Realty Pupil - Secrets of Real Estate

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Appraisers are inferior

Taxes. It’s a part of life and something everyone seems to hate. In Utah, people are often surprised/amazed/annoyed at the County’s ability to value their home without sending an appraiser over and doing a formal appraisal. That is because, most of the land in Utah is valued based on it’s initial selling price/appraisal. Using those numbers, the appraised value proceeds to increase by a set percentage each year. This can lead to an occasional error or even a gross over valuation.

Each year, generally in September or November, Utah residents receive a piece of paper stating their property’s appraised value, and the amount of taxes which they will be required to pay the following year based on the new valuation. For me, that meant a $7 increase to roughly $720 on an originally $155,000 home (county valued at $120,000). If one wishes to dispute their appraised value, they can often just head down and request that their valuation be reconsidered. We were advised that the best way to do this is by providing an appraisal, CMA, or some form of documentation to support the value we feel the home should be valued at. One wishing to dispute their home valuation will often benefit from being silent, and just handing over their evidence when disputing their value. Silence when dealing with public officials is a virtue. If you can prove that exceptions have been allowed for others, then you will often find yourself better off requesting that they make one for you.

Given that Utah is appreciating like crazy, I have little motivation in disputing my tax assessment, as my home would likely be valued closer to $180,000. It pays to complain if you’re overvalued. If you’re undervalued however, it’s certainly dangerous to bring attention to yourself in an effort to save a dollar or two. The instructor stressed the importance of understanding what a home is worth in order to value it. He seemed to consider that a CMA prepared by an agent is actually superior than an appraisal prepared by a licensed appraiser because “Agents know the market better”

As an added benefit, Utah state taxes residents (owner occupants) at 55% of their home’s appraised value. Further discounts of 10% or more are given to the disabled, elderly, and veterans. Commercial property, or non-owner occupied homes are taxed at the full 100% however.

The instructor shared a story regarding the Geneva steel plant in Orem, Ut which closed some time ago and was purchased for a third party group of attorneys for a fraction of what the county valued it at. This led to a change in the taxing of inactive industrial plants in the state of Utah after the buyers fought, and settled a heavy legal battle to lower their taxes.

We were then introduce to the Millage rate. This is a formula, which can be defined as follows:
Millage rate = Total budget divided by total county value. Using this rate, the county can determine just how much to tax in order to meet it’s budgetary needs. At well under 1%, Utah property taxes are considerably lower than much of the nation.

There are of course exceptions granted, particularly to non-profit groups and churches. Farmers are also offered a considerable tax relief assuming they own and develop a minimum number of acres for agricultural purposes. They must be careful to preserve the land in this role however, as reverting land use can result in a hefty tax bill…for this reason, farmers generally require that developers buying their farmland pay the taxes incurred by the change in land use.

If one simply ignores their taxes, then their land can be seized by the state. This is never done unless one had been delinquent for at least three years in their tax payments. Such delinquency results in the county auctioning the tax bill to the highest bidder. Such sales are performed at county tax sales auctions, in which bidders offer to pay the taxes due in return for a lien on a portion of the property offered. If there is only one bidder, then he or she can feasibly purchase the entire property for the cost of the taxes and their interest. If there is an additional bidder however, he or she must bid for a smaller portion of the property in return for paying the back taxes. This can be highly lucrative for someone who takes the time to research all the properties being offered.

The instructor shared the story of a man who was interested in building an apartment complex over two lots, so he purchased a home, then approached the neighbor and purchased the adjacent lot as well. Much to this investors displeasure, he found that there actually existed a meter-wide piece of land in between the the two lots which was in fact owned by another party. Apparently, one of the homes had been delinquent in paying their taxes some years ago, and as a result, this small sliver was auctioned off. This unlucky (or at least poorly researched) investor ended up spending as much as he had for one of the entire lots in order to acquire this tiny parcel of land, and complete his complex.

We continued by discussing land use, which I cover in Part 3 of this lesson.

4 Responses to “Lesson 4 - Utah Property Taxes and Land Use Part 2”

1. JamieL Says:
   March 5th, 2007 at 11:38 pm

   Interesting stuff. I wonder if the state purposefully undervalues properties in order to discourage people from coming in and bugging them with disputes.

   I imagine this set up is kind of discouraging to investors, knowing that they have to pay 50% more in taxes.

2. RealtyPupil Says:
   March 5th, 2007 at 11:46 pm

   I would imagine that the County certainly avoids a large amount of backlash from the public by keeping appraisals fair. Don’t forget that they could easily increase the tax rate and still keep your assessed value low in order to get the funds they need.

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