Dallas Public Schools: DCAD vs. Fair Market Value

Dallas ISD's Board of Trustees voted Thursday to OK the purchase of 9400 N. Central Expressway. (Photo: Bethany Erickson)

Dallas ISD’s Board of Trustees voted Thursday to OK the purchase of 9400 N. Central Expressway. (Photo: Bethany Erickson)

As you’ve probably read by now, the Dallas Independent School District’s Board of Trustees voted 5-3 last night to purchase the building at 9400 N. Central Expressway in a bid to consolidate the district’s various departments that are currently spread all over Dallas County.

We can debate the merits of having a building where hundreds of employees will be able to work under one roof for the first time in probably more than 50 years, but that was done for quite some time last night.

Instead, I’d like to talk about something else that came to light (actually, I’ve heard the confusion from many a homeowner about this time every year, too) at this meeting — folks don’t know there’s a difference between the appraisal value Dallas County Appraisal District uses for taxation, and a fair market value appraisal.

The building the district is buying will have a $46.5 million price tag and was built in 1979. Last night, both Bernadette Nutall and Joyce Foreman questioned that number and pointed to the fact that DCAD said the appraised value of the property was $23,790,000.

Like I said, they’re not the first folks to think the two values are interchangeable. But they’re not.

“The DCAD value is simply the number the government uses to determine how much to charge the owner in property taxes. Fair market value represents a reflection of the realistic amount of money a buyer and seller can expect to exchange in a property transaction based on current market conditions,” said Dallas Realtor Brian Davis with Dave Perry-Miller Real Estate.

This article in the New York Times is a great explainer on the difference: 

‘What we’re talking about is a moving target,’ said J. P. Vaughn, the publisher of Creative Real Estate OnlineMs. Vaughn explained that in addition to market value — homes are also described by their appraised value, their assessed value and by values calculated using automated-valuation models. Market value, Ms. Vaughn said, is defined as the price at which a house will sell within a reasonable period of time. Using that definition, the house in the example would have a market value of $420,000.

Our own Jon Anderson took a deep dive into appraisals and DCAD valuations last month as well. He explained:

One thing I haven’t touched on, and it’s huge, is commercial property.  Talk about a complete black hole. Almost everything is private.  Even if DCAD could access it, there’s no commercial MLS to centralize data. As a result, the commercial contribution to overall tax revenues is almost certainly the most inaccurate and results in the lowest ratios of market value to DCAD valuation.  If commercial property was taxed accurately, residential tax rates would likely plummet.

By most accounts, even at $46 million, this is a good buy for the district. The district will have room to grow, but in the meantime, it can honor the leases for the 55 current tenants in the building. According to the presentation last night, the district projects it will start seeing a savings by 2018 when they are projected to be around $3.8 million. Those savings will continue to increase until it hits around $28 million or so by 2021.

If all goes as planned, the district will close on the building in about two months, and after some make-ready, employees could begin moving in by December 2016.

3 Comment

  • I hate to disagree with Brian Davis but according to DCAD,
    “DCAD is required to appraise all property at Market Value as of January 1 of every tax year
    • Texas Property Tax Code Section 1.04 defines Market Value
    • Market Value means the price at which a property would transfer for cash or its equivalent under prevailing market conditions if:
    (A)
    Exposed for sale in open market place with a reasonable time for seller to find a purchaser
    (B)
    Both the seller and purchaser know of all uses and purposes to which the property is adapted and for which it is capable of being used and the enforceable restrictions on its use; and
    (C)
    Both the seller and purchaser seek to maximize their gains and neither is in a position to take advantage of the exigencies of the other.”

    The only reason there is a difference between “assessed value” and “market value” is because Texas does not disclose real estate transaction prices.

  • mm

    I think this is the best, smartest news to come out of DISD in months!

  • I would like to point out three things

    1) often the tenants of a building pay a separate property tax bill for the FFE & tenant improvements, but nobody charges a residential tenant for adding a closet, or upgrading their refrigerator. It would be more accurate to include commercial tenants appraisals to the buildings to come up with a true taxable total.

    2) market value of a commercial building is tied to income of that property. Taxable value is not. I would not want my home valued on the basis of my neighbor’s rental income, nobody should.

    3) tenants pay the property taxes in commercial building and pass it along to the customer, patient or guest. Instead of advocating higher taxes that we all eventually pay, why not consider the alternatives?