How Are Values Determined?
The Assessor determines the market value of every parcel of property in a city or town as of each January 1. There are three approaches to value: market, income, and cost.
Market Approach
This method analyzes recent commercial and industrial sales to develop units of value. These unit values may then be applied to comparable non-sold properties. Sales from surrounding communities with comparable property bases and market influences may also be used for analytical purposes. Most residential property is valued by the market approach.
Income Approach
This method requires the assessor to estimate the rental income from a property and capitalize that income into an estimate of current value. The approach recognizes that potential buyers demand property because they anticipate a future income stream. Assessors should collect current information on a community and regional level about rents, income, expenses, financing rates and terms and other data needed to develop capitalization rates. The approach is most useful in valuing investment property where sufficient market sales are not available.
Cost Approach
This method calculates the current cost to replace the building, adjusts for depreciation due to age or condition and adds a separately determined land value. The cost approach is most applicable to special-purpose properties that are not readily sold or rented.