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Montgomery County Property Valuation Administrator's Office

Appraisal Methods

How is Real Property Assessed?

Market Value is how much property would sell for, in an open market, under normal conditions. Before assessing any parcel of property, the assessor estimates its market value. To estimate market values, the assessor must be familiar with all aspects of the local real estate market, such as: what different properties are selling for, local construction and repair costs, normal operating expenses, typical rents, and current financing charges for borrowing money to buy or build property.

A property's value can be determined in three different ways:

  1. Property is compared to others similar to it that have sold recently, using only sales where buyer and seller both acted without undue pressure. This method is called the market approach and is normally used to value residential, vacant, and farm properties.

  2. The second way is to calculate what it would cost, using today's labor and material prices, to replace the structure with a similar one. If the structure is not new, the assessor determines how much it has depreciated since it was built. The resulting value is added to an estimate of the market value of the land. This method is used to value special purpose and utility properties, and is called the cost approach.

  3. The third way is to analyze how much income a property, like an apartment building, a store, or a factory will produce if rented. Operating expenses, insurance, maintenance costs, financing terms, and how much money owners expect to make on this type of property, are considered. This is the income approach.

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