ROCKINGHAM — According to The Listers' Handbook, there are 12 considerations that Listers adhere to in determining the highest and best use:
• Anticipation: This relates to the future benefits associated with property. It is closely related to the principle of change.
• Balance: The maximum return is realized when the four agents of production (land, labor, capitol and management) are balanced.
• Change: Because of the principle of change, an appraisal is only applicable on the day it is made.
• Competition: Buyers and sellers are attracted to the market by the desire for profit. Profits encourage competition for those profits. An oversupply can reduce profits and therefore value. A shortage in the supply can bring about higher profits and therefore increase value. Excess can mean a loss in value for all facilities of that type.
• Conformity: Property value can be affected by how the property relates to its surroundings. Maximum value is realized when the subject property is reasonably similar to the properties surrounding it, and when the demographics of the owners (age, income, education, etc.) are similar.
• Consistent use: This principle requires that an entire parcel must be valued with a single highest and best use. That is, the land cannot be valued on one basis and the buildings on another.
• Contribution: The value of any component of a property depends upon that component's contribution to the whole. In other words, cost does not necessarily equal value. It may cost $10,000 to build a garage. That does not necessarily equate to an increase of $10,000 to the parcel. Having a garage on that parcel may only add $8,000 to the value. That means $8,000 is the contributory value of the garage.
• Increasing and Decreasing Returns: It is described as “…when successive increments of one agent of production are added to fixed amounts of the other agents, future net benefits (income or amenities) increase up to a certain point (the point of decreasing returns) after which successive increments will decrease future net benefits.” Property Assessment Valuation, 2nd edition, 1996.
Progression and Regression: This is related to the principle of conformity. A lower priced (cost to build) property located among higher priced properties, will likely increase in value because of its association with the properties surrounding it. Conversely, a higher priced property located in a neighborhood of lower priced homes will tend to see a decrease in market value. A $250,000 home in a community of $80,000 homes is an example of such an over improvement.
Substitution: This is the underlying principle of the three approaches to value-cost, market and income. It states that value is determined by the cost of acquiring, within an acceptable period of time, an alternative property that is equally desirable.
Supply and Demand: The price a property will bring in the market varies in accord with the abundance of that property and the number of buyers trying to purchase.
Surplus Productivity: This is the net income realized after having satisfied the costs of labor, management, and capital. It is essentially the profit earned by the land. It relates to the principles of balance, contribution, and increasing and decreasing returns.