How Property is Appraised
The assessor's office first reviews all the property to be assessed, then values it. Accurate appraisals require constant research and digging for significant facts to accumulate and analyze in order to estimate the full and true (fair market) value of your property. To find the value of any piece of property, the assessor must first know what properties similar to it are selling for, what it would cost to replace it, how much it takes to operate and keep it in repair, what rent it may earn, and many other facts affecting its value, such as the current rate of interest charged for borrowing the money to buy or build properties like yours. Using these facts, the assessor can interpret the property value in three different ways as explained below.
Sales Comparison Approach
The first and most commonly used method compares your property to others that have sold recently. These prices, however, must be analyzed very carefully to get the true picture. One property may have sold for more than it was really worth because the buyer was in a hurry and would pay any price. Another may have sold for less money than it was actually worth because the owner needed cash right away. Perhaps the property was sold to the first person to make an offer. When using the sales comparison approach, the assessor must always consider such overpricing or underpricing and analyze many sales to arrive at a fair valuation for your property. Size, quality, condition, location, and time of sale are also important factors to consider.
A second way to value your property is based on how much money it would take, at current material and labor costs, to replace your property with one similar in utility. If your property is not new, the assessor must also estimate depreciation of the structures and how much a lot like yours would be worth if it were vacant.
The third way is to evaluate how much income your property would produce if it were rented as an apartment house, a store, or a warehouse. The assessor must consider operating expenses, taxes, insurance, maintenance costs, and the return most people would expect on your type of property.