Putting an estimate on what a house is worth is not an exact science. Invariably, when a building sells, tax estimates of what it’s worth will have been somewhat off target. But just how much off target can it be, and still be considered fair?
Turns out that the tax assessment industry has an answer: It’s anywhere from 80 to 120 percent of a home’s sale price. They call it the acceptable “standard of deviation.”
And based on an analysis of homes that sold in the past two years, Philadelphia tax assessors seemingly did not meet that standard in a full 40 percent of the cases.
Here’s what AxisPhilly found: 59.2 percent of the assessments fall within the acceptable range when compared to sale prices. Of those outside that range, 15.3 percent have assessments that are more than 50 percent off the sale price — mostly among lower priced properties.
|Assessed value more than 50% below sales price||177||1.3%|
|Assessed value 20% to 50% below sales price||1,914||14.3%|
|Assessed value up to 20% below sales price||4,890||36.6%|
|Assessed value and sales price same||31||0.2%|
|Assessed value up to 20% above sales price||2,984||22.4|
|Assessed value 20% to 50% above sales price||1,482||11.1%|
|Assessed value more than 50% above sales price||1,868||14%|
AxisPhilly got these numbers by taking the data for all the Philadelphia homes that sold in the years 2011 and 2012 and comparing those prices against what city assessors say the properties are worth. (We tossed out sales that weren’t considered to be “market rate” sales, and also tossed out those that sold for less than $30,000, just in case they, too, were actually friendly transactions between family members.)
“There appears to be something out of whack there,” said Robert Taylor Sr., president of the Independent Association of Assessment Officers. “It sounds to me as though there might be an issue with the accuracy of the square footage data that the city has on record for these buildings.”
Taylor said that sometimes assessments are thrown off because city records about whether a building has been renovated, or added on to, are not accurate. Typically he said, assessors take a square footage of a property and multiply that by an average price per square foot for similar properties in that market area to come up with an estimate of value.
The Office of Property Assessment initially did not respond to our questions about these findings directly. Several days later, Chief Assessor Ritchie McKeithen told us: “Frankly we don’t know what kind of analysis you guys did. We certainly know that we followed industry standards and best practices and … carefully collected data, and did the kind of regression analysis that goes along with that.” He said OPA brought in national experts to train the staff and check their work.
“No system is perfect, particularly in its first year,” he said. “But OPA believes and the administration concurs that the 2014 values are a major improvement in accuracy, and we will work with people in this first level review process to improve information.”
AxisPhilly also mapped the data it developed to allow you to explore your neighborhood. At a glance, it appears that in stable neighborhoods with a reasonable number of transactions, the assessments are generally within the 20% plus/minus range of sale prices. In more rapidly changing neighborhoods, with transactions more spread out, more variances appear (see example below).
In addition, we found that properties that sold for less than $100,000 made up nearly 83 percent of the properties where the assessment was more than 50 percent above the sale price, even though only 24 percent of the total pool of properties analyzed fell below that price point.
Our full data set can be viewed on Google Drive.
The Inquirer also drilled down into AVI assessments on Sunday, Feb. 24. It reported:
An Inquirer analysis of about 10,000 residential sales from 2012 showed only 40 percent of the homes would be assessed within 15 percent of the sale price. The Inquirer excluded sales below $10,000 and other transactions, including sheriff’s sales and those between related parties.
In a story looking at why assessments don’t always match sales prices, WHYY’s NewsWorks noted:
First District City Councilman Mark Squilla said his office has found hundreds of questionable assessments, including many that are very different than recent sales. He thinks this may indicate a bigger problem.
“I’m just worried now that we’re getting more and more calls that we’re logging, that it’s more than just some mistakes,” he said. “That there’s maybe some type of flaw in the process of how this was all done.”
NakedPhilly did an analysis of a single block in Graduate Hospital, but used its own appraisal of market value.