Sales Ratio Review and County Equalization Factor
Calder County’s equalization director is reviewing the 2025 sales study for a township with 1,450 real parcels. The township’s assessor submitted 84 sales from the 24-month study period. The file includes 9 sales of newly constructed homes, 7 foreclosure or REO sales, 4 transfers between family members for nominal consideration, and 2 sales in which the seller paid $15,000 in closing costs that the assessor did not adjust. The median ratio for all 84 sales is 0.910. After the director removes the non-arm’s-length sales and new construction and adjusts the concessions, 62 sales remain with a median ratio of 0.945, a coefficient of dispersion of 14.2, and a price-related differential of 1.08. The township’s total assessed value is $178 million. The county board is considering an equalization factor of 1.058 for the township. A parcel in the township has an assessed value of $150,000 and a taxable value of $104,000; its prior-year taxable value was $101,000.
1. Which sales should be excluded from the ratio study, and why? What is the indicated equalization factor?
Read the worked answer
Exclude the 7 foreclosure/REO sales because they are typically lender-driven and not arm’s-length market transactions. Exclude the 4 family transfers for nominal consideration because price does not reflect market value. Exclude the 9 new-construction sales from the existing-parcel ratio study because new construction is not comparable to the existing inventory; new construction should be studied separately for cost and value trends. The 2 concession sales should not be excluded, but the $15,000 seller-paid closing costs should be subtracted from the sale price (or otherwise adjusted) so the ratio reflects the net price paid.
The defensible study uses the 62 adjusted, arm’s-length sales. The indicated factor is:
100 ÷ 94.5 = 1.0582, rounded to 1.058.
The COD of 14.2 is somewhat high for residential property and suggests uneven assessment levels. The PRD of 1.08 is above the usual 1.03 threshold, indicating that higher-value properties may be relatively underassessed. The director should stratify by value or class before adopting a single township-wide factor.
2. Explain how the 1.058 factor would affect the parcel with assessed value $150,000 and taxable value $104,000. Does the factor override the taxable value cap?
Read the worked answer
The factor is applied to assessed value: $150,000 × 1.058 = $158,700. That corrects the level of assessment to the county’s standard.
The factor does not automatically multiply taxable value. Taxable value remains governed by the Proposal A cap. The prior taxable value was $101,000; with a 3.2% cap, the current taxable value would be about $104,232. The stated $104,000 is within that cap. After equalization, the parcel’s taxable value stays at $104,000 unless there is a transfer of ownership or an addition. The gap between assessed value ($158,700) and taxable value ($104,000) widens, but the taxpayer’s taxable value is not increased merely because the county equalized assessments.
If the parcel sold after the equalization, the transfer would uncap it and the new taxable value would be based on the assessed value. The assessor should not send a tax bill computed by multiplying $104,000 by 1.058.
3. What cautions should the county board consider before adopting the factor?
Read the worked answer
The board should consider the sample size and representativeness: 62 sales is workable, but the township has 1,450 parcels, and the sales may cluster in one neighborhood or price range. The board should review a three-year study if the current sample is thin. It should also review the PRD of 1.08 and the COD of 14.2 by property class and value stratum; a single factor may overcorrect low-value parcels and undercorrect high-value parcels.
The board should confirm that new construction was excluded consistently, that concessions were adjusted, and that the factor is applied by class where required. It should consider the appeal risk and the effect on taxpayers whose taxable values are capped. Finally, the board should document the decision and the data behind it, because the equalization factor is a judgment about the level of assessment, not a mechanical calculation from the 84-sale file.