February 12, 2021

What valuation approach is applied to mass appraise your property?

In America, real property appraisal is undertaken by every county's respective appraisal district and is overseen by assessors. Property assessment generally uses mass appraisal methods to determine market value. A mass appraisal process involves valuing a group of properties using common data, standardized methods, and statistical testing.

Computer Assisted Mass Appraisal systems (CAMAs) or automated valuation models are used for property information management, valuations, owners’ notifications and the security of taxation credibility through uniform valuation procedures. CAMAs streamline the usage of limited resources and complete the valuation process in time.

Learn more about Computer Assisted Mass Appraisal Systems here.

All appraisals, whether single property or mass, use a model. A model is a representation of the relationship between value and variables representing factors of supply and demand. Mass appraisal models represent the market for a specific type of property in a specified area. Valuation models are developed for defined property groups. It is particularly effective when housing types and styles are relatively uniform within areas.

Mass appraisal models are carried out through one of these three approaches:

  • The Cost Approach.
  • The Sales Comparison Approach.
  • The Income Approach.

Learn more about valuation models and approaches here.

Depending on the property to be assessed, the most appropriate valuation approach is taken into consideration. While relying on a single approach for a given type of property ensures consistency, using two or more approaches cross-checks data and ensures a greater degree of accuracy, particularly in the case of unique properties.

The following are the most common property categories and the approaches that are most suitable for their valuation,

Single-Family Residential Property

Most suitable - The Sales Comparison Approach :

An automated version of the sales comparison approach is most efficient and generally accurate in the case of the residential properties occupied by single properties including condominiums.
In case there is inadequate sales data or a need arises to supplement the sales comparison approach, the cost approach can be employed. Since most of these properties are no rented, the income approach may not be appropriate.

Manufactured Housing

Local market and ownership status determine the valuation approach for manufactured or mobile homes. Often, these are purchased separately and situated in a rented space. In such situations, mobile homes are best valued separately from the land.
Sometimes, mobile homes are on individual lots bought and sold like stick-built homes, particularly in rural areas. If so, they can be valued just like residential properties and included in the same models, provided the models include variables to distinguish them and recognize any relevant differences from other homes.

Multi-family residential property

Most suitable - The Sales Comparison and Income Approaches :

When sufficient sales data is available, either of these approaches can be used. Multiple Regression Analysis techniques assist in valuing such properties and calibrating different aspects of the income approach, including the estimation of market rents and development of income multipliers or capitalization rates.
The cost approach may be used when sales and income data are not available.

Commercial and industrial property

Most suitable - The Income Approach :

Direct sales comparison models can be equally effective in large jurisdictions with sufficient sales. If sufficient sales data and income data are not available, the cost approach is applicable.
Cost factors, land values, and depreciation schedules must be updated to current market values through periodic review.

Non-agricultural land

Most suitable - The Sales Comparison Approach :

This approach's application to vacant land involves the collection of sales data, the posting of sales data on maps, the calculation of standard unit values by area and type of land use, and the development of land valuation maps or computer-generated tables in which the pattern of values is displayed.
When vacant land sales data is not sufficient additional benchmarks can be obtained by subtracting the replacement cost new less depreciation of improvements from the sale prices of improved parcels. The technique works with reliable cost data. It is most accurate for new land improvements with minimal depreciation.
The hybrid model is split into land and building values. The values can be calibrated from improved sales alone. It is more reliable when data for both vacant and improved sales is available.

Agricultural land

Most suitable - The Sales Comparison and Income Approaches :

With adequate sales data, the sales comparison approach is preferred for the appraisal of agricultural land at market value. If appraised at used value, aggregating income data and using the income approach are more appropriate.
Land rents are often available, allowing the development and application of overall capitalization rates. Soil map assigns land to different productivity classes for which typical rents are calculated.

Special Purpose property

Most suitable - The Cost Approach :

Due to their distinctive nature resulting in the general absence of sales and income data, the cost approach is the most appropriate in determining appraisal values of special purpose properties.

Rank of typical usefulness of the three approaches to value in the mass appraisal of major types of property

Cost approachSales comparison approachIncome approach
Single-family residential213
Multifamily residential31, 21, 2
Industrial1, 231, 2
Non-agricultural land-12
Special-purpose**12, 32, 3


* Includes farm, ranch, and forest properties;
** Includes institutional, governmental, and recreation properties;

When more than one approach or model is used for a given property group, the appraiser must determine which to use or emphasize. Often this can be done by comparing ratio study statistics. Although there are advantages to being consistent, sometimes an alternative approach or method is more reliable for special situations and atypical properties.

A cyclic real property appraisal is a legal requirement in the USA. How often is your property reappraised and how is it carried out?
Know more about it here.

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