This approach adjusts a property’s TAV up or down in light of recent sales for similar properties to find current market value. TAV analysis is not an appraisal or a Competitive Market Analysis (CMA). It doesn’t try to find a target property’s value by tweaking the specifics of recent comparable sales.

It starts with a base-line valuation (provided free via periodic reassessments for tax purposes) and calculates an adjustment factor based on recent sales. If sales of roughly comparable properties are 25 percent higher than their most recent TAVS, increase the TAV of the target property by 25 percent to get a current market value. It’s quick, easy and free (if you go into the courthouse yourself).

One LandThink commentator suggested that TAV analysis does not factor into its valuation the current value of timber as a discrete and independent asset. That is true, and it’s an important point to understand. Let me explain.

A current market valuation of land (and to differing extents other types of property) — as estimated by appraisal, CMA or TAV analysis — may or may not have much to do with its actual net intrinsic worth, that is, the sum of all of its assets less their liabilities, risks and uncertainties.  Market value, as I’m using it in terms of TAV analysis, is simply an estimate of how the current local market of buyers is likely to value a property. TAV analysis is not an estimate of net intrinsic worth, which is the net value, or price, of a property’s important assets and improvements.

Net intrinsic worth is determined by a careful valuation of a property’s individual assets. These will include a mix of things—economic assets like merchantable and pre-merchantable timber and cropland; environmental assets (which can have both an environmental value and a monetized value as in a conservation-easement, solar rights or wind rights); improvements (residence, farm facilities); minerals and other resources. Each asset should be discounted to the extent that it can’t be used, must be altered, is inefficient, or requires additional investment and so on. Liabilities affecting the property generally, such as a residence in a floodplain or the presence of a federally listed ETS species, should also be factored in as value discounters.

Appraisers do not value property this way. They do not try to estimate the values – let alone the net values — of discrete assets, such as timber. Appraisals and CMAs work up their estimate of value based on a whole-property assessment rather than one that proceeds part by part. Tweaking in appraisals applies to residences, not differences in value in land assets.

Appraisals in my opinion are best suited to residential properties, particularly where the target property is one of many of its type in a particular neighborhood. Appraisal methodology may not well-suited for land in its various forms, particularly when a property combines several different types of assets and multiple discounting conditions.

Specialized farm appraisers are available. But I’ve found that a buyer must often obtain several different consultant evaluations of assets on one target property to get to a net intrinsic worth figure. A common combination of consultants is forester, mineral economist and environmentalist.

Appraisers who do the county’s assessment every few years generally use a fixed value that they apply to all timberland of a certain type. This straight-through value doesn’t take into account the actual market value of the merchantable timber on the tract or whether the tract has been cut recently, among other factors. I’ve seen a reassessment figure of $600/a applied to all timberland in a county regardless of whether the merchantable timber on the acre was $0 or $2,000.

With land, a buyer should use a TAV analysis to get a general sense of how buyers would value it compared with its own assessment value adjusted for recent price trends.

But to determine its worth involves in my opinion going through the property’s individual assets, netting out each asset’s value, then summing a net worth.

From a buyer’s perspective, a good deal presents itself when property can be purchased below its net intrinsic worth, regardless of the TAV number.

Sellers typically use several approaches to set an asking price. If an agent is involved, a seller might base price on a Competitive Market Analysis (CMA), which looks at recent selling prices of comparable properties. CMAs are not as comprehensive and technical as appraisals, but they will generate a market value based on the comps used. An appraisal is a second option.

Some agents recommend a listing price based on their recent experience with sales of similar properties in the same area.

Sellers often use their “own devices” to find an asking price. These are usually nothing more than their own opinions, or opinions of friends or opinion expressed as hope. I have seen sellers set prices in this fashion that were wildly off in both directions.

Some sellers simply announce, “This is my price.” Market analysis plays a minor role in their decision-making. Intestines rule.

On the opposite side, buyers, too, can avail themselves of an appraisal and a CMA. The buyer is, of course, better off obtaining value analyses before putting a price on an offer than after.

Buyers may avoid estimating market value altogether and offer what they think the seller will take, or some arbitrary percentage of the asking price, or some other number that’s easy to get to but may be totally unrelated to current value.

All of these valuation methods rely heavily on opinions to get to an opinion.

Appraisals are the “hardest” of these methods, but they too rely on subjective judgments for the choice of comparables, the type of tweaking that is applied and other matters. I have seen a second appraisal done within two weeks of the first but using different comps come in more than 50 percent higher. An extreme example, I agree, but it illustrates the variability that can arise.

I’ve found that buyers and sellers can work up a little “harder” market-value number by starting with numbers that are themselves a bit harder.

