Definition of "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.

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

The term’s abstract of title definition is the recorded summary of a property’s history. Abstracts of title can be used to determine former and present ownerships of any ...

Obligation taken on by a person who did not obtain it originally, but agrees to honor the terms of the existing obligation as a condition for the transaction. By assuming the loan rather ...

If you are involved with real estate, chances are you've come across the term "convey" or conveyance. But what does convey mean in real estate? This term is crucial whether you're buying, ...

Rent that a comparable property would mandate in a given real estate rental market. Market rent is a competitive rate based on rents other comparable properties receive. For example, in a ...

unfinished access space below the first floor having less height than a full story. An individual must crawl through the crawl hole to gain access. Any interior passage of limited ...

Thin layer or slate of baked clay, linoleum, or some other material that is used for covering floors, roofs, or as an ornament in a building. ...

Before getting a loan to buy a property, you must know the definition of foreclosure. A foreclosure is the process of making a loan due immediately. Technically, a loan becomes due way ...

The total expenditures required to make a locality suitable for the designated purpose. An example is how much it would cost to build a shopping center on a lot. ...

Area that is located between a rural and urban area. ...

Popular Real Estate Questions