This kind of sorta started out as an approximation of FMV. Today, there is very little correlation between taxable value and FMV. The taxable value and the tax rate are set by a combination of a governments need to fund operations, legislation, budgetary cycles, valuation cycles, etc.

2. Zillow

I have talked to Zillow’s VP Data and Analytics Stan Humphries, PhD a couple times at events. The calculation of the zestimate is a little more complicated. More data points are used and pumped through a proprietary algorithm to produce the zestimate. As you point out garbage in garbage out. WA tax data is famous for inaccuracies. I think it is difficult to build separate models for each area to account for the components that most influence value for that area.

3. Historical

Case-Schiller index has known issues as does the FHFA index or its predecessor OFHEO. The most accurate tends to be a combined analysis of Case, FHFA, and local statistical data. Of course, historical data is no guarantee of future performance.

5. Income Approach

Very close. There is a technical difference to the correct answer and your very close answer. The income approach uses Net Operating Income (NOI) which is rental income less actual expenses directly associated with the real property asset. Net Income includes NOI less other expenses not directly associated with the property such as depreciation or cost recovery and interest expense.

Investors will go further and use discounted cash flow techniques to calculate the assets return on capital to determine investment value to them. Commonly used techniques include Internal Rate of Return (IRR) and Net Present Value (NPV) and occasionally Modified IRR (MIRR) which includes a reinvestment rate for cash flows received.

Cheers,

Michael P. Lindekugel

Commercial Realtor

Certified Distressed Property Expert

RE/MAX Metro Realty, Inc