In a ratio study, the median assessment-to-sale ratio is 0.95. What does this indicate?
Correct Answer
B) Assessments sit about 5 percent below sale prices
Why this is correct: In a ratio study, the assessment-to-sale ratio is calculated as Assessment / Sale Price. A median ratio of 0.95 indicates that, for the typical property in the sample, the assessed value is 95% of the sale price, meaning assessments are about 5% below market value on average. Why the other choices are wrong: A ratio of 0.95 does not measure uniformity; that is measured by the coefficient of dispersion. It does not indicate that 95% of properties were assessed. A coefficient of dispersion of 5 is a separate statistic measuring uniformity, not directly given by the median ratio. Exam tip: Median ratio = level of assessment. Coefficient of dispersion (COD) = uniformity of assessment.
Why This Is the Correct Answer
Why this is correct: In a ratio study, the assessment-to-sale ratio is calculated as Assessment / Sale Price. A median ratio of 0.95 indicates that, for the typical property in the sample, the assessed value is 95% of the sale price, meaning assessments are about 5% below market value on average. Why the other choices are wrong: A ratio of 0.95 does not measure uniformity; that is measured by the coefficient of dispersion. It does not indicate that 95% of properties were assessed. A coefficient of dispersion of 5 is a separate statistic measuring uniformity, not directly given by the median ratio. Exam tip: Median ratio = level of assessment. Coefficient of dispersion (COD) = uniformity of assessment.
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An appraiser runs a regression of sale price on GLA, age, and a binary variable for 'renovated' (1 = yes, 0 = no). The estimated coefficient for 'renovated' is $18,400 with a standard error of $6,200 and a t-statistic of 2.97. Assuming a two-tailed test at Ξ± = 0.05 and 42 degrees of freedom, what conclusion is supported regarding the market's recognition of renovations?