Mass Appraisal of Residential Property (805)

Universe of Properties

A large number of selected parcels, sometimes all the property in the assessing jurisdiction

Standard Methodology

The use of standard methods results in a higher degree of uniformity and consistency, both among properties in the same appraisal and from one appraisal to the next

Statistical testing

Mathematical and statistical methods that are producing better and more consistent value estimates

What is meant by a “universe” of propterties

A “universe” is a large number of properties, perhaps all the properties in the assessing jurisdiction.

What is the first advantage of using standard methodology in a mass appraisal?

Greater consistency or uniformity in value estimates

What is the second advantage of using standard methodology in a mass appraisal?

Reasonable substantiation of the value estimates

What is the major benefit of using mathematic and statistical methodology in a mass appaisal?

They can produce better and more consistent value estimates

The assessor is required to value all property uniformly and fairly. This is necessary for the property tax burden to be distributed equitably among all property owners. Assessed value is based on a percentage of the estimated market value of a parcel of property as established by the taxing jurisdiction. The property tax, in turn, is based on the assessed value, which is known as ad valorum taxation. For example, let us say that, in your jurisdiction, assessed values are set at 25% of estimated market values, and that property taxes are 8% of assessed values. If your property has an estimated market value of $50,000, what would be its assessed value?

$12,500

The assessor is required to value all property uniformly and fairly. This is necessary for the property tax burden to be distributed equitably among all property owners. Assessed value is based on a percentage of the estimated market value of a parcel of property as established by the taxing jurisdiction. The property tax, in turn, is based on the assessed value, which is known as ad valorum taxation. For example, let us say that, in your jurisdiction, assessed values are set at 25% of estimated market values, and that property taxes are 8% of assessed values. If your property has an estimated market value of $50,000, what would be its assessed value? What would be the amount of your property tax?

$1,000

What would happen if your property’s market values was improperly estimated at too high an amount, and your neighbors was improperly estimated at too low an amount?

You would be paying more than your fair share of the property tax, and your neighbor would be paying less than a fair share.

The assessor may use a sales-ratio study to evaluate the fairness and uniformity of the distribution of the tax burden. A sales ratio is computed by dividing the assessed value of a parcel of property that has recently been sold by its sales price. The result is usually expressed as a percent. For example, if property with an assessed value of $15,000 is sold for $70,000, the sales ratio is 21.4%. ($15,000/$70,000) x 100% = 21.4%. Other names are often used in place of sales-ratio study. The most common are assessment/sales ratio analysis and assessment/sale price ratio analysis. If property with an assessed value of $20,000 is sold for $110,000, what is the sales-ratio?

18.2%

Mass appraisal

The process of valuing a universe of properties as of a given data, in uniform order, utilizing standard methodology, employing a common reference for data, and allowing for statistical testing.

During the last two years property values have risen

What is the first condition that indicate a need for reappraisal?

A large variation among sales ratios calculated from properties recently sold in the jurisdiction

What is the second condition that indicate a need for reappraisal?

A uniform underestimate of all property values, usually caused by a uniform increase in property values since the last appraisal

Suppose that twenty-five residential properties were sold within your jurisdiction in the past month. Sales ratios were calculated, and a large amount of variation was present. Is there a need for reappraisal?

If the tax burden in your jurisdiction is equitably distributed, what should you be able to say about the sales ratios for recently sold properties?

There should not be much variation among the sales ratio

If the total estimated market value of property in the jurisdiction is $100 million, and the assessed values are set at 25 percent of market values, what is the total assessed value of property in the jurisdiction?

$25 million

If market values rise 20 percent to a total of $120 million, but no change is made in the assessed value, what will happen to the assessed value/ market value percentage?

It will fall to 20.8%

If market values rise 20 percent to a total of $120 million, but no change is made in the assessed value, what will happen to the assessed value/ market value percentage? How can this problem be corrected?

The assessor can raise the percentage back to 25% by reappraising the jurisdiction’s property. A total estimated market value of about $120 million will result. The 25 percent assessed value figure can be applied, resulting in a new total assessed value of $30 million.

