Standard on Mass Appraisal of Real Property
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Standard on
Mass Appraisal of
Real Property
Approved January 2012
International Association of Assessing Officers
This standard replaces the 2002 Standard on Mass Appraisal of Real Property. The 2002 standard combined and re-
placed the 1983 Standard on the Application of the Three Approaches to Value in Mass Appraisal, the 1984 Standard on Mass
Appraisal, and the 1988 Standard on Urban Land Valuation. The IAAO’s assessment standards represent a consensus
in the assessing profession and have been adopted by the Executive Board of the International Association of As-
sessing Officers (IAAO). The objective of the IAAO’s standards is to provide a systematic means by which concerned
assessing officers can improve and standardize the operation of their offices. The IAAO’s standards are advisory in
nature and the use of, or compliance with, such standards is purely voluntary. If any portion of these standards is
found to be in conflict with the Uniform Standards of Professional Appraisal Practice (USPAP) or state laws, USPAP and
state laws shall govern.Acknowledgments At the time of the 2011 revision (approved January 2012) the Technical Standards Committee was composed of Alan Dornfest, AAS, chair; Doug Warr, AAS; Bill Marchand; Robert Gloudemans; Mary Reavey; Dennis Deegear, associate member; and Chris Bennett, staff liaison. Revision Notes The last full revision of the Standard on Mass Appraisal of Real Property was in February 2002. The most recent partial revisions, approved January 2012, were made to section 3.3 Published by International Association of Assessing Officers 314 W 10th St Kansas City, Missouri 64105-1616 816/701-8100 fax: 816/701-8149 http://www.iaao.org ISBN 978-0-88329-202-0 Copyright © 2012 by the International Association of Assessing Officers All rights reserved. No part of this publication may be reproduced in any form, in an electronic retrieval system or otherwise, without the prior written permission of the publisher. However, assessors wishing to use this standard for educating legislators and policymakers may photocopy it for limited distribution. Printed in the United States of America.
Contents 1. Scope........................................................................................................................................5
2. Introduction.............................................................................................................................5
3. Collecting and Maintaining Property Data...........................................................................5
3.1 Overview...................................................................................................................................... 5
3.2 Geographic Data......................................................................................................................... 5
3.3 Property Characteristics Data (rev. Jan-2011, Jan-2012).................................................... 5
3.3.1 Selection of Property Characteristics Data................................................................. 6
3.3.2 Data Collection................................................................................................................ 6
3.3.2.1 Initial Data Collection.......................................................................................... 6
3.3.2.2 Data Collection Format........................................................................................ 6
3.3.2.3 Data Collection Manuals..................................................................................... 7
3.3.3 Data Entry.................................................................................................................. 7
3.3.2.4 Data Accuracy Standards.................................................................................... 7
3.3.2.5 Data Collection Quality Control......................................................................... 7
3.3.3 Data Entry......................................................................................................................... 7
3.3.4 Maintaining Property Characteristics Data................................................................ 8
3.3.5 Alternative to Periodic On-Site Inspections............................................................... 8
3.4 Sales Data (rev. Jan-2011)......................................................................................................... 8
3.5 Income and Expense Data........................................................................................................ 8
3.6 Cost and Depreciation Data..................................................................................................... 8
4. Valuation..................................................................................................................................8
4.1 Valuation Models........................................................................................................................ 8
4.2 The Cost Approach..................................................................................................................... 9
4.3 The Sales Comparison Approach............................................................................................. 9
4.4 The Income Approach................................................................................................................ 9
4.5 Land Valuation..........................................................................................................................10
4.6 Considerations by Property Type..........................................................................................10
4.6.1 Single-Family Residential Property............................................................................10
4.6.2 Multifamily Residential Property...............................................................................10
4.6.3 Commercial and Industrial Property.........................................................................10
4.6.4 Non-Agricultural Land..................................................................................................11
4.6.5 Agricultural Property....................................................................................................11
4.6.6 Special-Purpose Property............................................................................................11
4.7 Frequency of Reappraisals.....................................................................................................11
5. Managerial Considerations...................................................................................................11
5.1 Overview....................................................................................................................................11
5.2 Staffing.......................................................................................................................................11
5.3 Data Processing Support........................................................................................................12
5.3.1 Hardware.........................................................................................................................12
5.3.2 Software..........................................................................................................................12
5.4 Contracting for Appraisal Services.......................................................................................12
5.4.1 Overview.........................................................................................................................12
5.4.2 In-House Staff.................................................................................................................12
5.5 Benefit-Cost Considerations..................................................................................................12
5.5.1 Overview.........................................................................................................................12
5.5.2 Policy Issues....................................................................................................................12
5.5.3 Administrative Issues....................................................................................................13
References..................................................................................................................................13
Glossary......................................................................................................................................14Standard on MaSS APPRAISAL OF REAL PROPERTY—2012
Standard on Mass Appraisal of Real Property
1. Scope (see section 5.5). Except for unique properties, individ-
This standard defines requirements for the mass ap- ual analyses and appraisals of properties are not practi-
praisal of real property. The primary focus is on mass cal for ad valorem tax purposes.
appraisal for ad valorem tax purposes. However, the
principles defined here should also be relevant to com- 3. Collecting and Maintaining Property Data
puter-assisted mass appraisals (or automated valuation
Choose software wisely because it can limit the data that
models) used for other purposes, such as mortgage
can be collected. The choice of data is largely dictated
portfolio management. The standard primarily ad-
by the valuation software, whether it is programmed in
dresses the needs of the assessor, assessment oversight
house or supplied by a commercial service, a mass ap-
agencies, and taxpayers.
praisal company, or a state agency.
