The market value of a property is the value of the entire property. It is the value that the entire property would have in one transaction. However, many things combine to give a property value. Some of the things that give a single family dwelling property value are the size of the dwelling, the number of bath rooms, a fireplace or a garage as examples. These things are often referred to as components. The amount that a component such as a fireplace or a garage contributes to the total value is known as its contributory value.
Estimating a component’s contributory value can be tricky. An hypothetical example: a single family dwelling in Chittenden County Vermont that is on one acre, 2,900 square feet, three bed rooms, two & a half baths, attached two car garage, built in 1992, very good condition recently sold for $590,000. If the new owners install a $25,000 in-ground pool, would the market value of the property increase to $615,000? In Vermont the answer is probably not. The amount of change in market value due to the pool is the pool’s contributory value. If the market value goes up by $7,500 then the pool’s contributory value is $7,500 even though it cost $25,000.
Cost and value are not the same things. One of the typical mistakes some Assessors or Listers make is to estimate the cost of each component of a property and then add them all up to arrive at a total market value. This would only work if all of the components had contributory values that equaled their cost.