First, get the current tax-assessed value (TAV) of the target property. This is available in the public tax records in the assessor’s office.

TAVs are produced by the methods of the appraisal firm that the county (or other jurisdiction) employs every few years to revise assessment values of all real property. From these values, various rates are applied to different types of property (land, improvements, minerals, etc.) to determine each property’s total annual property tax. States decide the time between assessments.

Each reassessment applies consistent valuing criteria to all properties, with adjustments for neighborhood and other factors. (Reassessment values, I know, are also opinions and often deserve the criticism they bear. But, once all appeals are resolved, they are both comprehensive and reasonably consistent.) The county’s most recent reassessment is the hardest data available in a semi-soft world.

The target property’s TAV may be several years old, which can put it out of line with current values. Don’t do anything yet; we’ll adjust for it.

Make sure that the TAV represents 100 percent of value. Some states carry TAV as a percentage of 100 percent valuation; West Virginia, for example, uses 60 percent as its TAV.

Land-use classification for agriculture or managed timberland also reduces TAV. Land-use provides significant tax breaks to encourage certain uses.

Land with a conservation easement should have a TAV that’s been lowered to reflect the sale or donation of development rights.

The second step is to calculate a factor that can be used to adjust the property’s current TAV to recent selling prices of comparable properties.

Most of the time in most places I know, TAV has lagged market value, sometimes by more than 100 percent. In today’s market, a property’s TAV may exceed market value.

The need, then, is to find a TAV adjustment factor that can be used to raise or lower the property’s TAV to reflect its value in current market conditions.

One way to do this is to use comps from a current appraisal or CMA to compare their TAVs against their recent selling prices. This method provides a harder number than opinion.

Derive an average sales price for the three current comps used in a CMA or appraisal. Match that average sales price against their average TAV. The difference, whether plus or minus, is the current local TAV adjustment factor, expressed as a percentage.

If you lack access to comps from an appraisal or CMA, go into the county’s office where deeds are recorded and find three to five broadly comparable properties that have sold recently in the same general area as your target. Calculate an adjustment factor based on their average TAV against their average sales price.

The last step is easy. If a property’s TAV is, for example, $500,000, and the adjustment factor is plus 20 percent of TAV, then its current market value can be estimated at $600,000.

A TAV valuation costs nothing when based on courthouse research or an agent’s CMA. Both are readily done. The TAV valuation gives the seller another estimate of worth to consider before setting a price and, similarly, helps a buyer with making an offer.

TAV valuation is a layman’s tool that I’ve found works in all market conditions.

I’ve found sellers, including myself, setting an asking price for real estate by fixing its value in one of at least several ways.

Seat of the pants. Sellers normally know more about the property they’re selling than any other party. Over time, sellers get a price-feel for how their places compare with others in terms of assets and liabilities. When it comes time to sell, many sellers integrate the information they’ve acquired over the years and intuit their way to a price.

Need. When the economy is lousy, some sellers find themselves pinched for cash and forced to sell real estate. Where the property is secured by a mortgage, the sale price is hoped to be sufficient to pay off the debt, transaction costs, taxes on gain and meet as much of the crisis need as possible. In the best circumstances, the seller will have some profit left; in the worst, sale of the real estate will leave him short of meeting his cash needs.

This seller must take the amount of his cash need and weigh that against what he thinks the market will bear for an asking price. The need-seller, in other words, like all others has to employ some method of coming to an asking price, apart from the numbers of dollars needed, which is his motivation for selling.

If I need $100,000 and I know my property won’t bring more than $40,000, it does me no good to set the asking price at $100,000. My best approach is to substantiate a price as much over $40,000 as I can, usually by disaggregating the property’s assets, valuing them individually, then adding them together.

Competitive Market Analysis (CMA). If the seller is listing the property, the listing broker can undertake a CMA to determine recent selling prices of roughly comparable properties. Brokers experienced in the local market will help a seller tweak that information in light of the comps used, the property to be sold and current market conditions. This is often a very practical approach. But it’s subject to influence when an agent or broker inflates a suggested “CMA-based” selling price in order to snag a listing.

Appraisal. Some sellers pay for an appraisal as a way of establishing the current market value of their properties. They then set an asking price, above or below appraisal value.

Appraisals are opinions of value, based on selecting the recent selling prices of three comparable properties sold within the previous six months. The appraiser adjusts the value of the seller’s property in light of each comp and arrives at a reasonable estimate of current market value.

