What is my value?
With new County and City real estate tax assessments coming out across Virginia, I’m getting lots of questions about property values. Owners call wanting to know why the assessment values have fallen. Look back to an earlier post “Charlottesville, Virginia Area 2010 Home Sales Report” and you’ll see the residential real estate values fell a bit more in most areas during 2010. There also seems to be some confusion between Assessments, Appraisals and Comparative Market Analysis (CMA’s). Let’s take a quick basic look at all three valuation methods.
Real Estate Assessments
Cities and Counties in Virginia value real property (land and permanently fixed structure) at fair market value (the sale price on X date given reasonable market exposure) which should be equal to the assessment of similar real estate and apply the tax rate to get the annual real estate property tax amount to collect. Some Cities/Counties reassess property values every year keeping up with the market value others every other year to every few years. Some Central Virginia Counties have not reassessed real estate values since the highs of the mid 2000’s. Each jurisdiction conducts the assessment process a wee bit differently. Want to find a Virginia real estate assessment, please click here.
Real Estate Appraisal
Real Estate Appraisals are usually ordered by lenders (even thought the borrower usually pays for them) from licensed appraisers for purchase and refinance valuation. The Appraisers determine a value usually by computing a weighted average of Comparable Sales (usually similar properties in the same city or county having sold in the last six months), Replacement Cost (how much would it cost to replace the property which then may be discounted due to age), and rental value (property value determined by the economic potential of renting the real estate) on Y date. The appraiser also comments on the local real estate market and neighborhood.
Real Estate Comparative Market Analysis (CMA)
Real Estate Agents often use CMA’s to determine a value when working with sellers to determine the price to list real estate or for price adjustment purposes after real estate has been on the market but not sold. CMA may look at similar sales or use two or three of the valuations an appraiser would use (see above) in determining a weighted average depending on the market on Z date.
When looking at any of the valuation methods, it remains important to know when the valuation was done, what methods were used, and what adjustments needed to be made between the subject property and the comparables used in placing the valuation. When Real Estate Assessments were going up, many owners wanted to challenge their assessment and try to get a lower value (pay lower real estate taxes once the tax rate was applied to the appraised value). Most assessor’s offices will work with the owner to supply date and much of the data can be found online. If you desire to challenge your assessment, the Virginia Association of REALTORS has some great info through the Virginia Home Owners Alliance on challenging your assessment. If you not a member of the Virginia Home Owners Alliance, please consider joining today!
Also please remember, when meeting with a real estate agent to review a February 2011 CMA, the value may be different from the June 2005 appraisal and your 2011 county real estate tax assessment. They can all be correct and different since the X, Y and Z dates are different. The house you purchased with an appraised value in June of 2005 (near the top of real estate market values) probably will not have the same value as your 2011 county real estate tax assessment (with field work done to establish value in possibly May of 2010) which will probably not match the CMA done today. The only thing staying the same in our real estate market remains change! The market values of real estate continue to change. That’s why up to date CMA’s provide such valuable information to buyers and sellers in today’s market. With a changing market, it may be necessary to update the CMA monthly.
This brief overview of valuation methods may raise more questions. The only bad questions remains the one you do not ask. If you have questions or would like a review of your recent real estate tax assessment or would like a current CMA on your real estate, I am here to help, so let’s talk.