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Module 7
Valuation
Testing for Mass
Appraisal
2nd Land Administration and Management Project (Property Valuation and Taxation Component)
OBJECTIVES:
At the end of the module, the participant will
be able to:
1. Cite the reason for testing the initial
schedule of market values (SMV);
2. Calculate and interpret the Value to Price
Ratio (VPR); and
3. Calculate and interpret the Coefficient of
Dispersion (COD)
Data Entry
into RESAS
database
Data
Analysis
Quality
Testing of
Values
Application
of SMV to
individual
properties
Preparatio
n of SMV
DATA COLLECTION:
Data Entry
into RESAS
database
Data
Analysis
Quality
Testing of
Values
Application
of SMV to
individual
properties
Preparatio
n of SMV
Data Entry
into RESAS
database
Data
Analysis
Quality
Testing of
Values
Application
of SMV to
individual
properties
Preparatio
n of SMV
Chapter 3,
Prescribed Format of the Schedule of
Sec. 5c of MRPAAO Fair
Market Value
GR Form No.1
GR Form No.2
GR Form No.3
GR Form No.4
GR Form No.5
GR Form No.6
GR Form No.7
GR Form No.8
GR Form No.9
GR Form No.10
GR Form No.11
Schedule of Depreciation
GR Form No.12
Data Entry
into RESAS
database
Data
Analysis
Quality
Testing of
Values
Application
of SMV to
individual
properties
Preparatio
n of SMV
Valuation Testing
Testing of results is essential in establishing the confidence
factor in any valuation process involving mass appraisal.
Mass appraisal adopts uniform unit value for various
elements pertaining to a property and then applies this to
other properties in order to establish the value of a large
number of similar properties at one time.Scan 1.jpg
Actual testing is
selecting a sold property within the range being
tested
for which a market value sale price is known
applying the proposed SMV rates to the
components of the particular property
to determine how accurate the derived
value is when compared to market
value.
Accuracy
ELEMENTS
ACCURACY
the closeness of a
valuation to actual
prices
Median Value to Price Ratio
Quality
Testing of
Values
VPR = (Value/Price) x
Example:
Value = P 1,020,000
Sale
Price
Value
1
1,220,000 1,065,000
2
1,250,000 1,100,000
3
1,350,000 1,200,000
4
1,450,000 1,350,000
5
1,100,000 1,020,000
6
925,000
874,000
7
1,365,000 1,300,000
8
1,050,000 1,010,000
VPR
Observati
on
Price
1,220,000
Value
1,065,000
VPR
87.3%
1,250,000
1,100,000
88%
Sale 1
VPR
Sale 2
VPR
Sale
1
Price
Value
1,220,000 1,065,000
2
1,250,000 1,100,000
3
1,350,000 1,200,000
4
VPR
Observation
87.30
20% (3/15)
are below the
88.00
10%
accuracy
88.89
range
93.10
1,450,000 1,350,000
5
92.73
1,100,000 1,020,000
94.49
925,000
874,000
95.24
1,365,000 1,300,000
96.19
1,050,000 1,010,000
9
1,150,000 1,100,000
10
1,000,000
975,000
80%
(12/15)of
95.65
properties
are within the
97.50
10%
Observations:
At higher transaction
levels, the discrepancies
between assessed values
and selling prices are
more noticeable.
This could indicate
hesitance to apply full
value of properties at the
upper end of the value
scale.
COEFFICIENT OF DISPERSION
(COD)
A
Sale
1
D = C/B
Value Price Ratio
Sale Price Assessor's Value
(VPR)
1,220,000
1,065,000
0.8730
1,250,000
1,100,000
0.8800
1,350,000
1,200,000
0.8889
1,450,000
1,350,000
0.9310
1,100,000
1,020,000
0.9273
925,000
874,000
0.9449
1,365,000
1,300,000
0.9524
1,050,000
1,010,000
0.9619
1,150,000
1,100,000
0.9565
10
1,000,000
975,000
0.9750
11
965,000
960,000
0.9948
12
960,000
950,000
0.9896
13
875,000
885,000
1.0114
14
865,000
870,000
1.0058
15
990,000
1,010,000
1.0202
E = C-Median
F = Abs(E)
Difference of VPR
from Median VPR
E = .8730 - .9619
Absolute Difference of
VPR from Median VPR
3:
3: Subtract
Subtract
median
median from
from VPR
VPR
Sale
Sale Price
1:
D = C/B
1:CCompute
Compute
Value
Price Ratio
VPR=Value/Price
VPR=Value/Price
Assessor's Value
(VPR)
1,220,000
1,065,000
0.8730
1,250,000
1,100,000
0.8800
1,350,000
1,200,000
0.8889
1,450,000
1,350,000
0.9310
1,100,000
1,020,000
0.9273
925,000
874,000
0.9449
1,365,000
1,300,000
0.9524
1,050,000
1,010,000
0.9619
1,150,000
1,100,000
0.9565
10
1,000,000
975,000
0.9750
11
965,000
0.9948
12
13
14
15
960,000
875,000
865,000
990,000
960,000
2:
2: Establish
Establish the
the
950,000
median
median VPR
VPR
885,000
870,000
1,010,000
0.9896
1.0114
1.0058
1.0202
Median =
E = D - Median VPR
Difference of VPR
from Median VPR
6:
6: Compute
Compute the
the
mean
mean
difference
difference =
=
total/no.
