Assessments for residential
properties (1, 2, 3 family houses and condominium units) are typically
based on the market approach to value. This approach incorporates
a statistical analysis of property sales to determine market values
as of January 1 of the year preceeding the "revaluation year".
This analysis takes into consideration only those transactions that
are deemed "arm's length", e.g. sales that took place between a
willing buyer and a willing seller, when neither party was under
compulsion to make the transaction. This data is incorporated into
computerized valuation models, which simulates varying market conditions
in each neighborhood and form the basis for residential values.
Assessments for office, retail,
apartment and industrial properties are typically derived using
the income and cost approaches to value. Under the income approach,
fair cash value is derived from the property's ability to generate
income. The assessors examine the rents generated by office, apartment,
retail and other commercial buildings, subtract operating expenses
to achieve a net income, then divide net income by an appropriate
capitalization rate, in order to derive a market value for each
parcel of commercial property.
The cost approach measures
the estimated cost of replacing or reproducing the buildings and
improvements on a property - less any depreciation - plus the value
of the land on which the building stands. The cost approach is mainly
employed in determining the value of special purpose properties.
Assessed values vary from
neighborhood to neighborhood and from property type to property