This standard addresses mass appraisal procedures by
which property can be appraised at market value, in-
cluding mass appraisal application of the three tradi- 3.1 Overview
tional approaches to value (cost, sales comparison, and Uniform and accurate valuation of property requires
income). Appraisals made on an other-than-market- correct, complete, and up-to-date property data. Assess-
value basis or on an individual basis are outside the ing offices must establish effective procedures for col-
scope of this standard. Where assessed value differs lecting and maintaining property data (that is, property
from market value because of statutory constraints such ownership, location, size, use, physical characteristics,
as use value, acquisition value, base year value, or clas- sales prices, rents, costs, and operating expenses). Such
sification, this standard does not provide guidance for data are also used for performance audits, defense of
determining assessed value. appeals, public relations, and management informa-
tion. The following sections recommend procedures
Mass appraisal requires complete and accurate data, for collecting these data.
effective valuation models, and proper management
of resources. Section 3 focuses on the collection and
maintenance of property data. Section 4 summarizes 3.2 Geographic Data
the primary considerations in valuation methods, in- Assessors should maintain accurate, up-to-date cadastral
cluding the role of the three approaches to value in the maps (also known as assessment maps, tax maps, parcel
mass appraisal of various types of property. Section 5 boundary maps, and property ownership maps) cover-
discusses certain managerial considerations: staff levels, ing the entire jurisdiction. At a minimum these maps
data processing support, contracting for reappraisals, should display a unique parcel number for each parcel.
support of valuations, and benefit-cost issues. Such cadastral maps allow assessing officers to identify
and locate all parcels, in both the field and the office.
Maps become especially valuable in the mass appraisal
2. Introduction process when a geographic information system (GIS)
Market value for assessment purposes is generally deter- is used. A GIS permits graphic displays of sale prices,
mined through the application of mass appraisal tech- assessed values, inspection dates, work assignments,
niques. Mass appraisal is the process of valuing a group land uses, and much more. In addition, a GIS permits
of properties as of a given date using common data, high-level analysis of nearby sales, neighborhoods, and
standardized methods, and statistical testing (IAAO market trends; when linked to a computer-assisted mass
[1990, chapter 5] and Gloudemans [1999, chapter 5]). appraisal system, the results can be very useful. For ad-
To determine a parcel’s value, assessing officers must ditional information on cadastral maps, parcel identi-
rely upon valuation equations, tables, and schedules de- fication systems, and GIS, see the Standard on Manual
veloped through mathematical analysis of market data. Cadastral Maps and Parcel Identifiers (IAAO 2004), Stan-
Unless required by law, values for individual parcels dard on Digital Cadastral Maps and Parcel Identifiers (IAAO
should not be based solely on the sale price of a prop- 2009), and Procedures and Standards for a Multipurpose Ca-
erty; rather, valuation schedules and models should be dastre (National Research Council 1983), and GIS Guide-
consistently applied to property data that is correct, lines for Assessors (URISA/IAAO 1999).
complete, and up-to-date.
Properly administered, the development, construction,
3.3 Property Characteristics Data
and use of a computer-assisted mass appraisal system
The assessor should collect and maintain sufficient
results in a valuation system characterized by accuracy,
property characteristics data for classification, valu-
uniformity, equity, reliability, and low per-parcel costs
5Standard on MaSS APPRAISAL OF REAL PROPERTY—2012
ation, and other purposes. Accurate valuation of real • Building features such as baths and central air
property by any method requires descriptions of land conditioning
and building characteristics.
• Significant detached structures including
guests houses, boat houses, and barns
3.3.1 Selection of Property Characteristics Data
Property characteristics to be collected and maintained Land Data
should be based on the following: • Lot size
• factors that influence the market in the locale • Available utilities (sewer, water, electricity)
in question
Location Data
• requirements of the valuation methods that
• Market area
will be employed
• Submarket area or neighborhood
• requirements of classification and property tax
policy • Site amenities, especially view and golf course
or water frontage
• requirements of other governmental and pri-
vate users • External nuisances, e.g., heavy traffic, airport
noise, or proximity to commercial uses
• marginal benefits and costs of collecting and
maintaining each property characteristic For a discussion of property characteristics important
for various commercial property types, see Gloudemans
Determining what data on property characteristics to
and Almy (2011, chapter 9).
collect and maintain for a computer-assisted mass ap-
praisal system is a crucial decision with long-term con-
3.3.2 Data Collection
sequences. A pilot program is one means of evaluating
Collecting property characteristics data is a critical and
the benefits and costs of collecting and maintaining a
expensive phase of reappraisal. A successful data collec-
particular set of property characteristics. (See IAAO
tion program requires clear and standard coding and
[1990, chapter 5] and Gloudemans [1999, chapter 2].)
careful monitoring through a quality control program.
In addition, much can be learned from studying the
The development and use of a data collection manual is
data used in successful computer-assisted mass apprais-
essential in achieving accurate and consistent data col-
als in other jurisdictions. Data collection and mainte-
lection. The data collection program should result in
nance are usually the most costly aspects of a comput-
complete and accurate data.
er-assisted mass appraisal. Collecting data that are of
little importance in the assessment process should be
3.3.2.1 Initial Data Collection
avoided unless another governmental or private need is
A physical inspection is necessary to obtain initial prop-
clearly demonstrated.
erty characteristics data. This inspection can be per-
The quantity and quality of existing data should be re- formed either by appraisers or by specially trained data
viewed. If the data are sparse and unreliable, a major collectors. In a joint approach, experienced appraisers
recanvass will be necessary. Data that have been con- would make key subjective decisions, such as the assign-
firmed to be reliable should be used whenever possible. ment of construction quality class or grade, and data
New valuation programs or enhancements requiring collectors would gather all other details. Depending on
major recanvass activity or conversions to new coding the data required, an interior inspection might be nec-
formats should be viewed with suspicion when the ex- essary. At a minimum, a comprehensive exterior inspec-
isting database already contains most major property tion should be conducted.
characteristics and is of generally good quality.