When can an assessment deficiency be corrected simply by raising all the market value estimates by the same percentage?

A uniform percentage increase can be used when there is a uniform underestimate in the market value of all the properties.

Four common types of possible assessment bias

Age, cost/value, location, and type

Age Bias

Newer properties may change in value at a rate that differs from that for older properties

Cost/Value Bias

Expensive properties may change in value at a rate that is higher or lower than that for inexpensive properties

Location Bias

Properties in different locations may change in value at different rates

Type Bias

Properties of different types (residential, commercial, industrial) may change in value at different rates

What type of bias is present in each of the following situations?

The market value of a store in the center of town has not changed in the last three years, while the market value of another store in a popular shopping mall on the edge of town has been steadily increasing. As a result, the downtown store is over assessed, while the one in the shopping mall is under assessed.

Location

What type of bias is present in each of the following situations?

Established residential properties near the center of town have been increasing in market value at about 8 percent per year, while residential properties in a new subdivision nearby have been increasing at about 12 percent per year. Therefore, the subdivision properties are under assessed, while the established residential properties are over assessed.

Age

What type of bias is present in each of the following situations?

The market values of light manufacturing plants at the edge of town have been increasing, while the market values of adjacent residential properties have been declining. Therefore, the manufacturing properties are under assessed, and the residential properties are over assessed.

Type

Planning

The management function of determining what must be done, and how, when and by whom it should be done

Organizing

The management function of logically grouping activities, identifying and obtaining the required resources, and establishing the appropriated authority and responsibility relationships among the people doing the work.

The goal of both planning and organizing is

to get the job done efficiently and efficiently as possible

For each of the following, decide whether the item represents a planning function or an organizing function:

a) Data processing facilities have been arranged to be available when needed. ________________

For each of the following, decide whether the item represents a planning function or an organizing function:

Smith will prepare the appraisers’ field manual, under the supervision of Jones.

For each of the following, decide whether the item represents a planning function or an organizing function:

Electronic data processing will be used to analyze certain mass appraisal data.

For each of the following, decide whether the item represents a planning function or an organizing function:

Ten thousand parcels of property will be reappraised within the next year.

Why are planning and organizing important in a mass appraisal?

A mass appraisal represents a set of numerous and complex activities. Without planning and organizing, the work is likely to fall behind schedule, and will consume more resources than necessary. The work will be neither effective nor efficient.

What are the major activities in the mass appraisal process?

Reassessment decision, planning and organizing, analysis of available resources, determination of essential variable property features, data collection, approaches to valuation, and performance analysis

Referring to the activities shown in the diagram of The Mass Appraisal Process and what you’ve learned thus far, identify the major activity to which each of the following is related:

Updating depreciation schedules.

Data Collection

Referring to the activities shown in the diagram of The Mass Appraisal Process and what you’ve learned thus far, identify the major activity to which each of the following is related:

Computing replacement cost new.

Approaches to valuation (cost approach)

Referring to the activities shown in the diagram of The Mass Appraisal Process and what you’ve learned thus far, identify the major activity to which each of the following is related:

Determining what data processing facilities are available.

Analysis of available resources

Referring to the activities shown in the diagram of The Mass Appraisal Process and what you’ve learned thus far, identify the major activity to which each of the following is related:

Designing forms for appraisal data.

Determination of essential variables

Referring to the activities shown in the diagram of The Mass Appraisal Process and what you’ve learned thus far, identify the major activity to which each of the following is related:

Using a sales-ratio study to determine whether a reappraisal is necessary.

Reassessment decision

Referring to the activities shown in the diagram of The Mass Appraisal Process and what you’ve learned thus far, identify the major activity to which each of the following is related:

Establishing the relationships of authority and responsibility among the personnel in the assessor’s office.

Planning and organizing

Referring to the activities shown in the diagram of The Mass Appraisal Process and what you’ve learned thus far, identify the major activity to which each of the following is related:

Checking the quality of the mass appraisal results.

Performance analysis