The Assessor determines the market value of every parcel of property in a city or town as of each January 1. There are three approaches to value: market, income and cost.
Market sales of similar properties that sold in the year prior to January 1 are analyzed, compared and adjusted to forecast what the property would sell for on January. Most residential property is valued by the market approach.
The income approach is applicable to real estate that is normally bought and sold on the basis of its income-producing capacity. The approach requires significant data such as rents, occupancy rates, operating expenses, and investor requirements. The approach is most useful in valuing investment property where sufficient market sales are not available.
The cost approach involves an estimate of the current reproduction or replacement cost of the building, deducting an estimate of depreciation (or loss of value from any cause) and then adding an estimated value of land. The cost approach is most applicable to special-purpose properties that are not readily sold or rented.