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The three approaches to appraising property are the cost, income and market approach. The market approach is defined as the most probable price that a property would sell for if exposed to the open market. By law, residential property is valued using only the market approach to value. In this approach, the value of the subject property is based on an analysis of comparable sales. For tax years 2011 and 2012, the comparable properties must have sold between January 1, 2009 and June 30, 2010. However, if insufficient data existed during that timeframe, data from each preceding six-month period (up to a period of five years preceding June 30, 2010) may be utilized. For more information on real property appraisal click here.
The cost approach estimates the material and labor costs to replace a building with a similar one. If the building is not new, the appraisal must consider its age and account for depreciation over time. This approach is most applicable when a building is new or relatively new. The cost approach is used to value agricultural outbuildings using a valuation service called Marshall Swift. This service establishes replacement costs for various types of outbuildings (barns, equipment buildings, etc). Then depreciation and local multipliers are applied to arrive at a current value.
The income approach may be considered for income producing properties such as stores, office buildings and warehouses. This method considers the landlord’s income and operating expenses and the financial return most people would expect from a given type of investment property. This approach is most commonly used in valuing commercial/industrial property Please refer to the brochure entitled Property Valuation and Taxation for Business and Industry in Colorado for additional information regarding non-residential property.
Property in the county is inspected under several circumstances such as sales, new construction or demolition and valuation appeals.
The appraisal staff is required by law to view property when it sells. This is an important component of the valuation process as it gives appraisers the opportunity to update the physical inventory of the property (square footage, condition, remodeling) and to verify any special terms involved in the sale. Inspecting and verifying sales provides a greater understanding of the market and what is paid for realty and non-realty items.
Appraisers in the Assessor’s Office review city and county building permits in order to discover new construction, remodeling and demolition. These properties are viewed in order to update records and arrive at appropriate values.
And finally, a property inspection is required in order to fully address any appeals to valuation. Because it is physically impossible to view every property in the county, the Assessor’s Offices uses mass appraisal techniques. However, when the value of an individual property is appealed, it is necessary to view that property’s interior and exterior and conduct an appraisal similar to that of a private or fee appraiser.
During a property inspection, the appraiser will attempt to make contact with the resident in order to identify themselves, provide county identification and gain permission to conduct the inspection. Ideally, the owner will participate in the inspection process by showing the home and verifying inventory with the appraiser. All structures will be measured and sketch of the building ‘footprint’ drafted. In the event that no one is home, the appraiser will inspect the property to the best of their ability from the exterior and leave a door hanger regarding the site visit.