3.3.2.2 Data Collection Format
The following property characteristics are typically used Data should be collected in a prescribed format de-
in predicting residential property values: signed to facilitate both the collecting of data in the
field and entry of the data into the computer system.
Improvement Data
• Living area A logical arrangement of the collection format makes
data collection easier. For example, all items requir-
• Construction quality or key components ing an interior inspection should be grouped together.
thereof (foundation, exterior wall type, etc.) The coding of data should be as objective as possible,
• Effective age or condition with measurements, counts, and check-off items used
in preference to items requiring subjective evaluations
• Building design or style (such as “number of plumbing fixtures” versus “ad-
• Secondary areas including basements, garages, equacy of plumbing: poor, average, good”). With re-
covered porches, and balconies spect to check-off items, the available codes should be
exhaustive and mutually exclusive, so that exactly one
6Standard on MaSS APPRAISAL OF REAL PROPERTY—2012
code logically pertains to each observable variation of a immediately after the data collection phase begins and
building feature (such as type of room). The data col- may be performed by jurisdiction staff, project consul-
lection format should promote consistency among data tants, auditing firms, or oversight agencies. The inspec-
collectors, be clear and easy to use, and be adaptable to tions should review random samples of completed work
virtually all types of construction. Specialized data col- for completeness and accuracy and keep tabulations of
lection formats may be necessary to collect information items coded correctly or incorrectly, so that statistical
on agricultural property, timberland, industrial parcels, tests can be used to determine whether accuracy stan-
and other property types. dards have been achieved. Stratification by geographic
area, property type, or individual data collector can
3.3.2.3 Data Collection Manuals help detect patterns of data error. Data that fails to
A clear, thorough, and precise data collection manual meet quality control standards should be re-collected.
is essential and should be developed, updated, and
maintained. The written manual should explain how to The accuracy of subjective data should be judged pri-
collect and record each data item. Pictures, examples, marily by conformity with written specifications and ex-
and illustrations are particularly helpful. The manual amples in the data collection manual. Subjective data
should be simple yet complete, with a high degree of judgment calls should be substantiated by field notes.
standardization for uniformity. Data collection staff
should be trained in the use of the manual and related
3.3.3 Data Entry
updates to maintain consistency. The manual should To avoid duplication of effort, the data collection form
present guidelines for personal conduct during field should be able to serve as the data entry form. Data en-
inspections, and, if interior data are required, it should try should be routinely audited to ensure accuracy.
outline procedures to follow when the property owner Data entry accuracy should be as close to 100 percent
has denied access or when entry might be risky. as possible, and should be supported by a full set of
range and consistency edits. These are error or warning
3.3.2.4 Data Accuracy Standards messages generated in response to invalid or unusual
The following standards of accuracy for data collection data items. Examples of data errors include missing
are recommended. data codes and invalid characters. Warning messages
should also be generated when data values exceed nor-
• Continuous or area measurement data, such as
mal ranges (for example, more than eight rooms in a
living area and exterior wall height, should be
1,200-square-foot residence). The warnings should ap-
accurate within one foot (rounded to the near-
pear as the data are entered. When feasible, action on
est foot) of the true dimensions or within 5% of
the warnings should take place during data entry. Field
the area. (One foot equates to approximately
data entry devices provide the ability to edit data as it
30 centimeters in the metric system of measure-
is entered and also eliminate data transcription errors.
ment). If areas, dimensions, or volumes must
be estimated, the property record should note
where quantities are estimated.
3.3.4 Maintaining Property Characteristics Data
Property characteristics data should be continually up-
• For each objective, categorical, or binary data dated in response to changes brought about by new
field to be collected or verified, at least 95 per- construction, new parcels, remodeling, demolition, and
cent of the coded entries should be accurate. destruction. There are several ways of doing this. The
Objective, categorical, or binary data char- most efficient involves building permits. Ideally, strictly
acteristics include such attributes as exterior enforced local ordinances would require building per-
wall material, number of full bathrooms, and mits for all significant construction activity, and the as-
waterfront view. As an example, if a data collec- sessor would be given copies of the permits. This would
tor captures 10 objective, categorical, or binary allow the assessor to identify properties whose charac-
data items for 100 properties, at least 950 of the teristics are likely to change, to inspect such parcels on
1,000 total entries should be correct. a timely basis (preferably as close to the assessment date
• For each subjective categorical data field col- as possible), and to update the files accordingly.
lected or verified, data should be coded cor- Aerial photographs also can be helpful in identifying
rectly at least 90 percent of the time. Subjective new or previously unrecorded construction and land
categorical data characteristics include data use.
items such as quality grade, physical condition,
and architectural style. Some jurisdictions have used self-reporting, in which
property owners are given the data in the assessor’s
3.3.2.5 Data Collection Quality Control records and asked to provide additions or corrections.
A quality control program is necessary to ensure that Information derived from multiple listing sources and
data accuracy standards are achieved and maintained. other third-party vendors can be used to update prop-
Independent quality control inspections should occur erty records.