of
total/no. of
sales
sales
4: Get
Get the
the
4:
absolute
absolute
value of
of
value
difference
difference
F = Abs(E)
Absolute Difference of
VPR from Median VPR
5:
5: Total
Total the
the
absolute
absolute
differences
differences
0.0296
0.0514
0.0458
0.0602
7: Compute
Compute COD
COD =
=
7:
average/median
x
Average
(Mean)=
average/median
x
100
100
0.0348
0.0296
0.0514
0.0458
0.0602
Total =
3:
3: Subtract
Subtract
median
median from
from VPR
VPR
Sale
Sale Price
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
1,220,000
1,250,000
1,350,000
1,450,000
1,100,000
925,000
1,365,000
1,050,000
1,150,000
1,000,000
965,000
960,000
875,000
865,000
990,000
D = C/B
1:
1: Compute
Compute
Value Price Ratio
VPR=Value/Price
VPR=Value/Price
Assessor's
Value
(VPR)
1,065,000
0.8730
1,100,000
0.8800
1,200,000
0.8889
1,350,000
0.9310
1,020,000
0.9273
874,000
0.9449
1,300,000
0.9524
1,010,000
0.9619
1,100,000
0.9565
975,000
0.9750
960,000
0.9948
950,000
0.9896
885,000
1.0114
870,000
1.0058
1,010,000
1.0202
Median = 0.9619
2:
2: Establish
Establish the
the
median
median VPR
VPR
E = D-Median VPR
Difference of VPR from
Median VPR
-0.0870
-0.0800
-0.0711
-0.0290
-0.0327
-0.0151
-0.0076
0.0019
-0.0035
0.0150
0.0348
6:
Compute
6: Compute
the
0.0296 the
mean
mean
0.0514
difference
difference =
=
0.0458
total/no.
of
total/no. of
sales
0.0602
sales
4: Get
Get the
the
4:
absolute
absolute
value of
of
value
difference
difference
F = Abs(E)
Absolute Difference of
VPR from Median VPR
0.0870
0.0800
0.0711
0.0290
0.0327
0.0151
0.0076
0.0019
0.0035
0.0150
0.0348
0.0296
5:
Total
the
5: Total
the
0.0514
absolute
absolute
0.0458
differences
differences
0.0602
Total = 0.5648
3.91%
`
7
7:: Compute
Compute COD
COD =
=
average/median
average/median x
x
B
Sale Price
C
Assessor's Value
D
E
Value Price Ratio Difference of VPR
(VPR)
from Median VPR
1,220,000
1,065,000
0.87
1,250,000
1,100,000
0.88
1,350,000
1,200,000
0.89
1,450,000
1,350,000
0.93
1,100,000
1,020,000
0.93
925,000
874,000
0.94
1,365,000
1,300,000
0.95
1,050,000
1,010,000
0.96
1,150,000
1,100,000
0.96
10
1,000,000
975,000
0.98
11
965,000
960,000
0.99
12
960,000
950,000
0.99
13
875,000
885,000
1.01
14
865,000
870,000
1.01
15
990,000
1,010,000
1.02
16
972,000
1,220,000
1.26
F
Absolute Difference
of VPR from Median
VPR
B
Sale Price
1,220,000
1,250,000
1,350,000
1,450,000
1,100,000
925,000
1,365,000
1,050,000
1,150,000
1,000,000
965,000
960,000
875,000
865,000
990,000
972,000
1,000,000
1,050,000
950,000
C
Assessor's Value
D
E
Value Price Ratio Difference of VPR
(VPR)
from Median VPR
1,065,000
0.87
1,100,000
0.88
1,200,000
0.89
1,350,000
0.93
1,020,000
0.93
874,000
0.94
1,300,000
0.95
1,010,000
0.96
1,100,000
0.96
With 4 additional sales, the
975,000
0.98
COD increased to 10.29%.
960,000
0.99
These sales had a VPR >25%.
950,000
0.99
A review of
the
details
of
the 4
885,000
1.01
properties870,000
is necessary. 1.01
1,010,000
1.02
1,220,000
1.26
1,300,000
1.30
1,375,000
1.31
1,275,000
1.34
Median VPR
0.98
-11
-10
-9
-5
-5
-4
-3
-2
-2
0
1
1
3
3
4
28
32
33
36
Total
Average (Mean)
COD
F
Absolute Difference
of VPR from Median
VPR
11
10
9
5
5
4
3
2
2
0
1
1
3
3
4
28
32
33
36
192
10.09
10.29
AT FIRST IMPOSSIBLE.
Thomas Carlyle
END.
Data Analysis.