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IAAO Standards for High-Quality Assessments

Accuracy Estimated values should be reasonably accurate. The typical median
sales ratio should be within 0.95 and 1.05 – i.e., estimated values
should be within 5% of sale prices. This is determined by analyzing the
median sales ratio of properties in a class and region.

• Within a specific class of properties, median sales ratios lower
than 0.95 indicate under-assessment. Median sales ratios over
1.05 indicate over-assessment.
• When under-assessment or over-assessment occur, it means
that some property owners may have paid less than their fair
share of property taxes, while others may have paid more.

Uniformity Sales ratios should be uniform, or precise. Similar properties in similar
neighborhoods should have similar assessments.

• Similar properties with substantially different sales ratios
indicates non-uniformity. Take two homes with ratios of 0.80
and 1.20. Even though their average is 1.0, they are not
uniform. When non-uniformity occurs, it adds unfairness to the
property tax system.

Uniformity is measured using a statistic called Coefficient of Dispersion.
This measures how far away a typical property’s ratio is from the
median ratio. When most ratios are close to the median ratio, this
means assessments are uniform. When ratios vary, such that some are
significantly above and some are significantly below the median, this
means assessments are imprecise, or non-uniform.

Equity Assessments should be equally precise for properties that sold for
(Vertical Equity) $100,000 and for those that sold for $1,000,000 (and all others, too).
The IAAO measures assessment equity by analyzing whether sales
ratios are systematically higher or lower based on properties’ sale
prices. According to the IAAO, inequity can take the form of statistical
regressivity or progressivity.

• Regressivity occurs when properties with lower sale prices
have higher sales ratios, on average, than properties with
higher sale prices.
• Progressivity occurs when properties with lower sale prices
have lower sales ratios, on average, than properties with higher
sale prices.
When inequities like regressivity or progressivity occur in assessments,
the property tax burden is shifted inequitably.

Equity is measured using two statistics: Price-Related Bias, and Price-
Related Dispersion. If one of these statistical tests meet IAAO
standards, assessments meet the IAAO standard on equity.

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