How is Real Property Assessed?

Before assessing any parcel of property, the assessor estimates its market value. Market value is how much a property would sell for, in an open market, under normal conditions. To estimate market values, the assessor must be familiar with all aspects of the local real estate market. A property’s value can be estimated in three different ways. First, property is compared to others similar to it that have sold recently, using only sales where the buyer and seller both acted without undue pressure. This method is called the market approach and is normally used to value residential, vacant, and farm properties. The second way is to calculate the cost, using today’s labor and material prices, to replace the structure with a similar one. If the structure is not new, the assessor determines the depreciation since it was built. The resulting value is added to an estimate of the market value of the land. This method, called the cost approach, is used to value special purpose and utility properties. The third way is to analyze how much income a property (like an apartment building, store, or factory) will produce if rented. Operating expenses, insurance, maintenance costs, financing terms, and how much money expected to be earned are considered. This method is called the income approach . Properties in sub optimal uses generally may not be assessed at market value; they must be assessed at their current-use value. Assessors with computers can estimate values more efficiently than by hand. Computer Assisted Mass Appraisal (CAMA) techniques are used to analyze sales and estimate values for many properties at once. Once the assessor estimates the market value of a property, its assessment is calculated. New York State law provides that all property within a municipality be assessed at a uniform percent of market value. The level of assessment can be five percent, 20 percent, 50 percent, or any other fraction, up to 100 percent. Everyone pays his or her fair share of taxes as long as every property in a locality is assessed at the same percent of value. For example, a house with a market value of $100,000 located in a town that assesses at 15 percent of value would have an assessment of $15,000. The assessment is multiplied by the tax rate for each taxing jurisdiction – city, town, village, school district, etc. – to determine the tax bills.

For further explanation of this process, see “How the Property Tax Works.”