Much like tax rates, the way property is assessed differs by county. However, while the way counties assess property might differ slightly, nearly all appraisal districts use mass appraisal technology to generate values for property as well as some variation of the following appraisal methods. 

 

Sales Comparison (Market) Approach:

Often referred to as the “Sales Comparison”, “Sales Comps”, or “Market Approach”, this approach determines a property’s value based on recent sales prices of similar properties in the area. This value is adjusted to fit differences in characteristics between the “subject property” (the property being appraised) and nearby recent sales. This is the most common approach for assessing the value of residential properties. 

Income Approach:

The Income Approach is commonly used to value multifamily, commercial, and agricultural real estate. This approach uses a property’s income and expense information to determine its current value based on its income-producing potential. Values indicated by the income approach are based on what an investor would be willing to pay for a property based on its anticipated future revenue streams.

Cost Approach:

The Cost Approach bases a property's value on its replacement costs. These replacement costs refer to the cost to replace the building with a similar improvement while maintaining equal utility. Depreciation may be applied, along with an estimate to account for land value. This approach is most commonly used to value properties which are under construction, have recently completed construction, are not yet occupied by tenants, or are otherwise difficult to value using the other approaches.

 

Mass Appraisal:

“Mass appraisal” refers to the processes used by Appraisal Districts to appraise real estate (for tax purposes) at scale. The processes use individual property characteristics, neighborhood-specific information, available sales data, and more to create statistical models for property values.

CADs are therefore required to follow the Uniform Standards of Professional Appraisal Practice when using mass appraisal technology to ensure that the same appraisal methods and techniques are used to assess similar properties. Since counties are legally obligated to appraise property values most CADs use mass appraisal technology to efficiently assess the value of properties within their county.