Definition of "Assessment Sales Ratio"

Helen  Reece real estate agent

Written by

Helen Reeceelite badge icon

Remax Executive

The assessment sales ratio is a way of measuring the accuracy of a property’s assessed value when compared to the property’s selling price. This measurement gives the municipalities an analysis of how real estate is assessed in relation to how it is sold. It is a measurement that helps municipalities better organize the distribution of public funds to improve the community. 

Why are Assessment Sales ratios important?

The assessment sales ratio is used to make sure the assessments are as accurate as possible to the fair market value of the properties in a city. The reason why this process is so important for municipalities is because taxes are established by assessment ratios. If the assessment values aren’t similar to the market values, then taxes aren’t calculated properly for those properties. And taxes are also the generator of school fundings and other public funds spent in those neighborhoods.

Municipalities have assessors that are responsible for correctly assessing the value of a property. These homes are usually assessed every year, but there are taxing authorities that only do them every five years. An assessment is done by taking into account the property itself as well as other properties surrounding it. These assessments are done to determine a median assessment sales ratio in an area of a city or for the entire city (with metro-areas there are subclasses analyzed). Every house in the area surveyed is assessed, then the assessment to sales ratio is calculated for each house to determine the median ASR in an area.

This assessment to sale ratio also helps municipalities determine the coefficient of dispersion, which is a way to measure the variations of individual ratios to the mean ratio in an area. It is used to understand the consistency or interchangeability of the assessed value of the real estate in an area or neighborhood.

How is the Assessment Sales Ratio (ASR) Calculated?

The selling price of a property is divided by its assessed value. If the real estate has a selling price of $400,000 but its assessed value is 438,000, the ratio is 1.053. An assessment sales ratio below 1 shows that the property has been assessed below the market value. If the ASR is above 1 then the property has been assessed above the market value.

The formula to calculate the ASR:

Assessment to Sales Ratio = Assessed Value of the Property / Selling Value of the Property.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

Any walls constructed without using concrete or mortar. Drywall materials include sheetrock, gypsum, plywood, Styrofoam, and pressed fiver. See also drywall construction. ...

An insect, such as a termite, that "eats into" the wood and destroys it. This can cause significant damage to the home. Most states have laws that require termite inspection and ...

Word, or group of words, that identifies a business or one of its products. The name is registered with U.S. Patent Office and provides legal protection for an indefinite number of renewals ...

Also called real property. Anything permanently affixed to the land, such as buildings, walls, fences, and shrubs, as well as the rights to own or use them. It is distinguished from ...

Projecting what the total cost would be to construct a structure. Costs include material, labor, and lawyers' fees. ...

Square footage of space a parcel of land has. ...

Geographical area for which a given governmental agency has authority and responsibility. For example, the jurisdiction of a county court is the county in which it is located. ...

Adding a period of time onto another. An examples a mortgagor who successfully restructures his loan by tacking another five years onto the term. ...

Exposure can have various meanings in real estate and insurance, depending on the context. Let’s have a thorough look at these scenarios! Exposure as property’s ...

Popular Real Estate Questions