The Sales Comparison Approach estimates a property’s value (or some other characteristic, such as its depreciation) by reference to comparable sales.
This approach, like the name implies, entails comparing your property to the sale of comparable properties in your market area. Adjusting for differences (such as numbers of bathrooms) by adding (or subtracting) the approximate value of the differences to the sale price, you can get an indication of what your property might sell for.
When the sales comparison approach is used to generate market values it is typically used to adjust the cost approach values. For example, if all properties are valued using the cost approach, and on average the county’s sold properties have assessments that are eighty percent of sale prices, they may raise their cost tables inside the Computer Assisted Mass Appraisal (CAMA) system by ten percent. The resulting sale ratios would then be approximately ninety percent of sale prices.
The other time you may encounter sales data is when you appeal your value. The county appraiser may bring property sales to an appeal hearing in support of their CAMA generated cost approach value. They will typically bring the most similar properties with the highest sale prices they can find.
As a result you need to know the value of your property based on the sale comparison approach. Unfortunately, unless you are a real estate professional with access to real estate data services you will have to do some digging to get the required data. Luckily, free websites such as www.trulia.com and www.realtor.com can help you find a list of sold properties in your market area. You can also go to the assessor’s website and look for sales street by street in your neighborhood. Its here you want to make sure you look for low priced sales that may not appear on the free websites.
You want the most recent sales you can find that took place before the assessor’s effective date of appraisal. This is January 1 in most states, but given that my experience is not country-wide I recommend you ask your local assessor. Try to use sales that take place within the 12 months preceding the effective date of appraisal. For commercial properties 24 months is not unreasonable. Appraisers like to use units of comparison such as sale price per square foot of living area, so you should consider breaking your sale prices into price per foot as well.
When you have some sales broken down into price per foot or some other appropriate unit of comparison it is important to analyze them like the assessor would. Determine the median sale price per foot to compare to your assessed value per foot. Assessors use medians because they are unaffected by extreme values. One extremely high or low sale price can skew the average higher or lower while not affecting the median. If your assessed value per foot of building area is higher than the median sale price per foot this is good information for your property tax appeal. Of course, you don't have to use every sale available when calculating this median value. If there are many high sales pulling the median up you can always find a way to remove them from the analysis because they aren't "comparable."
Identifying the lowest sales in your neighborhood is extremely important because the county will be using the highest sales they can find to support their values. In contrast, your research into the lowest sales will help you argue a lower value. If there are several foreclosure sales in your market area, you may be able to use them to your advantage. The county may say that those aren’t valid fair market sale prices. However, you may be able to justify using them if the foreclosure market is the only market in your neighborhood.
For further information contact Fair Assessments the property tax appeal company.
