Property assessment shall be understood as the process which results in obtaining an assessment of the value of the property.
The most common form of valuation used in practice is the comparative approach. It assumes a significant similarity between the analyzed real estate and the price of real estate with similar parameters. Three methods can be listed as part of the comparative approach - pairwise comparison, correction of average prices and statistical analysis of the market:
- pairwise comparison method - it involves assessing the value of properties valuing the value of properties with precisely specified parameters after comparing it with at least three similar properties that have already been on the real estate market, whether bought or sold;
- method of adjusting average prices - leads to the determination of the value of real estate on the basis of a list and analysis of prices of several similar real estate. The exact price is known after adjusting the average market price with the help of coefficients that describe individual features of the property;
- statistical analysis of the market - uses the application of the principles of statistical analysis to novelties that can be observed on the set of real estate, which similarly corresponds to ocean real estate. This is a relatively rare method.
Factors affecting the valuation
It often happens that the owners overestimates their property during self-evaluation, Especially when they are influenced by sentimental aspects of said property. The second problem may be underestimation resulting from ignorance of laws and trends on the real estate market. The amount of professional property valuation depends on many factors. These are among others:
- property type;
- real estate area
- year of construction;
- apartment standard;
- technical condition;
- access to infrastructure.
Increasing the number of parameters that affect the quality of real estate is often the reason for an increasingly complicated estimate of its value. When estimating the cost of the valuation itself, one should also take into account:
- the cost of possible acquisition of data on transaction prices in a given area;
- the cost of obtaining documents specifying the property title to the property and designation in the spatial development plan;
- expected valuation date.
Property assessment uniformity
The unification of property assessment is a very important matter, as concluded by Justin M. Ross; although scholars have devoted a lot of attention to the matter of property assessment uniformity in various different studies, mostly treating it „as a technical problem related to the difficulty of the task, popular, and policy sentiment against the property tax is frequently directed at the incidence of nonuniformity across socioeconomic groups.” It is further elaborated on that socio-economic factors may cause differences among assessments e.g. the results show that „appointed assessors perform similarly during mass reappraisals in terms of maintaining uniformity, but appointed assessors perform far better during nonassessment years." (Justin M. Ross, 2013)
Estimating the value of a property versus the market value
The estimated values have been widely reported among United States’ property markets and are frequently used by the general public as an intermediary in the process of valuating a property. It has been proved that the assessed value does in fact influence the non appraisers’ market value estimations. „These results seem to indicate that expert appraisers need some content validity before using a reference point as a valuation anchor and make distinctions among unsanctioned anchors that are plausibly informative (such as a pending sale price or expert valuation opinion of another) and unsanctioned anchors that are fundamentally inappropriate.” (Matthew Cypher, J. Andrew Hansz, 2003)
- Bell M., Connolly K., (2010), Financing Urban Government in Transition Countries: Assessment Uniformity and the Property Tax, "Environment and Planning C: Politics and Space" 28(6)
- Cypher M., Hansz J. A., (2003), Does assessed value influence market value judgments?, "Journal Journal of Property Research" 20(4)
- Luce K. K., (1937), Assessment of Real Property for Taxation, "The Michigan Law Review Association" 35(8), pp. 1217-1252
- Ross J. M., (2013), A Socioeconomic Analysis of Property Assessment Uniformity: Empirical Evidence on the Role of Policy, "Public budgeting & finance" 33(1)
Author: Kamila Nawara