The Three Approaches to Value

MPAC uses one of three recognized approaches to establish an assessed value for properties: the direct comparison approach, the income approach or the cost approach. The approach is chosen based on the property’s current use and how frequently similar types of properties are bought and sold on the open market.

Our assessors are trained experts in the field of valuation and apply appraisal industry standards and best practices. Our assessments and data have met international standards of accuracy and are relied upon by banks, insurance companies and the real estate industry.

Direct comparison approach

Recent sales of comparable properties are analyzed to provide an indication of value for properties assessed through this approach. In considering any sales evidence, it is critical to ensure that the property sold has a similar or identical use as the property to be valued.

Examples of property types:

  • single family residences
  • condominiums
  • vacant land

Income approach

An income-producing property’s ability to earn revenue is directly tied to its market value. This method requires a detailed analysis of both income and expenses, both for the property being valued and other similar properties, to determine how much income a property could be expected to generate. MPAC analyzes the relationships between incomes and sale prices to calculate a capitalization rate that is applied to that type of property.

Examples of property types:

  • industrial malls
  • large medical/dental building
  • office buildings
  • retail properties
  • shopping centres
  • large sport stadiums

Cost approach

When a property type is unique and rarely sold on the market, MPAC cannot rely on the sales approach or the income approach to determine its value. In these cases, a property’s value is estimated as the current cost of reproducing or replacing buildings, structures or other taxable components on the land. Once this has been established, MPAC makes a deduction to account for depreciation due to age, functional or economic conditions that would affect how much a buyer would be willing to pay for the property. The market value of the land is then added.

Examples of property types:

  • general-purpose industrial properties
  • grain elevators
  • gravel pits
  • marinas
  • warehousing

For more information about the methodology MPAC uses to assess your property, find it under the property type tab on the menu.

Note: The applicable law prevails to the extent there is any conflict between this information and the current law. This information is not intended to provide legal advice and should not be relied upon as such.