The Department of Revenue is an oversight agency that conducts an annual property tax ratio study of both real and personal property values in each of the 39 counties.
Frequently asked questions
Annual ratio study
- How is the Department of Revenue’s Annual Real Property Ratio Study conducted?
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The Department of Revenue (DOR) performs annual ratio studies in each of the 39 counties to determine the level of assessment for both real and personal property. This discussion focuses on the real property ratio study.
The majority of the Department’s annual real property ratio study is based on the results of the valid and invalid sales reports provided by the counties in accordance with Chapter 458-53 WAC which outlines the rules for the Property Tax Annual Ratio Study.
The sales study uses sales occurring in the 12-month period between May 1 preceding January of the current assessment year and April 30 of the current assessment year. These transactions are separated into valid and invalid sales reports. The valid sales are used to calculate the real property ratio. The valid sales are considered a sample of the universe of properties within the county. WAC 458-53-070
The invalid sales are not used in the ratio calculation, since the sale price is not considered a true reflection of market price. However, for accountability purposes, the county is still required to document and report the invalid sales to the department.
There are many reasons why a sale may be classified as invalid. The WAC rules list 27 invalidation codes a county may utilize in the invalid sales report. It could be something as simple as a sale between relatives (code #1 Family), or as complicated as a piece of property being sold at a price significantly different from a similar property because it is being combined with other parcels to become a larger unit of land (code #21 Plottage).
Upon receipt of the valid and invalid sales reports, DOR performs an initial review to identify any obvious errors or omissions.
Concerns and questions are discussed with county personnel prior to accepting the sales reports and calculating the real property ratio.
- What further reviews does DOR perform regarding the Real Property Ratio Study?
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As part of the DOR’s oversight responsibilities, further reviews of counties’ use of the 27 invalidation codes listed in WAC 458-53-080 as well as counties’ treatment of selling vs. non-selling properties are conducted annually on one third of the counties in the state.
Because the Real Property Ratio Study is a statewide endeavor, it’s important that all the counties are applying the invalidation codes in a uniform fashion. Focusing on particular invalidation codes, the DOR selects a number of invalidated sales in each of the counties and Department staff performs follow-up reviews to determine the accuracy and uniformity in the utilization of invalidation codes.
Once DOR staff has completed the follow-up review, meetings are conducted with county staff to discuss the results of the study. This allows an opportunity for education and increasing statewide uniformity in the invalidation process.
Another study that the Department performs is the Selling vs. Non-selling Study. Since the majority of the real property ratio is determined based solely on the valid sales provided to the state by the counties, the accuracy of the study hinges on the theory that non-selling properties are being assessed in the same manner and at the same level as the selling properties. The IAAO Technical Standard on Ratio Studies addresses the importance of this concept in the excerpt below.
“As long as sold and unsold parcels are appraised in the same manner and the data describing them are coded consistently, statistics calculated in the sales ratio study can be used to infer appraisal performance for unsold parcels.
However, if parcels that sell are selectively reappraised or recoded based on their sale prices or some other criterion (such as listing price) and if such parcels are in the ratio study, sales ratio study uniformity inferences will not be accurate (appraisals will appear more uniform than they are). In this situation, measures of appraisal level also will be unsupportable unless similar unsold parcels were appraised by a model that produces the same overall percentage of market value (appraisal level) as on the parcels that sold based on consistently coded descriptive and locational data.
If sold and unsold properties within a specified group are appraised in the same way, their appraised values should reflect similar average percentage changes from year to year. Accordingly, changes in appraised values for sold and unsold parcels can be compared to determine whether sold parcels have been selectively appraised.
For example, if sold parcels are considered representative of a stratum and appraised values increased an average of 10 percent while appraised values for unsold parcels in the same stratum increase an average of only 2 percent, “sales chasing” is a likely conclusion." IAAO Technical Standard on Ratio Studies, April 2013.
In performing this study, the DOR samples a number of the valid residential sales provided by the counties from the previous year’s ratio study and the assessment changes on those selling properties are compared to similar non-selling properties in the neighborhood. The DOR utilizes statistical tests taken directly from the IAAO Technical Standard on Ratio Studies to determine whether sold and unsold properties are being appraised in the same manner.
As with the invalidation code review, once completed the results of the Selling vs. Non-Selling study are discussed with county personnel.
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International Association of Assessing Officers (IAAO). 2013. Standard on Ratio Studies, Kansas City, MO:IAAO.