Overview of the Mass Appraisal Process

The mass appraisal process is a systematic approach to valuing a large number of properties efficiently and equitably. It involves the following key steps:

1. Collection of Property Data

Accurate and comprehensive property data is essential for mass appraisal. Data collection includes:

• Physical Characteristics: Size, location, construction quality, age, and condition.

• Land Features: Lot size, topography, and zoning.

• Use and Occupancy: Residential, commercial, agricultural, etc. Field data collectors or assessors gather this information, often supplemented by aerial imagery, permits, and property owner submissions.

2. Collecting and Verifying Market Data

Market data is critical to understanding trends and establishing property values. This involves:

• Sales Data: Recent sales transactions are analyzed to identify market trends.

• Verification: Sales data is verified for accuracy to ensure it reflects arm’s-length transactions.

• Economic Data: Insights into local market conditions, supply, demand, and economic factors affecting value.

3. Development of the Valuation Models.

Most properties are valued on the cost approach where we estimate the following:

• Replacement Cost: The cost to construct a similar structure with modern materials and standards.

• Depreciation: Adjustments for physical wear, functional obsolescence, and external factors.

• Land Value: Estimated separately, often using comparable land sales.

Income and expense data can also be collected and reviewed as necessary.

The valuation models are developed, tested, and verified to be accurate by sales via ratio studies. More on ratio studies is below.

4. Final Review

Before finalizing values:

• Data Accuracy: All property and market data are reviewed to ensure completeness and accuracy.

• Equity Checks: Assessed values are compared within neighborhoods to ensure fairness.

Ratio Studies in Mass Appraisal

Ratio studies are a critical tool in mass appraisal, used to evaluate the accuracy and equity of property assessments. They compare the assessed value of properties to their actual market value, typically determined from verified sales data. These studies help assessors determine whether properties are being valued fairly and consistently, both within and across property classes, neighborhoods, and throughout the jurisdiction.

How Ratio Studies Are Calculated

The primary measure in ratio studies is the Assessment-to-Sale Ratio (ASR), which is calculated using the formula:

An ideal ASR reflects uniformity and compliance with statutory standards. For example, if a jurisdiction aims to assess properties at 100% of market value, an ASR of 1.00 indicates perfect alignment. Ratios below 1.00 suggest underassessment, while ratios above 1.00 indicate overassessment.

Additional statistical measures in ratio studies include:

• Median ASR: The midpoint ratio, providing a measure of central tendency.

• Coefficient of Dispersion (COD): A measure of uniformity that calculates the average deviation of individual ASRs from the median. This score is a measure of horizontal equity. It gauges how the assessments are across the board spectrum of properties within the jurisdiction including, large properties, small properties, large acreage tracts, small town lots, etc.

• Price-Related Differential (PRD): A measure of vertical equity, which identifies whether high- or low-value properties are disproportionately assessed.

Stratification of Sales

To improve accuracy and ensure equitable results, ratio studies often involve stratification. Sales data is grouped based on property characteristics or market factors, such as:

• Property Type: Residential, commercial, agricultural, etc.

• Location: Neighborhoods, school districts, or zoning areas.

• Value Ranges: High-, mid-, or low-value properties.

• Sale Date: Ensuring analysis reflects current market conditions.

• Age , quality of construction, and condition are all considered.

Stratification allows assessors to identify patterns or disparities in valuation across different segments, facilitating targeted adjustments to improve equity.

Purpose and Importance

Ratio studies serve multiple purposes:

• Ensuring Equity: Identifying and correcting inconsistencies in assessments.

• Evaluating Performance: Providing metrics to evaluate compliance with state or local standards.

• Supporting Reappraisals: Informing adjustments to valuation models or methods.

Ratio studies are an important part of the real estate assessment process.

Fee Appraisal vs. Mass Appraisal

Fee appraisal and mass appraisal are distinct methods used to determine the value of real estate, differing in their purpose, scope, and methodology.

Fee appraisal, also called individual appraisal, is a detailed and in-depth evaluation of a single property. This method is typically used for purposes such as property sales, refinancing, estate planning, or litigation. A fee appraiser focuses on the specific features of the property, including its location, condition, improvements, and relevant market trends. The result is a comprehensive report that provides an accurate estimate of the property's market value.

In contrast, mass appraisal involves valuing a large number of properties systematically and uniformly. This method is most commonly used for property taxation. Instead of focusing on individual properties, mass appraisers use mathematical models and market data to estimate the values of multiple properties in a cost-effective and consistent way. The goal is to ensure uniformity and equity in property valuations across a broad area.

In summary, while fee appraisals provide a customized, property-specific valuation, mass appraisals focus on efficiently valuing many properties with a standardized approach, meeting the distinct requirements of each appraisal method.