The Assessor's Office relies on technology to provide the speed and accuracy needed to value tax parcels promptly. At the heart of this technology is "the appraisal process," a universally accepted methodology which guides the valuation of real estate among all professional appraisers.
Fee Appraisal and Assessment Appraisal
Assessment professionals deal with many properties at once, but the basic approach to value is the same as that utilized in the private sector.
The City maintains data on the physical characteristics of all properties, collects and analyzes data on all properties sold in its jurisdiction and uses this data to construct valuation tables that can be applied to the various components of value to arrive at a total for each parcel.
These totals are individually checked against the sale prices of nearby properties to ensure that they are reasonable.
Properties that rely upon income production for their value are more complicated and are assessed using more sophisticated techniques.
Fair Market Value
Fair market value is defined by the courts as, "The price it will bring when it is offered for sale by one who desires but is not obliged to sell it, and is bought by one who is under no necessity of having it.”
Title 58.13201 of the Code of Virginia states that "All real estate, except that exempted by law, shall be subject to such annual taxation as may be prescribed by law ... all general assessments or annual assessments in those localities which have annual assessments of real estate, except as otherwise provided ... shall be made at 100 percent of fair market value."
Experts in the field of assessment administration advocate a full value assessment because the results are more equitable and realistic and property owners can more easily understand an assessment that represents the current market value of their property.
The Three Approaches to Value
The assessor follows accepted professional appraisal practice in the valuation of the tax parcels under his or her jurisdiction. This consists of three universally accepted approaches to value:
Sales Comparison Approach: The most popular and accurate for determining market value when adequate sales of comparable properties similar to those being appraised exist. Adjustments for differences in the properties are made, and value is estimated for the subject by comparison.
Cost Approach: Consists of estimating the current reproduction or replacement cost of the improvements, deducting any accrued depreciation, and adding the value of the land.
Income Approach: Most applicable to commercial properties that are bought and sold based on their earning potential. The process involves estimating the potential gross income from the property, then deducting typical vacancy and collection losses and operating expenses to arrive at net operating income. This net operating income is then converted into value using market-derived capitalization rates that reflect the relationship between net income and market value.