Market Value

Residential, multi-residential, commercial and industrial real estate is assessed at 100% of market value. The assessor must determine the fair market value of the property. To do this, the assessor generally uses three approaches.

The first approach is to find properties that are comparable to the subject property and that have recently sold. Local conditions peculiar to the subject property are then considered. In order to adjust for local conditions, the Assessor also uses sales ratio studies to determine the general level of assessment in a community. This method is generally referred to as the MARKET APPROACH and is usually considered the most important in determining the value of residential property.

1. Define the appraisal problem
2. Data collection & verification
3. Determine appropriate unit of comparison
4. Select comparable properties
5. Development of reasonable adjustments
6. Analysis of adjusted sales prices
7. Reconciliation of value indicators

The second approach to value is the COST APPROACH, which is an estimate of how many dollars at current labor and material prices it would take to replace a property with one similar to it. In the event the improvement is not new, appropriate amounts of depreciation and obsolescence are deducted from replacement value. Value of the land is added to arrive at an estimate of total property value.

1. Estimate the land/site value as if vacant and available for development to its highest and best use
2. Estimate the total cost new of the improvement
3. Estimate the total depreciation
4. Subtract the depreciation from the cost new of the improvement
5. Add the land/site value to the depreciated improvement value

The INCOME APPROACH is the third method used if the property produces income. If the property is an income producing property, it could be valued according to its ability to produce income under prudent management; in other words, what another investor would give for a property in order to gain its income. The income approach is the most complex of the three approaches because of the research, information and analysis necessary for an accurate estimate of value. This method requires thorough knowledge of local and national financial conditions, as well as any developmental trends in the area of the subject property being appraised since errors or inaccurate information can seriously affect the final estimate of value.

1. Estimate the potential gross income (PGI)
2. Deduct for vacancy and collection loss
3. Add miscellaneous income to get the effective gross income (EGI)
4. Determine operating expenses
5. Deduct operating expenses from the EGI to determine net operating income (NOI) before discount, recapture, and taxes
6. Select the proper capitalization rate
7. Determine the appropriate capitalization procedure to be used
8. Capitalize the NOI into an estimated property value