So how do County Property Appraisers establish values for properties?

First, all County Property Appraisers must adhere to a standard of professional appraisal practices and guidelines. This entails accurately collecting, maintaining and analyzing massive amounts of data. The process requires accurate identification of a property’s physical characteristics and condition, its use (warehouse, office building, hotel etc.), zoning classification, lot size, ownership records and maintaining qualified sales data. It’s important that our client’s property data on file are accurate.

The appraisal process establishes a final estimate of value, which is ultimately your assessment. This final estimate of value is the result of a reconciliation process that considers all three recognized approaches to value.

The three approaches to value are as follows:

  • Sales Comparison Approach – the “principle of substitution” is fundamental to this approach, which means buyers will look at equally desirable properties for sale to establish a price comparison. So, in developing your assessed value, recent sales of comparable properties are analyzed. Since all properties are not the same, value adjustments are made to sale properties to account for differences between sales and the subject property.
  • Cost Approach – this method examines the cost to reproduce your property from the ground up. Generally, it entails establishing the ‘replacement cost new’ for structures and other site improvements. Next is estimating the amount of depreciation and/or obsolescence for the subject property which is then deducted from the replacement cost new. This leaves the depreciated value of the structure and site improvements. The subject property’s land value is then added to the estimated depreciated cost of improvements for a total value. The cost approach is often relied upon for “special use” type properties.
  • Income Approach – generally, this is most appropriate for income- producing properties. It’s based on the financial income stream concept of “the present worth of future benefits”. An income analysis is conducted of the subject property which includes consideration of market rents, occupancy levels, typical expenses, net operating income (NOI) and a market-derived capitalization rate. This generates an income-based value.

At Champions Commercial Consulting (C3) we are knowledgeable of the valuation process. Our firm provides clients with years of experience in assessment reviews.

Do you believe your property assessment or real estate taxes are too high? If so, Champions Commercial Consulting (C3) is ready to work for you.

Mike Chaves