7Standard on MaSS APPRAISAL OF REAL PROPERTY—2012
A system should be developed for making periodic field erties that have significant change should be inspected
inspections to identify properties and ensure that prop- when work is complete.
erty characteristics data are complete and accurate.
It is incumbent on assessment jurisdictions and over-
Properties should be periodically revisited to ascertain
sight agencies to ensure that images meet expected
that assessment records are accurate and current. As-
quality standards. Standards required for vendor-sup-
suming that most new construction activity is identified
plied images should be spelled out in the RFP and
through building permits or other ongoing procedures,
contract for services, and images should be checked
a physical review at least every four to six years should
for compliance with specified requirements. For gen-
be conducted, including an on-site verification of prop-
eral guidance on preparing RFPs and contracting for
erty characteristics. A reinspection should include par-
vendor-supplied services, see the Standard on Contracting
tial remeasurement of the two most complex sides of
for Assessment Services [IAAO 2008].
improvements and a walk around the improvement to
identify additions and deletions or independent review
of the current measurements with specific require- 3.4 Sales Data
ments by an outside auditing firm or oversight agency. States and provinces should seek mandatory disclosure
Photographs taken at previous physical inspections can laws to ensure comprehensiveness of sales data files. Re-
help identify changes. gardless of the availability of such statutes, a file of sales
data must be maintained. Sales data are required in all
3.3.5 Alternative to Periodic On-Site applications of the sales comparison approach, in the
Inspections development of market-based depreciation schedules
Provided that an initial physical inspection has been in the cost approach, and in the derivation of capitaliza-
completed—and the requirements of a well-maintained tion rates or discount rates. Refer to IAAO (1990, chap-
data-collection and quality-management program (see ter 5) and Gloudemans (1999, chapter 2) for guidelines
sections 3.3.2.1 to 3.3.4) have been achieved, jurisdic- relating to the acquisition and processing of sales data.
tions may employ a set of digital imaging technology
tools to supplement field inspections with a computer-
3.5 Income and Expense Data
assisted office review. These imaging tools should in-
clude: Income and expense data must be collected for income-
producing property, as these data are required in the
• Current high-resolution street-view images (at application of the income approach to value. (See sec-
a sub-inch pixel resolution that enables quality tion 4.4.) Refer to IAAO (1990, chapter 5) and Gloude-
grade and physical condition to be verified) mans (1999, chapter 2) for guidelines addressing the
collection and processing of income and expense data.
• Orthophoto images (minimum 6” pixel reso-
lution in urban/suburban and 12” resolution
in rural areas, updated every 2 years in rapid 3.6 Cost and Depreciation Data
growth areas, or 6–10 years in slow growth Current cost and depreciation data adjusted to the lo-
areas). cal market are required for the cost approach (see sec-
• Low level oblique images capable of being used tion 4.2). Cost and depreciation manuals and schedules
for measurement verification (four cardinal may be purchased from commercial services or created
directions, minimum 6” pixel resolution in ur- in-house. See Gloudemans (1999, chapter 4) for guide-
ban/suburban and 12” pixel resolution in rural lines on creating manuals and schedules.
areas, updated every 2 years in rapid growth
areas or, 6–10 years in slow growth areas). 4. Valuation
Effective tool sets validate CAMA data and incorporate 4.1 Valuation Models
change detection techniques that compare building Any appraisal, whether single-property appraisal or
dimension data (footprints) in the CAMA system to mass appraisal, uses a model, that is, a representation
georeferenced imagery or remote sensing data from in words or an equation of the relationship between
sources (such as LiDAR [light detection and ranging]) value and variables representing factors of supply and
and identify potential CAMA sketch discrepancies for demand. Mass appraisal models attempt to represent
further investigation. the market for a specific type of property in a speci-
In addition, appraisers should visit assigned areas on an fied area. Mass appraisers must first specify the model,
annual basis to observe changes in neighborhood con- that is, identify the variables (supply and demand fac-
dition, trends and property characteristics. An on-site tors) that influence value, for example, square feet of
physical review is recommended when significant con- living area. Then, mass appraisers must calibrate the
struction changes are detected, a property is sold, or an model, that is, determine the adjustments or coeffi-
area is affected by catastrophic damage. Building per- cients that best represent the value contribution of the
mits should be regularly monitored and affected prop- variables chosen, for example, the dollar amount the
8Standard on MaSS APPRAISAL OF REAL PROPERTY—2012
market places on each square foot of living area. Care- Depreciation schedules can be extracted from sales
ful and extensive market analysis is required for both data in several ways. Methods for extracting depre-
specification and calibration of a model that estimates ciation can be found in IAAO (1990, chapter 8) and
values accurately. All three approaches to value—the Gloudemans (1999, chapter 4).
cost approach, the sales comparison approach, and the
Another key difficulty in use of the cost approach is
income approach—are modeled for mass appraisal.
determination of land value, which is estimated inde-
Geographic stratification is appropriate when the value pendently from sales (often from sales of improved
of property attributes varies significantly among areas. It property because sales of vacant land are scarce). Land
is particularly effective when housing types and styles are values used in the cost approach must be current and
relatively uniform within areas. Separate models can be consistent. Section 4.5 provides standards for land valu-
developed for market areas (also known as economic or ation in mass appraisal.
model areas). Subareas or neighborhoods can serve as
variables in modeling and can also be used in land value
tables and selection of comparable sales. (See Gloude- 4.3 The Sales Comparison Approach
mans [1999, chapter 3].) Smaller jurisdictions may find The sales comparison approach estimates the value of a
it sufficient to develop a single residential model. subject property by statistically analyzing the sale prices
of similar properties. This approach is usually the pre-
Commercial and income-producing properties should ferred approach for estimating values for residential
be stratified by property type. In general, separate mod- and other property types with adequate sales.
