Valuation Methodologies: The Cost Approach

Three methodologies are normally used in the determination of the market value of a property. These methodologies include: the market sales, the cost, and the income approach.

Section 23.0101 of the Texas Tax Code provides: "In determining the market value of property, the chief appraiser shall consider the cost, income, and market data comparison methods of appraisal and use the most appropriate method."

Previously, we examined the market data comparison (or sales) approach to value determination. This month we look at the "cost" approach.

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RECENT CASELAW

Associates Home Equity Services Company, Inc. v. Hunt

A taxpayer's redemption of his property after a delinquent tax sale reinstates liens against the property that existed at the time of the sale. The taxpayers claimed that, though they remained indebted on a mortgage, the lien against their property had disappeared with the tax sale and was not reinstated by their subsequent redemption of the property. Though recognizing the long-standing rule that foreclosure of a superior lien (such as a tax lien) wipes out inferior liens (such as a mortgage), the majority of the appellate court held that the taxpayers' title and interest was restored to the same condition it was at the time of the sale; i.e., the lien was reinstated. One of the justices disagreed and would have held the mortgage lien extinguished.

Read the opinion.

Upcoming deadlines

January 1, 2005
Appraisal valuation date for most types of taxable property

January 1, 2005
Date lien attaches for payment of 2005 taxes, interest and penalties

January 1, 2005
Qualification date for most tax exemptions for 2005 tax year