Essay --

Final Examination (2) Discuss the three approaches to property valuation. What is the process of each? When might it be better to use one approach over the other? The three approaches to property valuation are: comparable sales approach (market data approach); income approach; and cost summation approach. Comparable sales approach is determined by using recent sales of similar properties to the one being assessed. This estimates true property value by comparing the property that is in question to others that have been recently sold and then making the adjustments as needed. The idea is that you need to find market areas that have relative or same economic status. Once this process is done then you can group the â€Å"parcels† in different categories, i.e. size, year it was built, the size of the lot, etc. The book says that the property that is not sold is compared to similar property that a market value can be observed and then infers a value. (LJJ, 155) It is common in jurisdictions to assess parcels as a percentage or fraction of the full market value. In theory it does not make a difference if the full value or fractioned value is assessed, the outcome should be the same. When using fractional assessment you need to use a higher tax rate than using market value assessment. This seems to make taxpayers more comfortable but can lead to problems if different fractions are used in the same jurisdiction. Another problem is that this approach requires a large number of sales and can be time consuming if done annually or for the first time. This approach is great for residential properties. The income approach converts the future returns from ownership of a â€Å"parcel† into their present value equivalent. This approach can be done by c... ...edit of the issuing government. This non-guaranteed bond is backed by a certain business-like government activity and not a larger government entity that has taxing powers. Some revenue bonds can have lower interest rates than obligation bonds. If for example a water district with a excellent history of borrowing may have a lower interest rate than a general obligation bond with a declining property tax and low personal income. (LJJ, 492) Unlike obligation bonds these types of bonds generally do not need or require a popular vote and are repaid by the users f the service. This means that no tax dollars are directly used which is considered a good thing. The more costly of the two bonds are revenue bonds because they generally have higher interest rates. If there was a default on the general obligation bonds then taxes would have to be raised which is less popular.