Market Value is the price at which a property would sell for cash or its equivalent under prevailing market conditions if:
- Exposed for a reasonable time in the open market
- Both the buyer and the seller are well informed of all the property uses, purposes, and restrictions
- Both parties seek to maximize their gains
- Neither party is in a position to take advantage of the other.
The value of real property subject to local property taxation is determined by the use of Mass Appraisal techniques. Within the Mass Appraisal system, there are three widely recognized approaches to determining value.
The Sales Comparison or Market approach, the Cost approach and the Income approach are all considered in the value determination.
The type of property being appraised will determine how much weight will be given to the values derived for a property under each approach.
Texas laws require appraisal districts to appraise all property at its current market value. Collingsworth County Appraisal District utilizes all three recognized approaches to value to determine local market values.
Sales Comparison or Market Approach:
The sales comparison or market approach to value develops an estimate of value by comparing the subject to similar properties that have recently sold. The focus is on sales prices of similar properties. It is the most reliable approach to value in an active sales market. This approach is best suited for residential properties.
The cost approach to value estimates value by calculating what it would cost to develop a new property with the characteristics of the property being appraised then adjusting the cost to reflect the actual condition and circumstances. The calculated value of the structures is then added to the land value for an overall property value, very accurate for new properties. Best approach for unique properties where there are no sales and there is no income being derived from the property.
The income approach to value relies on the concept that income over a period of years can be capitalized or converted to a lump sum that represents what someone would pay to purchase the right to receive the income. This lump sum is also called present worth. It is the most meaningful value indicator for properties that produce income (offices, apartments, hotels/motels).