In VA, Estimating The Fair Market Value Of House
The appraisal staff employs three universally accepted approaches in estimating market values, using the most appropriate for the type of property being appraised.
Residential Properties - The market data approach is preferred in estimating the value of residential property, which experiences a high level of sales. The estimated value is obtained by comparing similar properties of the same type and class which have sold recently in the same neighborhood, taking into consideration other factors which may effect value, such as location, condition and physical characteristics. This approach is considered the most reliable in determining value because it reflects the balance of supply and demand in the marketplace; it is based on the principle that a typical buyer will not purchase property at a price higher than the selling price of similar property.
Non-Residential Properties- Properties such as shopping centers, office buildings and apartment complexes are purchased based on future earning capacity. These properties, therefore, are most often valued by the income approach, which recognizes the relationship between the property's value and the income it is expected to earn. The appraiser uses certain market data and mathematical computations to translate the estimated future income of a property into an estimate of present day market value.
Special purpose properties that rarely sell, such as schools, churches and banks, are valued by the cost approach. The current cost of replacement of the building, less accrued depreciation, plus the value of the land as determined by recent sales provide an estimate of value.
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