To find the value of any piece of property the assessor's office must first know which properties in the village have sold and for how much, what it would cost today to replace buildings, how much money it takes to operate and keep buildings in repair, what income a building may produce if leased, as well as many other dollar factors affecting its value, such as the current rate of interest charged for borrowing the money needed to buy or build properties.

Using this type of information the assessor's office can then go about estimating property values in three different ways.

THE MARKET APPROACH

This approach requires the assessor's office to review and analyze properties that have sold and then use this analysis to value those properties that have not. The assessor's office receives information regarding the sales price of every property that sells in a community during a given year. Properties that have been sold are grouped by property type and similar residential or commercial environments and then analyzed to achieve a better understanding of how much each property type within each neighborhood has changed in value since the last village-wide revaluation. Assessors in Wisconsin value thousands of properties at any one time and use various statistical procedures to facilitate the valuation process. This is referred to as "mass appraisal" in the Wisconsin Property Assessment Manual and other assessment handbooks.

Wisconsin law requires the assessor's office to rely on the market approach when determining assessed values if there is sufficient market evidence available to value each property type.

THE COST APPROACH

Lacking sufficient sales evidence, the assessor's office can employ what is called the "cost approach" to value. Commonly used to value unique commercial, industrial, and institutional properties, the cost approach estimates a value based on how much money it would take, at current material and labor costs, to replace a property with one just like it. If the property is not newly constructed, the assessor's office applies depreciation to account for its age and physical condition.

THE INCOME APPROACH

A third method is used, in addition to the other two, if a property has the ability to produce income such as an apartment complex, shopping center, or office building. Using the "income approach" to value a property, the assessor' office considers only the income the property produces and not the income of a business operating within the property. In other words, the rent paid to occupy space in a building is income the building produces and is used in this method of valuation. Also taken into consideration are such dollar factors as expenses to repair and maintain the property, administrative expenses of the property owner that are related to the property, property taxes, insurance, the degree of financial risk taken in earning income from the property, degree of vacancy and/or collection loss when tenants leave or skip rental payments, and finally, the return most people would expect to realize from owning property that produces income.

This method is not typically used to value single family homes.