Approach to Value

Assessments That Rely Too Heavily on or Ignore One of the Approaches to Value

There are three approaches to value – the Cost Approach, the Sales Comparison Approach, and the Income Approach. You should consider all three approaches equally for the most accurate tax assessment:



·      The Cost Approach relies on the cost of acquiring a property and making improvements minus accrued depreciation. Its foundation is that a potential user shouldn't pay more for a property than it would cost to build a comparable one.

·      The Sales Comparison Approach is directly affected by the real estate market. It considers the recent sale prices of similar properties with comparable features and determines their value as a sum of all features.

·      The Income Approach quantifies the present value of future benefits associated with property ownership.