els should be developed for apartment, warehouse/in-
dustrial, and retail properties. Large jurisdictions may Applications of the sales comparison approach include
be able to stratify apartment properties further by type direct market models and comparable sales algorithms
or area or to develop multiple commercial models. (See Gloudemans 1999, chapter 3 & 4, IAAO 1990,
chapter 6 & 15, and IAAO 1999, and the IAAO Stan-
dard on Automated Valuation Models 2003). Comparable
4.2 The Cost Approach sales algorithms are most akin to single property ap-
The cost approach is applicable to virtually all improved praisal applications of the sales comparison approach.
parcels and, if used properly, can produce highly ac- They have the advantages of being familiar and easily
curate valuations. The cost approach is more reliable explained and can compensate for less well specified
for newer structures of standard materials, design, and or calibrated models, since the models are used only
workmanship. to make adjustments to the selected comparables. They
can be problematic if the selected comparables are not
Reliable cost data are imperative in any successful ap-
well validated or representative of market value. Be-
plication of the cost approach. The data must be com-
cause they predict market value directly, direct market
plete, typical, and current. Current construction costs
models depend more heavily on careful model speci-
should be based on the cost of replacing a structure
fication and calibration. Their advantages include effi-
with one of equal utility, using current materials, de-
ciency and consistency, since the same model is directly
sign, and building standards. Costs of individual con-
applied against all properties in the model area.
struction components and building items should also
be included in order to adjust for features that differ Users of comparable sales algorithms should be aware
from the base specifications. These costs should be in- that sales ratio statistics will be biased if sales used in
corporated into a construction cost manual and related the ratio study are used as comparables for themselves
computer software. The software can perform the valu- in model development. This problem can be avoided
ation function, and the manual, in addition to provid- by (1) not using sales as comparables for themselves
ing documentation, can be used when nonautomated in modeling or (2) using holdout or later sales in ratio
calculations are required. studies.
Construction cost schedules can be developed inter-
nally, based on a systematic study of local construction 4.4 The Income Approach
costs, obtained from firms specializing in such informa- In general, for income-producing properties the in-
tion, or custom generated by a contractor. Cost sched- come approach is the preferred valuation approach
ules should be verified for accuracy by applying them when reliable income and expense data are available,
to recently constructed improvements of known cost. along with well-supported income multipliers, overall
Construction costs also should be updated before each rates, and required rates of return on investment. Suc-
assessment cycle. cessful application of the income approach requires the
One weakness in the cost approach tends to occur in collection, maintenance, and careful analysis of income
the estimation of accrued depreciation. This estimate and expense data.
must be based on non-cost data (primarily sales) and Mass appraisal applications of the income approach be-
can involve considerable subjectivity. gin with collecting and processing income and expense
9Standard on MaSS APPRAISAL OF REAL PROPERTY—2012
data. (These data should be expressed on an appropri- pated use, capitalization of ground rents, and land re-
ate per-unit basis; such as per square foot or per apart- sidual capitalization. (See IAAO [1990, chapter 7] and
ment unit.) Appraisers should then compute normal or Gloudemans [1999, chapter 3].)
“typical” gross incomes, vacancy rates, net incomes, and
expense ratios. These figures can be used to judge the
reasonableness of reported data for individual parcels 4.6 Considerations by Property Type
and to estimate income and expense figures for parcels The appropriateness of each valuation approach varies
with unreported data. Alternatively, models for estimat- with the type of property under consideration. Table 1
ing gross or net income and expense ratios can be de- ranks the relative usefulness of the three approaches
veloped using actual income and expense data from a in the mass appraisal of major types of properties. The
sample of properties and calibrated using multiple re- table assumes that there are no major statutory barri-
gression analysis. For an introduction to income mod- ers to obtaining cost, sales, and income data. Again,
eling, see IAAO (1990, chapter 14) and Gloudemans although certain approaches tend to produce better re-
(1999, chapter 3). The developed income figures can sults for a given type of property, the use of two or more
be capitalized into estimates of value in a number of approaches should produce greater accuracy.
ways. The most direct method involves the application
of gross income multipliers, which express the ratio of 4.6.1 Single-Family Residential Property
market value to gross income. At a more refined level, The sales comparison approach is the best approach
net income multipliers or their reciprocals, overall capi- for single-family residential property, including con-
talization rates, can be developed and applied. These dominiums. Automated versions of this approach are
multipliers and rates should always be extracted from highly efficient and generally accurate for the majority
actual income and sale price data obtained from prop- of these properties. The cost approach is a good sup-
erties that have recently been sold. Income multipliers plemental approach and should serve as the primary
and overall rates tend to provide reliable, consistent, approach when the sales data available are inadequate.
and readily supported valuations when good sales and The income approach is usually inappropriate for mass
income data are available. appraisal of single-family residential properties, be-
cause most of these properties are not rented.
