This is a reasonable and common concern, and one I shared until I looked into it in fine detail. Turns out it's far easier to estimate the value of land that things sit on than the entire property value, and most of the country actually operates on continually updated estimates of total property value rather than just land.

There's several anchoring sales nearby, you can regress out from all sales, etc. etc. And it's smoothly varying for nearby parcels, with very little change!

A much better explanation than what I can write can be found in the "Estimating" section here https://landeconomics.org/reports/california-billionaire-wea...