Each year the level of assessment is checked for residential properties by use of the assessment-to-sale ratio (ASR). ASR analysis is the process of comparing assessed values with the actual sale prices of properties that have sold in the previous calendar year. For example, if the assessed value of a single family was $200,000 but it sold for $250,000, this would produce a ratio of 0.80, or 80%.
Annually there are between 700 to 1,200 arms-length (valid) sales of single-family homes in the city. If the median (the middle) ASR is less than 95% or more than 105%, a revaluation is in order. It is more equitable for both the taxpayer and the city to revalue annually as opposed to the DOR mandated three-year cycle. In appreciating markets, this allows the level of assessment to keep pace with market value and in depreciating markets; assessments are lowered to reflect declining values.
After determining that a revaluation is in order, the next step is to carefully verify the validity of all known sales from the previous calendar year. Once completed, the computer modeling begins with only this validated data.
There is a formula utilized to determine the valuation of each residential property. There are about twenty-five (25) variables used each year, most are quantitative but some are qualitative. For instance; room count, bedrooms, bathrooms, half-bathrooms, lot area, garage, fireplaces, square feet of living area, square feet of porch/deck area and heating system type are all quantitative variables. Neighborhood location, style of house, quality of construction and condition of structure are all qualitative variables.
The Assessor has a complex computer application that calculates the values, called coefficients, assigned to each quantitative variable. Reference descriptors (factors) are the benchmark, or starting, values of the qualitative variables. The procedure used is called Adaptive Estimation Procedure (AEP or feedback), which was first introduced as an assessing technique in the early 1980s. The application is a statistical technique for estimating unknown data on the basis of known and available data. In computer assisted mass appraisal, the unknown data are market values. The known and available data are sales prices and property characteristics. The program models a relationship between the twenty-five variables and the known sales prices.
The proposed formula using these values is then entered into the VISION computer model, which calculates the valuations for all of the sale properties of the previous calendar year. The assessment-to-sales ratios (ASR) are calculated and the statistical analysis begins. Properties are sorted by neighborhood to verify each level of assessment (median ASR) and the uniformity of assessments (coefficient of dispersion - COD). Each style of home (colonial, ranch, Victorian, bungalow, etc.) is also similarly analyzed, as are two other categories specified by the DOR. First, each price quartile is analyzed, from the lowest quarter of sale prices, to the next highest quarter, and next quarter and finally the highest quarter of sale prices. This analysis ensures that all properties are assessed at the same level of assessment. The second DOR analysis is the time-of-sale quartiles (January-March, April-June, July-September and October-December). This ensures that our assessed values are uniform and equitable in translating the data collected over the entire twelve-month period. These initial statistical tests invariably show that some of the reference descriptors (factors) have to be adjusted to more accurately reflect the actual sale prices. The computer model is thus adjusted and re-run and, after 25 to 40 separate adjustments and re-runs, the coefficients and factors finally make the statistical hurdle in terms of both level and uniformity of assessments.
Over 1,000 statistical tests are conducted for the single-family homes alone. The median ASR of each separate group must be within five percent of the overall median ASR and the COD must be less than ten percent according to DOR standards. This means that our assessments are within ten percent of the exhibited sale prices. After obtaining this level of conformity, the formula is then applied to all 42,000 properties in the VISION model. This process of valuation and statistical analysis is carried out annually by the Assessor. The DOR audits our methods and practices every three years according to statute.