4.5 Land Valuation 4.6.2 Multifamily Residential Property
State or local laws may require the value of an improved The sales comparison and income approaches are pre-
parcel to be separated into land and improvement ferred in valuing multifamily residential property when
components. When the sales comparison or income ap- sufficient sales and income data are available. Multiple
proach is used, an independent estimate of land value regression analysis and related techniques have been
must be made and subtracted from the total property successfully used in valuing this property type. Income
value to obtain a residual improvement value. Some multipliers can also be highly effective. As with other
computerized valuation techniques provide a separa- residential property, the cost approach is useful in pro-
tion of total value into land and building components. viding supplemental valuations and can serve as the pri-
Land values should be reviewed annually. At least once mary approach when good sales and income data are
every four to six years the properties should be physi- not available.
cally inspected and revalued. The sales comparison ap-
proach is the primary approach to land valuation and 4.6.3 Commercial and Industrial Property
is always preferred when sufficient sales are available. In The income approach is the most appropriate method
the absence of adequate sales, other techniques used to apply when valuing commercial and industrial prop-
in mass appraisal include allocation, abstraction, antici- erty if sufficient income data are available. Direct sales
Table 1. Rank of typical usefulness of the three approaches to value in the mass appraisal of major types of property
Cost approach Sales comparison approach Income approach
Single-family residential 2 1 3
Multifamily residential 3 1,2 1,2
Commercial 3 2 1
Industrial 1,2 3 1,2
Non-agricultural land — 1 2
Agricultural* — 2 1
Special-purpose** 1 2,3 2,3
*Includes farm, ranch, and forest properties.
**Includes institutional, governmental, and recreation properties
10Standard on MaSS APPRAISAL OF REAL PROPERTY—2012
comparison models can be equally effective in large 4.7 Frequency of Reappraisals
jurisdictions with sufficient sales. When a sufficient Section 4.2.2 of the Standard on Property Tax Policy (IAAO
supply of sales data and income data is not available, 2010) states that current market value implies annual
the cost approach should be applied. However, values assessment of all property. Annual assessment does not
generated should be periodically checked against avail- necessarily mean, however, that each valuation must be
able sales data. Cost factors, land values, and deprecia- reviewed or recomputed individually. Instead, trending
tion schedules must be kept current through periodic factors based on criteria such as property type, location,
review. size, and age can be developed and applied to groups of
properties. These factors should be derived from ratio
4.6.4 Non-Agricultural Land studies or other market analyses.
The sales comparison approach is the preferred ap-
proach for non-agricultural land. Application of the Analysis of ratio study data can suggest groups or strata
sales comparison approach to vacant land involves the of properties in need of physical review. In general,
collection of sales data, the posting of sales data on trending factors can be highly effective in maintaining
maps, the calculation of standard unit values (such as equity when appraisals are uniform within strata. How-
value per square foot, per front foot, or per parcel) by ever, such factors are not a substitute for physical re-
area and type of land use, and the development of land views and individual reappraisals, which are required to
valuation maps or computer-generated tables, in which correct lack of uniformity within strata.
the pattern of values is displayed. When vacant land Although assessment trending can be effective for short
sales are not available or are few, additional benchmarks periods, properties should be physically reviewed and
can be obtained by subtracting the replacement cost individually reappraised at least every four to six years.
new less depreciation of improvements from the sales This can be accomplished in at least three ways:
prices of improved parcels. The success of this tech-
nique requires reliable cost data and tends to work best • reappraising all property at periodic intervals
for relatively new improvements, for which depreciation (that is, every four to six years)
is minimal. • reappraising properties on a cyclical basis (for
If neither vacant-parcel nor improved-parcel sales data example, one-fourth or one-sixth each year)
are available, the assessor will need to apply allocation • reappraising on a priority basis as indicated
methods or use valuation methods that provide sepa- by ratio studies or other considerations while
rate land and building values. Sometimes income ap- still ensuring that all properties are physically
proach applications can also be used. reviewed at least every sixth year
4.6.5 Agricultural Property
If adequate sales data are available and agricultural
5. Managerial Considerations
property is to be appraised at market value, the sales 5.1 Overview
comparison approach would be preferred. However, Mass appraisal requires human, computing, and other
nearly every state or province provides for use-value resources to be well managed and appropriate apprais-
assessment (and usually appraisal), which significantly al and analytical methods need to be employed. In this
understates the market value for agricultural property, section certain key managerial considerations are dis-
so the sales comparison approach is usually not applica- cussed.
ble. Because of this limitation, it is imperative to obtain
good income data and to use the income approach for
5.2 Staffing
agricultural land. Land rents are often available, some-
times permitting the development and application of A successful in-house appraisal program requires a
overall capitalization rates. This method, of course, also sufficiently large staff composed of persons skilled in
entails the estimation of normal land rents for unrent- general administration and supervision, appraisal, map-
ed parcels. When agricultural parcels include improve- ping and drafting, data processing, and secretarial and
ments, the cost approach or sales comparison models clerical functions. Typical staffing sizes and patterns
that provide separate building values may be used to for jurisdictions of various sizes are illustrated in Prop-
determine their value. erty Appraisal and Assessment Administration (IAAO 1990,
chapter 16).
4.6.6 Special-Purpose Property Unless efficiency or practical concerns dictate other-
The cost approach tends to be most appropriate in the wise, persons performing the various mass appraisal
appraisal of special-purpose properties, due to the dis- functions should be employees of the assessor. When
tinctive nature of such properties and the general ab- these functions are not performed by assessment staff,
sence of adequate sales or income data. it is imperative that they be adequately provided by oth-
er departments, an oversight agency, a service bureau, a
qualified contractor, or another source. Strong lines of
11Standard on MaSS APPRAISAL OF REAL PROPERTY—2012
communication must be established between the asses- have reports that list each parcel, its characteristics,
sor’s staff and the designated support groups. and its calculated value. Parcels with unusual charac-
teristics, extreme values, or extreme changes in values
should be identified for subsequent individual review.
