Determining Market Value
Minnesota's statutory definition of Market Value describes it as the usual selling price at the time of assessment. A more detailed definition developed by the International Association of Assessing Officers defines market value as the most probable price expressed in terms of money that a property would bring if exposed for sale in the open market in an arm's length transaction between a willing seller and a willing buyer both of whom are knowledgeable concerning all the uses to which the property is adapted and for which it is capable of being used. An arm's length transaction is a sale between two unrelated parties both seeking to maximize their position from the transaction.
How does the Assessor determine market value? State law requires that the value and classification of real estate be established as of January 2 each year. The Assessor’s Office works throughout the year to estimate the market value of each property for the following January 2 assessment date.
How does the Assessor determine market value? State law requires that the value and classification of real estate be established as of January 2 each year. The Assessor’s Office works throughout the year to estimate the market value of each property for the following January 2 assessment date.
- Views Property: Approximately every 5th year, an appraiser will view the property. In addition, all new construction, alterations, or improvements will be viewed in the current year.
- Gathers Information: The appraiser gathers information on all characteristics of the property that affect market value, such as size, age, quality, basement finish, and also extra features such as fireplaces, extra baths, walkouts, sheds, etc.
- Estimates Value: The property characteristics are entered into a computerized system. The computer aids the appraiser in estimating the property value. Information from actual sales is used to update the computer model and set the table schedules which are used to update your market value. The market value estimated by the assessor should be at, or very close to, the amount the property would sell for if placed on the open market.
- Assessment Statistics are analyzed: There are numerous statistics which are analyzed to ensure assessments are equalized and fair.
- Median Ratio – The median ratio for all sales in a jurisdiction must be maintained between 90% and 105% for compliance with the Department of Revenue. When the median ratio falls below or rises above a compliant level, this is when most properties will see changes to their values. These changes are made in response to changes in market activity and can happen even if no changes have been made to your specific property.
- Coefficient of Dispersion – The Coefficient of Dispersion (COD) is a measurement of how tightly grouped sales ratios are in a specific jurisdiction. This is another statistic which has levels of compliance for different property types. When the COD rises above a compliant level, it indicates the quality of the assessment is poor. When the COD becomes too low, it is often viewed as an indication of ‘Sales Chasing’ which is a punishable offense. When the COD is maintained at a compliant level it provides a good indication the appraiser for that jurisdiction has maintained a fair and equitable assessment.
- Price Related Differential/Price Related Bias – These two statistics are used to measure vertical equity. Vertical equity in the assessment is crucial as it measures how lower valued properties are treated relative to higher valued properties. This is another statistic which must be maintained in a level of compliance. When it falls out of compliance, the assessment is either considered ‘Regressive’ (lower valued property is over-assessed while the higher valued property is under assessed) or ‘Progressive’ (higher valued property is over-assessed while lower valued property is under-assessed).
The combination of these statistics provides the Jackson County Assessor’s Office with a good indication of the quality of the assessment and whether there are any problems which need to be addressed. The one variable in this equation is often the quality of information contained within the assessment records which must be a cooperative effort by the appraiser and property owner.