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Commercial Department
Here at the property appraiser’s office we are bound by statute, which is one of the things I love the most, not counting our staff or our amazing community. This month we will talk about our commercial department located in our Inverness office. Our commercial department currently has five staff members with a total of 33 years of experience among them. It is their job to ensure that all commercial parcels are valued correctly. This department works alongside our tangible personal property (TPP) department, which we talked about in our April guest column. If you missed it, you can read it on our website located at citruspa.org.
The commercial department uses Florida Statute 193.011, 193.017, 194.023, and 194.034 when valuing commercial property.
Florida Statute 193.011 states the eight criteria in which should be considered when placing a value on a property. 1) The present cash value, what a willing buyer would pay to a willing seller. 2)The highest and best use of the property, can and will it be legally permissible, and assumed to achieve its highest and best use. 3) The location of said property. 4) The size of the property. 5) The cost of the property and the present value of all improvements. 6) The condition of said property. 7) The income a property can achieve. 8) The net proceeds a property seller can achieve after deducting all usual and reasonable cost of sale fees. Any TPP should not be considered as part of the sale price of real estate.
Florida State Statutes (FSS) requires that property appraiser's offices around the state visit every parcel a minimum of once every five years. This includes vacant residential and commercial parcels, improved residential and commercial parcels, industrial parcels, and agricultural parcels. All of our values are to be certified by the Florida Department of Revenue (DOR) every year. If our values are not approved, we can not certify our tax roll. If we don’t certify our tax roll, then the taxing authorities can’t prepare their budgets and determine millage rates.
So how do we come up with the value of a commercial property? Well, did you know that we use three different types of valuation for valuing commercial property? We use the cost approach, income approach, and sales comparison approach.
The “Cost Approach”. This is the first type of valuation for valuing commercial property. In this approach, an appraiser will estimate the value of a real estate property based on the cost it would take to build it from scratch. With the cost approach, the formula used to calculate value is land value plus construction cost, minus accumulated depreciation.
The “Income Approach”. This is the second type of valuation. In January, we mail out an income and expense request form and letter that is due back in our office by March 31st. Again, this date is regulated by statute. These forms are handled with confidentiality and are not public record after we receive them. The office uses this information to develop our rental rates and to build our vacancy and expense ratios with local information that we have received back from our business owners. In this approach, we take the effective gross income, which is the potential gross less the vacancy ratio, then subtract expenses to develop a net income. We then capitalize the net income with a market cap rate. This is the value based on as much local information that we have been able to obtain.
The “Sales Comparison Approach”. This is the third type of valuation. When a property sells, the sale price does not equal the assessment value of the property. It may be higher or lower. One sale does not determine a market value. The property appraiser’s office studies all “like sales” in the county to build a sales comparison for a specific type of property. This is used to find an average price per square foot that a certain type of property will sell for.
Final reconciliation will occur after researching and studying all three approaches to value and determining that they all fall within a specific value range. We apply the value that we determine is most likely to answer all three approaches to value.
We look forward to providing Citrus County residents and property owners with continued information in the coming months. Our Customer Service Department is always available to answer questions in both offices. Please call (352) 341-6600 or visit our website at www.citruspa.org. Our social media pages are also available via Facebook or Instagram at @CitrusCountyFLPropertyAppr.
Sincerely,
Cregg E. Dalton, CFA
Citrus County Property Appraiser
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