5.3 Data Processing Support Equally important, summary reports should show aver-
Computer-assisted mass appraisals require considerable age values, value changes, and ratio study statistics for
data processing support. (See the Standard on Facilities, various strata of properties. These should be reviewed
Equipment, Computers, and Supplies [IAAO 2003].) to ensure the overall consistency of values for various
types of property and various locations. (See the Uni-
5.3.1 Hardware form Standards of Professional Appraisal Practice, Standards
The hardware should be powerful enough to permit Rule 6-7, for reporting requirements for mass appraisals
computerization of appropriate applications of the [The Appraisal Foundation, Appraisal Standards Board
cost, sales comparison, and income approaches, as well 2008–2009].)
as providing word processing, data inquiry, and activ-
ity summaries. The requirements for efficient running The staff should also be prepared to support individual
of desired software should be established before the valuations as required, preferably through comparable
acquisition of hardware. Computer equipment can be sales. At a minimum, staff should be able to produce a
purchased, leased, rented, or shared with other jurisdic- property record and explain the basic approach (cost,
tions. If the purchase option is chosen, the equipment sales comparison, or income) used to estimate the value
should be easy to upgrade so that technological devel- of the property. A property owner should never merely
opments can be taken advantage of without purchasing be told that “the computer” or “the system” produced
an entirely new system. the appraisal. Generally, the staff should tailor the ex-
planation to the taxpayer’s knowledge and expertise.
5.3.2 Software Equations converted to tabular form can be used to ex-
plain the basis for valuation. Cost tables can be used to
Computer software can be developed internally, adapt-
explain values based on the cost approach.
ed from software developed by other public agencies,
or purchased (in whole or in part) from private ven- In all cases, the assessor’s staff should be able to produce
dors. (Inevitably there will be some tailoring needed sales or appraisals of similar properties in order to sup-
to adapt externally developed software to the require- port (or at least explain) the valuation of the property
ments of the user’s environment.) Each alternative has in question. Comparable sales can be obtained from re-
advantages and disadvantages. The software should be ports that list sales by such features as type of property,
designed so that it can be easily modified; it should also area, size, and age. Alternatively, interactive programs
be well documented, at both the appraiser/user and can be obtained or developed that identify and display
programmer levels. the most comparable properties.
Security measures should exist to prevent unauthorized Assessors should notify property owners of their valua-
use and to provide backup in the event of accidental tions in sufficient time for property owners to discuss
loss or destruction of data. their appraisals with the assessor and appeal the value if
they choose to do so (Standard on Public Relations [IAAO
2011]). Statutes should provide for a formal appeals
5.4 Contracting for Appraisal Services process beyond the assessor’s level (Standard on Assess-
5.4.1 Overview ment Appeal [IAAO 2001]).
Reappraisal contracts can include mapping, data col-
lection, data processing, and other services, as well as
valuation. They offer the potential of acquiring profes- 5.5 Benefit-Cost Considerations
sional skills and resources quickly. Often these skills and 5.5.1 Overview
resources are not available internally. Contracting for The object of mass appraisal is to produce equitable
these services can permit the jurisdiction to maintain a valuations at low costs. Improvements in equity gener-
modest staff and to budget for reappraisal on a periodic ally require increased expenditures.
basis, but also makes the assessor less likely to develop Benefit-cost analysis in mass appraisal involves two ma-
in-house expertise. (See the Standard on Contracting for jor issues, one of policy and the other of administration.
Assessment Services [IAAO 2008].)
5.5.2 Policy Issues
5.4.2 In-House Staff
An assessment jurisdiction requires a certain expendi-
The assessor’s staff must have confidence in the apprais- ture level simply to inventory, list, and value properties.
als and be able to explain and defend them. This confi- Beyond that point, additional expenditures make pos-
dence begins with application of reliable appraisal tech- sible rapid improvements in equity initially, but mar-
niques, generation of appropriate valuation reports, ginal improvements in equity diminish as expenditure
and review of preliminary values. It may be helpful to increases. At a minimum, jurisdictions should budget
12Standard on MaSS APPRAISAL OF REAL PROPERTY—2012
to meet statutory standards of equity. Refer to the Stan- International Association of Assessing Officers. 2003.
dard on Ratio Studies (IAAO 2010) for a listing of perfor- Standard on facilities, computers, equipment, and supplies.
mance standards. Chicago: International Association of Assessing Officers.
International Association of Assessing Officers. 2004.
5.5.3 Administrative Issues Standard on manual cadastral maps and parcel identifiers.
Maximizing equity per dollar of expenditure is the pri- Chicago: International Association of Assessing Offi-
mary responsibility of assessment administration. The cers.
assessor must provide leadership, make decisions, and
get results by planning, budgeting, organizing, and con- International Association of Assessing Officers. 2010.
trolling within all social, economic, and governmental Standard on property tax policy. Chicago: International As-
limits (IAAO 1990, chapter 16). The computer-assisted sociation of Assessing Officers.
mass appraisal system selected must be designed and International Association of Assessing Officers. 2010.
used to evaluate appraisal performance and ensure Standard on ratio studies. Kansas City: International As-
compliance with laws, regulations, and policies. sociation of Assessing Officers.
National Research Council. 1983. Procedures and stan-
References dards for a multipurpose cadastre. Washington, DC: Na-
The Appraisal Foundation, Appraisal Standards Board. tional Research Council.
2008–2009. Uniform standards of professional appraisal
Urban and Regional Information Systems Association
practice. Washington, DC: The Appraisal Foundation.
and International Association of Assessing Officers.
