Formula – Assessment Ratio

By on June 6, 2018

P / A = R

P – Asking price

A – Assessed value

R – Assessment ratio

It is a well-known fact that property transaction prices seldom, if ever, matches the assessed value. And in a lot of cases, the 2 figures can vary widely.

Assessed value is the value the authorities place on a property for the purpose of property tax calculation.

With this in mind, the difference between asking price and assessed value provides a good indication of how optimistic or pessimistic a market currently is.

More importantly, it provides the investor with a basis for observing inconsistencies or patterns between asking price and assessed value.

R is expressed as a percentage.

Because this formula for assessment ratio does not take into account of several important real estate variables, especially time, an adjusted assessment ratio is often used for a more accurate reflection.



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