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Residential, commercial
and industrial real property are assessed at 100% market value. Market value of a property is an estimate
of the price that it would sell for on the open market on the first day of
January of the year of assessment.
This is often referred to as the “arms length transaction” or “willing
buyer/willing seller” concept. The
assessor must determine the fair market value of real property. To do this, the Assessor generally uses
three approaches to value.
MARKET APPROACH
The first approach is
to find properties that are comparable to the subject property and that have
recently sold. Local conditions
peculiar to the subject property are then considered. In order to adjust for local conditions,
the Assessor also uses sales ratio studies to determine the general level of
assessment in a community. This method
is generally referred to as the MARKET APPROACH and is usually considered the
most important in determining the value of residential property.
COST APPROACH
The second approach to
value is the COST APPROACH, which is an estimate of how many dollars at
current labor and material prices it would take to replace a property with
one similar to it. In the event the
improvement is not new, appropriate amounts of depreciation and obsolescence
are deducted from replacement value.
Value of the land is added to arrive at an estimate of total property
value.
INCOME APPROACH
The INCOME APPROACH is
the third method used if the property produces income. If the property is an income producing
property, it could be valued according to its ability to produce income under
prudent management; in other words, what another investor would give for a
property in order to gain its income.
The income approach is the most complex of the three approaches
because of the research, information and analysis necessary for an accurate
estimate of value. This method
requires thorough knowledge of local and national financial conditions, as
well as any developmental trends in the area of the subject property being
appraised since errors or inaccurate information can seriously affect the
final estimate of value.
Agricultural real
property is assessed at 100% of productivity and net earning capacity
value. The Assessor considers the
productivity and net earning capacity of the property. Agricultural income as reflected by
production, prices, expenses, and various local conditions are taken into
account.
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