How property is assessed

The first step in assessing is to determine a property's market value. To estimate market values, the assessor must be familiar with the local real estate market.

A property's value can be estimated in three different ways:

Market approach

The assessor compares property to similar properties that have recently sold. The market approach is typically used to value residential, vacant, and farm properties.

Cost approach

With the cost approach, the assessor:

• calculates the cost to replace a structure with a similar one using today's labor and material prices
• subtract depreciation
• add the market value of the land

The cost approach is used to value industrial, special purpose and utility properties.

Income approach

With the income approach, the assessor analyzes how much income a property (such as an apartment building) will produce if rented.

The assessor takes into account:

• operating expenses
• insurance
• maintenance costs
• financing terms
• amount expected to be earned

Assessors also use computer assisted mass appraisal techniques to analyze property sales and estimate values for multiple properties simultaneously.

From market value to assessment

Once the assessor estimates the market value of a property, its assessment is calculated.

In a city or town assessing at 100% of market value, the market value becomes the assessment.

If assessments in your municipality are at a fraction of market value, the assessment is calculated by multiplying the market value of the property by the level of assessment for the municipality. For example:

• market value of property = $100,000
• level of assessment = 27% (City assesses property at 27% of market value)
• assessment = $27,000

To learn why a municipality's levels of assessment can be less than 100%, visit Equalization rates.

Department of Taxation and Finance

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