Three Approaches to Value
We use one of three approaches to establish an assessed value (also known as "Current Value Assessment") for properties:
- direct comparison approach
- income approach
- cost approach
The approach we used depends on your property type and how frequently similar types of properties are bought and sold on the open market.
Direct comparison approach
This is the most commonly known valuation approach. We analyze recent sales of comparable properties to determine the value of your property. In considering any sales evidence, we ensure that the property sold has a similar or identical use as the property to be valued.
The direct comparison approach is typically used for the following types of properties:
- vacant land
An income-producing property’s ability to earn revenue is directly tied to its current value. When using the income approach, we carry out a detailed analysis of your property's income and expenses and then compare it to similar properties to determine how much income a property could be expected to generate.
We then analyze the relationships between incomes and sale prices to calculate the capitalization rate (cap rate) for the property by dividing the income by the sale price.
The income approach is typically used for the following types of properties:
- industrial malls
- large medical/dental building
- office buildings
- retail properties
- shopping centres
- large sport stadiums
When a property type is unique and rarely sold on the market, we can’t rely on either the comparison or income approaches to determine its current value. In these cases, we estimate your property’s current value with a three-step process:
- We calculate the current cost of replacing buildings, structures or other taxable components on the land.
- We apply a deduction for depreciation due to age, functional or economic conditions that could impact the value of the property.
- We determine the value of the land and add it to the calculations to produce an overall valuation.
The cost approach is typically used for the following types of properties:
- general-purpose industrial properties
- grain elevators
- gravel pits