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King County Department of Assessments

Fair, Equitable, and Understandable Property Valuations

Department of Assessments

500 Fourth Avenue,
Suite ADM-AS-0708,
Seattle, WA 98104

Office Hours:
Mon - Fri
8:30 a.m. to 4:30 p.m.

TEL: 206-296-7300
FAX: 206-296-5107
TTY: 206-296-7888

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Glossary of terms for commercial parcels

CAPITALIZATION
Capitalization is the process of converting a series of anticipated future payments (income) into present value.  Capitalization transforms net operating income produced by a property into the property value.

CAPITALIZATION RATE
A composite rate used for converting property income into property value.

CENTRAL TENDENCY
(1) The tendency of most kinds of data to cluster around some typical or central value, such as the mean, median, or mode. (2)  By extension, any or all such statistics. Some kinds of data, however, such as the weights of cars and trucks, may cluster about two or more values, and in such circumstances, the meaning of central tendency becomes unclear.  This may happen in ratio studies when two or more classes of property are combined.

COLLECTION LOSS
The loss resulting from the failure of tenants to pay the rent.

COEFFICIENT OF DISPERSION
The average deviation of a group of numbers from the median expressed as a percentage of the median. In ratio studies, the average percentage deviation from the median ratio.

COEFFICIENT OF VARIATION (COV)
A standard statistical measure of the relative dispersion of the sample data about the mean of the data; the standard deviation expressed as a percentage of the mean.

COST APPROACH
One of the three approaches to value, the cost approach is based on the principle of substitution – that a rational, informed purchaser would pay no more for a property than the cost of building an acceptable substitute with utility.  The cost approach seeks to determine the replacement cost new of an improvement less depreciation plus land value.