  • Every county in Florida has at least one tax assessor who must determine the just value of each home in the county. Generally, tax appraisers use recent sales of comparable properties to determine the value of real estate. Appraisers must disregard the sales of distressed properties such as foreclosed homes when making these comparisons. If no comparable homes have been sold, the appraiser must determine the price by establishing how much the home would cost to replace. Assessors determine the just value of rental properties and apartments by using the above criteria but also taking into account the rental income the property could generate.

Market Value

  • Home appraisers inspecting homes on behalf of prospective buyers use the same criteria as tax assessors to determine the value. However, appraisers working for buyers or lenders actually conduct a physical inspection of the property whereas tax assessors do not. Therefore, upgrades unseen by the tax assessor can cause the true market value of a home to exceed its tax assessed value. Furthermore, the real estate market experiences peaks and troughs throughout the year that cause market values to rise and fall based on supply and demand.

Save Our Homes

  • The state of Florida "Save Our Homes" law limits the amount that an owner occupied property's tax assessed value can rise from one year to the next. Property owners must file a homestead exemption form at the local county courthouse to benefit from this law. The assessed value of an owner occupied home can only increase by the lesser of 3 percent or the annual increase in the Consumer Price Index. Therefore, tax assessed values increase very slowly whereas market values can change 30 or 40 percent in on year. Tax assessed values reset whenever a home changes hands.

Effects Of Home Values

  • When home prices are rising rapidly homeowners seeking to cash out equity or sell their homes are hesitant to use tax assessed values as the basis for pricing their homes because these values do not keep pace with market price gains. However, when property prices fall, homeowners are often dismayed that property taxes based on tax assessed values increase year over year. Florida law allows tax assessors to increase the value even if the market price declines as long as the tax assessed value does not exceed the market price.

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