Value & Accuracy Tests

To ensure market-level values within economic areas, the sale prices are compared to actual values. The acceptable market level, as established by the state, is an actual value within 5 percent, plus or minus, of a sale price. A sales ratio is used for this and is calculated by taking the actual value divided by the sale price. The middle, or median, sales ratio of all the sales in an economic area must be between .95 and 1.05. In addition to testing by economic area, all neighborhoods are tested for their compliance to the same sales ratio standard.

Another test for market equity includes the amount of difference between all the sales ratios and the median sales ratio. A COD, or coefficient of dispersion, is used for this. It is basically a percentage of the average difference (absolute deviation) of all ratios with the median sales ratio. The COD indicates the amount of homogeneity, or sameness, existing in the market place. Areas with diverse properties have a higher COD than those having more similarity. The law requires different COD levels, depending upon  the property type. All residential property must have a COD less than or equal to 15.99. All other property, including vacant land must have a COD less than or equal to 20.99.