Fair Market Value can be defined as what a willing seller accepts for a house and property, in dollars, from a willing buyer, both being informed as to what is happening in the housing market. The property must be exposed to the market for a reasonable amount of time (the sale must be an arm's length sale, in other words, not a brother-in-law deal). So, what does all this mumbo jumbo mean? It means that no one will buy a house and pay more than he absolutely has to, right. Right! It also means, no one will sell a house for less than he absolutely has to. That is "THE MARKET".
There are three nationally recognized methods to determine fair market value. They are:
1. Cost Approach
2. Sales Comparison Approach
3. Income Approach
The cost approach is as its name implies based upon the cost or reconstruction cost new minus depreciation. A disadvantage of this approach is that accurate depreciation schedules for specific areas such as St. James Parish are not available.
The sales comparison approach is generally the most widely accepted because it is based on market sales (fair market value). The only drawback with this method is that there must be sufficient sales to be able to use this method.
The income approach for single family residential housing is not always an approach that can be applied unless there are a sufficient number of homes that are being rented. Fair market value is determined by capitalizing the net income.
Currently, the St. James Parish Assessor's Office relies heavily upon the sales comparison approach, because with over 400 home sales in the last four years, this approach yields the most accurate fair market values. We use the known sales prices of homes along with each feature such as square feet of living area, age, quality, condition, land size, along with a number of other features, and apply these to homes that have not sold to determine their fair market value.
Please direct question to the St. James Parish Assessor's Office.