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How does the Property Tax Assessor Determine Value?

Posted by Daniel Jones on Wed, Jan 11, 2012 @ 01 PM

There are three recognized approaches to valuing real estate. They are the sale comparison approach, the cost approach, and the income approach. The cost approach is used by virtually all taxing jurisdictions. The sales comparison approach is usually used to adjust the values that were derived via the cost approach. The income approach is used on commercial properties if the County has the resources needed to use it.

The sales comparison approach is what it sounds like. It is the use of sales data compared with a subject property or subject properties in order to derive a value. It is based on the principle of contribution. If a sold property is just like your property except it has a one car garage and you have a two-car garage, then the sale price of the sold property would be adjusted upward to indicate what it would have sold for if it had a two-car garage. The resulting value can be used to estimate the value of your, superior house.

The cost approach uses an estimate of the cost to replace the subject structure with an equivalent structure of the same functionality at today's cost and construction standards. From this cost to build the improvements new an amount reflecting accrued depreciation is deducted based on the actual age and condition of the property being appraised. To that is added an estimate of the land value, and the total is an estimate of the total property value.

The income approach uses the anticipation of future benefits to value the property. The future benefits are cash flow in the form of rents. Using sales of income generating properties it can be to determine what investors are willing to pay for a dollar of income for different property types in different market areas. Armed with this knowledge appraisers can estimate the market rents for your property and apply an appropriate multiplier or capitalization rate to estimate the value.

In a previous post I talked about how the assessors use sales data to adjust all properties in a given neighborhood or market area up or down. After values are generated using one of these three approaches to value, the assessors will compare their mass appraisal values to the sales from the market area. If their cost approach sure income approaches 10% lower than sales prices than they may adjust all the values in the market up as a result. For some more information on this process go here. For help with your property tax appeal contact Fair Assessments LLC at 404-644-1667.