There are three main real estate valuation methods for the purpose of determine property assessment and property taxes.
Real estate valuation is the process of determining the value of a property. There are several methods that can be used to value real estate, each with its own strengths and limitations. Some common methods of real estate valuation include:
- Comparable sales method: This method involves comparing the subject property to similar properties that have recently sold in the same area. The value of the subject property is determined based on the sale prices of the comparable properties.
- Cost approach: This method values a property based on the cost to replace it with a similar structure, minus any depreciation.
- Income capitalization method: This method values a property based on the income it generates. It is commonly used for rental properties and other income-producing properties.
These valuation approaches are used to develop an appraisal report. An appraisal is a professional opinion of value that is typically performed by a licensed appraiser. An appraisal is based on a thorough analysis of the property and may include the use of one or more of the above methods.
No single method of real estate valuation is perfect, and different methods may produce different values for the same property. As a result, it is important to consider a range of factors and methods when valuing real estate.
