New York, NY (PressExposure) December 25, 2009 -- While most property assessment experts are wrestling with the frequency of the assessment cycle, meaning whether properties should be assessed annually or every three years, etc., I have a completely different perspective on this issue.
Proper market information and data hold the key to produce a fair and equitable roll. The real estate market, like the stock market, has become extremely volatile (rises fast or declines fast), making it increasingly difficult to produce a futuristic roll with the backward-bending market data. Since the taxable status date is generally a futuristic date, the available market information and data tend to be quite inadequate to develop proper predictive (mass appraisal) models that, in turn, generate the assessment roll.
Case in point: many taxing jurisdictions utilizing mass appraisal modeling generally build their models in August and September with the available data, targeting the next January 2 as the status date (assuming the valuation and status dates are the same). At that point, because of the usual 3-month lag in recording and validation of sales, the most recent sales in the modeling file would cover, at best, June-July, leaving an enormous predictive gap of at least six months. Worse yet, a vast majority of those armâs length sales would have been contracted in the first and early second quarter of the year, leaving a small percentage of the questionable investor/distressed cash sales to represent the recent state of the market.
With a market as volatile as this, and considering the structural shift to higher risk-taking resulting in continued higher volatility going forward, those futuristic rolls are tantamount to crapshoots in the name of mass appraisal modeling. Granted, today we have more mass appraisal experts all around the world, thanks to organizations like IAAO, as well as more advanced econometric and operations research techniques, but the higher modeling expertise and advanced techniques could not be the proxy for the lack of market data around the status date. Simply put, nobody has the crystal ball in simulating a volatile market six to nine months in the future. That experimentation would be okay to write a thought-provoking paper or article, but is totally unacceptable to experiment with an assessment roll involving most taxpayersâ biggest financial investment.
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