Assessment Sales Ratio
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.
Popular Real Estate Terms
The amount of inherent risk for a mortgage in granting a mortgage. An operating principle in mortgage risk rating is that the mortgage cannot exceed 2.5 times the mortgagor's annual income, ...
Lien on a given property, such as an person's house as a collateral for a loan. ...
Legal status conferred by certain states on a homeowner's principal residence. In certain states, homestead status may provide protection against creditor claims or forced land sales ...
Cost of the standard unit of area that is used to measure a parcel of real estate. Commercial property rentals are generally quoted on the basis of square foot cists. For example, a ...
Same as term higher and best use: Use of a parcel of land that will produce the greatest current value. ...
Land subject to an easement. ...
Commercial building having several different uses blending together. For example, retail shops are on the first floor, professional offices are on floors two through ten, and a restaurant ...
Provision at the end of a document, such as a will, wherein the witnesses sign that the instrument has been executed before them. This may be useful involving transfers of real estate. ...
Out-of-state or out of jurisdiction administrator appointed to probate a decedents property when there is no executer or executrix. ...
Have a question or comment?
We're here to help.