How are Assessments Determined?


 

Free DHTML scripts provided by
Dynamic Drive

 

 

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 type.