Market value is how much property would sell for, in an open market, under normal conditions. Before assessing any parcel of property, the assessor estimates its market value. To estimate market values, the assessor must be familiar with all aspects of the local real estate market, such as: what properties are selling for, local construction/building costs, and operating costs.
A properties value can be determined using three methods:
Property is compared to other similar properties that have sold recently, using only sales where buyer and seller both acted under normal market conditions. This method is called the market approach and is normally used to value residential, vacant, and farm properties.
The second method is called the cost approach, and value is determined using today’s labor and material prices, to replace the structure with a similar one. If the structure is not new, the assessor determines how much it has depreciated since it was built. This calculation is added to the market value of the land to determine a total value for land/improvements.
The third way is to analyze how much an income producing property, like an apartment building, store, or factory will produce if rented. Operating expenses, expenses, insurance, maintenance costs, financing terms, and owner expected profit are all considered. This is the income approach.
Properties can be revalued using the following information: