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Properties are appraised for ad valorem tax purposes in order to have schools, fire, police protection, trash collection and other public benefits. The property tax is designed to distribute the tax burden in proportion to the amount of money our individual properties are worth.
The Code of VA requires that all properties be assessed for taxation at 100% of fair market value. The same law requires Cities the size of Salem to assess properties on an annual or biannual cycle. The City of Salem Council has decided that we will conduct a reassessment annually. During the reassessment cycle all property values are examined and adjustments made where necessary to insure that all property is assessed at fair market value and distributed equitably and uniformly.
The definition of market value as defined by the International Association of Assessing Officers is: The most probable sale price of a property in terms of money in a competitive and open market, assuming that the buyer and seller are acting prudently and knowledgeably, allowing sufficient time for the sale, and assuming that the transaction is not affected by undue pressures.
Finding the market value of your property involves discovering the price most people would pay for it in its present condition. This process involves researching sales information, including interviewing persons familiar with the transaction, sending out sales verification forms to the new owners, verifying information using the Roanoke Valley Association of Realtor's MLS website, and making physical inspections of the property to ensure all property characteristics are accurate and to identify the most recent trends. The assessor then compiles similar property type sales and compares the information against the assessments on those properties to determine whether adjustments to the assessments are warranted.
To find the value of any piece of property, the assessor must first know what properties similar to it are selling for, what it would cost to replace it today, how much it takes to operate and keep it in repair, what rent it may earn, and many other factors affecting its value, such as the current rate of interest charged for borrowing money to buy or build properties like yours.
Using these facts, the assessor can then go about finding the property's value in three different ways:
The first method compares your property to others that have sold recently. These prices, however, must be analyzed very carefully to get the true picture. One property may have sold for more than it's worth because the buyer is in a hurry and would pay any price. Another may have sold for less than it was actually worth because the owner needed cash right away and the property was sold to the first person who made an offer. When using the sales comparison approach, the assessor must always consider such overpricing and underpricing and analyze many sales to arrive at a fair valuation for your property. Size, time, quality, condition, and location are also important factors to consider.
A second way to value your property is based on how much money it would take, at current material and labor costs, to replace your property with one similar. If your property is not new, the assessor must also estimate how much value has been lost to wear and tear or other factors such as obsolescence. The adjustment called depreciation is then deducted from the replacement cost. Finally, the assessor estimates the value of your lot and adds this to the depreciated cost to arrive at the total property value.
The third way is to evaluate how much income your property would produce if it were rented as an apartment house, a store, a factory, etc. The assessor must consider operating expenses, taxes, insurance, maintenance costs, and the return most people would expect on your kind of property. The net income from the operation of the property is then capitalized into a value estimate by using a rate that provides a return on and off the property investment. This method is seldom used to appraise single-family residential properties. The City of Salem uses this approach on income-producing properties such as offices, shopping centers, apartments, and like properties.
Property values can change for many reasons. The most obvious are changes to the property itself, for example, an addition, garage, swimming pool or other improvements, or if the property is destroyed by flood or fire.
Additionally, property values change as a result of what other similar properties are selling for. When sale prices indicate new trends then the assessments need to reflect those changes. Buyers and Sellers dictate market value by their transactions in the marketplace. It is important to note that the assessor does not create this value. The assessor simply has the legal responsibility to study those transactions and appraise your property accordingly.
In order to make the most accurate assessment on a property, it is desirable to see the inside and outside of the property. The City of Salem keeps records on physical characteristics for each property and makes every attempt to continually verify this information with the owners. Even though the assessor may not have been able to go inside your property, the assessment will still be reviewed, based on the existing records and sales of similar properties.
No. However, when an interior inspection is not allowed, the assessor will attempt to update the records by looking at the outside of the property and using any other information available. To ensure an accurate assessment, it is to your advantage to allow the assessor inside your property if requested.
When reviewing properties in the City of Salem where the owner is not at home, the assessor will leave an information request on your door, if information is needed. You may then call back to the assessor's office with the information.
While improvements to property obviously bring changes in values, sometimes just general economic conditions can affect property values. Supply and demand and interest rates, inflation rates and changes in laws can influence the value of real estate. Those resulting value changes must be reflected in the assessments.
There are differences between individual properties and neighborhoods. One neighborhood may have sales that indicate a change in value, while sales in another may not reflect any change at all. Different types of properties within the same neighborhoods may also show different value changes. For example, one-story houses may be in larger demand than two-story houses, or vice versa. Older home values might rise slower than newer homes.
There are numerous factors to be considered by the assessor when reviewing property values, thus causing different areas and types of properties to change values at different rates.