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Key Terms in Real Estate Assessment
Monday, September 19, 2016

What is Property Assessment?

Property assessment for municipal governments is the process of establishing a monetary value of the property as related to taxation. The complex process is vital to the financial health of local governments. Generated from within the community, property tax helps to finance such local government services as garbage collection, water and sewer, parks and leisure and fire protection.

Assessed values of properties for tax purposes must be accurate so that the tax burden will be distributed fairly and the public will have confidence in the local tax administration.

Actual Value

The term “actual value” refers to the market value of the fee simple interest in the real property.

Market Value

Market value is the amount of money that a willing seller and a willing buyer would most likely agree to during fair negotiations. Potential uses of the property may also play a factor in determine the fair market value.

The market value of a property:

  • is not the highest, lowest or average price, but rather the most likely or reasonable price that a seller and buyer would agree to
  • is only ever expressed in terms of money
  • implies that a property has had a reasonable time to be exposed to the market
  • implies that both the buyer and seller understand the potential uses of the property
  • assumes a third-party will negotiate the transaction in the open market
  • assumes that both the buyer and the seller are willing and neither is being taken advantage of
  • considers present and potential use of the property

Uniformity

The term “uniformity” refers to the standard that the assessor adheres to in order to ensure that all properties are regarded fairly. Using standardized and acceptable assessment procedures, the assessor will consider all properties that are similar to the one being assessed. The value should then be similar to those other properties. Taxes for that property should be similar as well.

 

 





 
 
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