How Property is Valued

How is my property valued?
Valuation is based on "full and fair cash value," the amount a willing buyer would pay a willing seller on the open market. Assessors first inspect the property to record specific features of the land and buildings that contribute to its value. Examples of the data collected and listed on the individual property record cards are:
  • Baths
  • Fireplaces
  • Number of bedrooms
  • Quality of construction
  • Size
  • Type of heating system
  • Type
Using these facts, the assessors determine the value of property by choosing the assessing methodology that most accurately reflects the real estate marketplace. The 3 methods of appraisal are as follows:

Market Approach
This method compares your property to others that have sold recently. Before any sale can be used in this approach, it must be determined if they are "arms length," or good, open market sales. As there may be outside factors that go into a sale price, the assessors must analyze each sale carefully. Other important valuation considerations are:
  • Condition
  • Location
  • Quality
  • Size
  • Time of sale
The market data approach gives the best evidence of market value when there is an active real estate market and sales are plentiful. It is best applied to residential properties and to vacant land in residential and commercial areas because these properties usually sell most frequently and these types are usually the easiest to compare. Commercial and industrial properties are more complex and therefore more difficult to compare.

Cost Approach
This approach is based on the cost of replacing your property new. It is how much money it would take, at current material and labor costs, to replace the property with 1 similar. The object of the cost approach is not to estimate the actual cost of buying land and constructing a new building, but to estimate the market value of an existing property. If the property is not new, the assessors must also determine how much it has depreciated. In addition to the value of the improvements, the assessors must also separately establish the value of the land as if it were vacant.

Income Approach
The income approach to value is the process of converting anticipated net income into an estimate of value. The income approach is used to value property which is normally bought and sold on the basis of its income producing capabilities, for example:
  • Apartment buildings
  • Industrial buildings
  • Office buildings
  • Shopping centers
The assessors determine through a capitalization formula what a prudent investor would typically pay for your property. They consider factors, such as:
  • Insurance
  • Maintenance costs
  • Operating expenses
  • Taxes
  • The return most people would expect on your kind of property
Capitalization Process
The capitalization process converts anticipated future benefits in the form of income into a present value estimate. In order for the Assessors to support the value derived by the income approach, information on current market rentals is gathered from a variety of sources, such as:
  • Brokers
  • Owners of other rental property (via an income/expense questionnaire)
  • Property owners
  • Public records (leases, etc.)
  • Tenants