Gloudemans, R.J. 1999. Mass appraisal of real property. 1999. GIS guidelines for assessors. Park Ridge, IL, and Chi-
Chicago: International Association of Assessing Officers. cago: Urban and Regional Information Systems Associa-
tion and International Association of Assessing Officers.
Gloudemans, R.J., and R. Almy. 2011. Fundamentals of
mass appraisal. Chicago: International Association of As-
sessing Officers. Suggested Reading
International Association of Assessing Officers. 1990. Cunningham, K. The use of LiDAR for change detec-
Property appraisal and assessment administration. Chicago: tion and updating of the CAMA database. Journal of
International Association of Assessing Officers. Property Tax Assessment & Administration. Volume 4, Is-
sue 3.
International Association of Assessing Officers. 2001.
Standard on assessment appeal. Chicago: International As- International Association of Assessing Officers. 2000.
sociation of Assessing Officers. Standard on professional development. Chicago: Interna-
tional Association of Assessing Officers.
International Association of Assessing Officers. 2011.
Standard on public relations. Chicago: International Asso- International Association of Assessing Officers. 2001.
ciation of Assessing Officers. Standard on valuation of properties affected by environmental
contamination. 2001. Chicago: International Association
International Association of Assessing Officers. 2008. of Assessing Officers.
Standard on contracting for assessment services. Chicago: In-
ternational Association of Assessing Officers. International Association of Assessing Officers. 2005.
Standard on the valuation of personal property. Kansas City:
International Association of Assessing Officers. 2009. International Association of Assessing Officers.
Standard on digital cadastral maps and parcel identifiers. Chi-
cago: International Association of Assessing Officers.
13Standard on MaSS APPRAISAL OF REAL PROPERTY—2012
Glossary Appraisal Ratio Study—A ratio study using indepen-
Abstraction Method—Method of land valuation in the dent expert appraisals as indicators of market value.
absence of vacant land sales, whereby improvement val- Arm’s-Length Sale—A sale between two unrelated
ues obtained from the cost model are subtracted from parties, both seeking to maximize their positions from
sales prices of improved parcels to yield residual land the transaction.
value estimates. Also called land residual technique.
Assessment Cycle—A legally sanctioned reappraisal
Accrued Depreciation—(1) The amount of deprecia- period generally ranging from one to ten years.
tion, from any and all sources, that affects the value of
the property in question on the effective date of the ap- Assessment Date—The status date for tax purposes.
praisal. (2) In accounting, the amount reserved each Appraised values reflect the status of the property and
year or accumulated to date in the accounting system any partially completed construction as of this date.
for replacement of a building or other asset. When de- Assessment Equity—The degree to which assessments
preciation is recorded as a dollar amount, it may be de- bear a consistent relationship to market value.
ductible from total plant value or investment to arrive at
the rate base for public utilities. See also Depreciation. Assessment Level—The common, or overall, ratio of
assessed values to market values.
Acquisition Value—An assessed value based on the
cost of acquiring the property; increases in this value Assessment Maps—See Cadastral Map.
are usually limited until the next qualifying sale. Assessment Ratio—(1) The fractional relationship an
Adaptive Estimation Procedure (AEP)—A computer- assessed value bears to the market value of the property
ized, iterative, self-referential procedure using proper- in question. (2) By extension, the fractional relation-
ties for which sales prices are known to produce a mod- ship the total of the assessment roll bears to the total
el that can be used to value properties for which sales market value of all taxable property in a jurisdiction.
prices are not known. Also called “feedback.” See Level of Assessment.
Adjusted Sale Price—The sale price that results from Assessment Ratio Study—An investigation intended
adjustments made to the stated sale price to account to determine the assessment ratio and assessment eq-
for the effects of time, personal property, financing, or uity.
the like. Assessment Ratio—(1) The fractional relationship an
Adjustments—Modifications in the reported value of a assessed value bears to the market value of the property
variable, such as sale price or gross income. For exam- in question. (2) By extension, the fractional relation-
ple, adjustments can be used to estimate market value ship the total of the assessment roll bears to the total
in the sales comparison approach by adjusting the sale market value of all taxable property in a jurisdiction.
price of the comparable for differences between com- See Level of Assessment.
parable and subject properties. Assessment Ratio Study—An investigation intended
Ad Valorem Tax—A tax levied in proportion to the to determine the assessment ratio and assessment eq-
value of the thing(s) being taxed. uity.
Aerial Photograph—A photograph of a part of the Audit—A systematic investigation or appraisal of pro-
earth’s surface taken by an aircraft-supported camera. cedures or operations for the purpose of determining
conformity with specifically prescribed criteria.
Agricultural Property—Improved or unimproved
land devoted to or available for the production of crops Audit, Performance—An analysis of an organization
or other agricultural products, livestock, and agricul- to determine whether or not the quantity and quality of
tural support buildings. work performed meets standards. Ratio studies are an
important part of performance audits of an assessing
Allocation Method—A method used to value land, in organization.
the absence of vacant land sales, by using a typical ra-
tio of land to improvement value. Also called land ratio Audit, Procedural—An examination of an organiza-
method. tion to determine whether established or recommend-
ed procedures are being followed.
Appraisal Foundation, The—The organization autho-
rized by the United States Congress as the source of ap- Audit Program—The procedures undertaken or par-
praisal standards and appraiser qualifications. ticular work done by an accountant in conducting an
examination.
Appraisal Ratio—(1) The ratio of the appraised value
to an indicator of market value. (2) By extension, an Audit Trail—A set of records of the changes made to
estimated fractional relationship between the apprais- another set of records.
als and market values of a group of properties. See also
Level of Appraisal.
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