Call Today314-732-4238
Call Today
The Law Office of Cathy Steele, P.C.
Serving St. Louis Metro Area And Surrounding Counties

The 3 techniques assessors use to value property

| Jan 24, 2020 | Commercial Property Tax Appeals

It’s not uncommon for a St. Louis metro property owner to receive their assessment and wonder: “How did they come up with that number?” There is a process, however, and it is based on the use of three different approaches.

As explained by the Missouri State Assessors Association, an assessor may rely on one of these techniques, or use a blend. It depends on what is deemed appropriate for the property in question. Here’s a brief overview of the three techniques.

Income approach

The income approach is often used for commercial properties, such as apartments, office buildings and shopping centers. In this technique, the assessor:

  • Calculates the potential gross income
  • Subtracts operating expenses or vacancies from that calculation
  • Converts the subsequent net income to a property value via capitalization

The actual calculations here can vary, and may be based on things such as market multipliers or a cash flow analysis.

Cost approach

For the cost approach, an assessor looks at the property value from the ground up – literally. They first consider the value of the land itself, if nothing were on it. Then, they begin adding to the value based not just on what currently exists there, but what it might cost to replicate it. This can include:

  • Material and labor costs
  • Permit fees
  • Overhead expenses
  • Profits

For older buildings and property, the assessor can adjust these calculations based on depreciation.

Market approach

When using the market approach, the assessor reviews comparable properties in the area that were recently sold. Then, adjusting for the inclusion or exclusion of different traits, they use these sales figures to put an estimate on your property. This approach is usually employed for a residential property.

Appealing a valuation

Property owners can appeal the conclusion of an assessment. This might be beneficial for those who think the valuation is far too high, and as a result, are facing a significantly higher property tax bill. Appealing, however, requires strict adherence to the process, and may go through the assessor’s office, the Board of Equalization or even the State Tax Commission if you choose to take it that far.