Buyers tend to put some faith in seller-supplied appraisals, because they are supposed to be unbiased. Appraisals are readily manipulated to get to a certain number. Appraisers are free to choose the comps they want to use (and not choose others) and make further adjustments. A seller-commissioned appraisal is subject to pressure a seller may choose to apply to the appraiser to hit a high valuation.

The other problem with appraisals that I’ve found is their too-general level of analysis. Appraisals rarely dollar in or dollar-out quality-of-individual-asset considerations.

Timberland, for example, that contains $1,500 in immediate timber-sale value is usually valued at the same price as timberland that has $750 in timber value. Improvements are valued by type, age and square footage, but quality factors — materials, details, condition, convenience of layout, etc. – are not generally looked at hard.

I’ve also found that appraisals rarely dig deeply into material defects that affect the property’s usability, such as a crawlspace that’s too low to the ground, or ground that’s too steep for operating equipment, or land that’s unproductive for various reasons.

A market that’s either in rapid decline or rapid ascent requires an appraisal derived from pending sales, not ones that are as much as six months old.

I’ve seen a seller commission simultaneous appraisals from three different appraisers and then set his asking price as the average of the three. If, of course, a seller is willing to lean on one appraiser, he’s also willing to lean on three to get to the number he wants.

The average-of-the-three approach is a practical method for establishing the value of estate property where one heir wants to buy out the interests of the others—and everyone is looking for a fair-to-all way of doing so.

Tax-assessed value (TAV). In recent years, tax-assessed values lagged selling prices with most types of rural property. For that reason, buyers often used TAVs as a starting point in negotiations, forcing sellers to dismiss them as unrealistically low. With sales slowing, the situation could easily reverse, with TAVs of record showing unrealistically high values.

TAVs are based on formulas that reassessment appraisers use across the board. Very little, if any, digging into quality-of-asset considerations occurs. The TAV method provides a way of comparing the value of one parcel with its neighbors since the methodology is applied to all equally, but TAVs don’t tell a seller or buyer much about the value of any particular property once its researched assets and researched defects are netted out.

Online home-value sites. I ran through a number of these sites. None provided any valuation of my current rural residence, a house that has been standing for almost 100 years, on a street with a numbered address. I concede for the record that Blue Grass, Virginia is not in the thick of things.

I plugged in my childhood home in Pittsburgh…and got wildly varying results, a low of $84,500 to a high of $154,000. The sites could not agree on the number of bathrooms and most recent sale date. Others may have better luck with sites such as Eppraisal, Real Estate ABC, Zillow, Yahoo, Homegain, cyberHomes; PropertyShark and HouseFact.

Home-Price Indexes. These efforts — Federal Housing Finance Agency House Price Index; Purchase-Only; Radar Logic (25 metro areas using price psf); S&P Case-Shiller U.S. National Home Price Index; NAR Median Sale Price; LoanPerformance House Price Index; and Integrated Asset Services IAS360 National Index — are not very useful for rural properties for various reasons, mainly dealing with different approaches and different data bases. (Carl Bialik, “Only One Person Knows a Home’s Value: Its Buyer,” Wall Street Journal, November 21, 2008)

Each provides a trend that shows percent gain/loss plotted against time, and they don’t agree. Since January, 2000, four show about a 50 percent increase and two show a 75 percent increase. All show a decrease over the last couple of years, but the steepness of the decline differs. Taken together, they give a seller a sense of price direction.

So what’s a seller to do?

First, property does not have an objective dollar value until a buyer buys it. Every other number is speculation, to one degree or another.

Second, the various approaches described above will provide a range of value estimates, hopefully narrow enough to be useful. A seller can narrow the range by throwing out the low and the high numbers, then averaging the remainder. The seller might consider this number his estimated working value (EWV), in terms of which he sets his asking price.

Third, the settlement, or sale, price should be more related in the seller’s thinking to the EWV than to the asking price.

Fourth, sellers should understand that familiarity breeds overvaluation. The longer a seller has owned a place and the more emotionally invested he is, the more dollars he thinks its worth.

No universal formula exists for a seller to determine his property’s EWV, asking price or settlement price. EWV is the result of pulling together as much data-hardened information as possible and using experience and judgment to come up with a good-enough value estimate, given the seller’s circumstances. Asking price is a matter of tactics, and settlement price is often a matter of circumstances.

When a seller has only one buyer, his choice is to make a deal or keep the property. If holding is not an option, the seller has to make the best deal he can. In that circumstance, a seller does what he has to do. The decision is forced upon him by circumstances, so there’s not a lot of agonizing.

When a seller has flexibility and holding power, he should make a good-faith effort to figure out his EWV. It makes setting an asking price and a settlement price much easier. When a buyer is close to the seller’s EWV, it’s time to make a deal.