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 dollar 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 then go about finding the property value in three different ways:
Sales Comparison Approach
The first method compares your property to others that have recently sold. These prices, however, must be analyzed very carefully to get the true picture. One property may have sold for more than it is really worth because the buyer was in a hurry and would pay any price. Another may have sold for less money than it was worth because the owner needed cash right away. The property was sold to the first person that made an offer. When using the sales comparison approach, the Assessor must always consider such over-pricing or under-pricing 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. If your property is not new, the Assessor must also estimate how much a lot like yours would be worth, if 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 factory. The Assessor must consider operating expenses, taxes, insurance, maintenance costs, and the return most people would expect on your kind of property.