Home Market Value

There are 3 common methods to find the value of a property:

1. cost approach

2. income approach

3. fair market value comparison approach

The best and most widely-used approach to use in your tax appeal is the fair market value comparison approach. This approach uses sales and appraisal data and examines the current relationship between these two factors.

This is done by comparing the market value of your house to other houses of similar size, location, etc. which have recently been sold.

1. The cost approach is used by the assessor to value your property. Because it values each component of a building structurally, it is difficult to use.

2. The income approach is used when valuing income-producing property. Even though residential property is sometimes rented, the income approach is generally not used.

3. The fair market value comparison approach uses the principle of substitution. The principle of substitution states that the maximum value of your house and property tends to be set by the sales price of an equivalent, equally desirable, similar substitute house and property, for a certain date in time.

This market approach is most easily understood and most relied upon by the taxing authorities to capture the realistic value of your house and property. There are four basic phases involved in this approach:

• Recording and analyzing data from your property and potential comparable properties
• Selecting the appropriate comparable data
• Developing reasonable adjustments based on market data
• Applying your findings to the subject (your property)

Formula for fair market value comparison approach:

Sales Price of Comparable Property + or - Adjustments = Market Value of Subject Property (your property)

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For further information and for authentic dollar amounts to use in adjusting for a particular item when determining a cost approach to value, Marshall and Swift Residential Cost Handbook provides an excellent reference. You can find it in most larger libraries. Marshall and Swift contains individual building costs for various style buildings for all 50 states, the U.S Territories and the Canadian Provinces

popular cost manuals are Means Cost Calculator, Boeckh Building Manual, and Dodge Building Manual found in your local or county library (the county library is the most likely source). See Appendix C for a complete description of likely sources of information.

Another fast and expedient way to get a market value figure for a particular item or structure is to speak to the local tax assessor, appraiser or loan officer at a financial institution where you do business. Ask for a figure to check against for a particular adjustment you have in mind.

Most people in the profession are very co-operative as long as you don't waste too much of their time. Bring a picture of the item you are seeking to evaluate. Attach it to a blank sheet of paper and get it signed and dated to further validate the value for a particular item. Include this in your appeal as supplemental evidence if it is accurate and supports your appeal. Appraisal firms often make disrupting phone calls to individuals to find financial data in their search for market value. Appraisal firms should be willing to reciprocate and answer a question or two if you keep the call courteous and brief.

The Comparative Market Analysis (CMA) that real estate brokers employ is not a bona fide appraisal. Real estate firms may provide this for free or for a small charge. It is not thorough, complete, supportable or defensible in most situations. Do not use this information in a tax appeal. However, for valuation on specific items, a Realtors® professional designation is respected as an authority on market conditions and his or her opinion has some auxiliary value.

COSTS VS. VALUE OF IMPROVEMENT: Survey of Realtors®

Each year, hundreds of real-estate agents nationwide are asked to rate improvements. Remodeling magazine, a trade publication for contractors, publishes a yearly financial pay back survey and compiles it in its annual Cost vs. Value Report. This 2008 report identifies and ranks building projects that deliver the best return for money spent on them, Google for this on the internet: 2008 Cost vs. Value Report From Remodeling Magazine