Mass Appraisals
What is a mass appraisal and who would use one?
A mass appraisal typically involves the valuation of multiple, similar properties using a variety of statistical functions to arrive at a valuation model. The valuation model is a mathematical equation that is extracted using as much data as can obtained. The more data, the more accurate the model will be.
The valuation model is based on the classic appraisal formula:
Market Value = Land Value + Building Value
Land Value and Building Value can be broken up into a number of smaller variables and those are the variables used in mass appraisal projects.
The basic steps required to carry out a mass appraisal start with acquiring the data and organizing it. This type of data can sometimes be purchased from the assessing authority. Ideally, recent sales data from over one hundred properties should be used. The data will include items like: neighbourhood code, lot size, building size, various value influences such as if the property has a pool, if it’s on a corner lot, number of bedrooms, number of bathrooms, a numerical quality code, the number of garages, etc. There may be up to 40 variables that apply to each property. After the database is acquired, the appraiser looks for any bad or missing data and removes entries that don’t suit. Through the use of statistical software, it is now the appraiser’s job to determine which variables have the most influence on value and eventually create a mathematical function that can be used to accurately predict property values. Each variable would be multiplied by a specific coefficient and then all the values are summed to arrive at a predicted market value.
Ten to fifteen variables may be used in the formula and after the formula is generated, it would be tested against some of the sales from the database to ensure accuracy. After it has been tested and it shows accurate predictions, it can then be used to quickly predict property values on a mass scale by simply plugging in the variables.
They may be used by various levels of government, developers, investors, or even insurance underwriters. Governments may use mass appraisals to arrive at assessment values for taxation purposes. A developer may want to know what the value of a new development that will include 100 new houses or if a condo building is built, what each individual unit should sell for.
Mass appraisals are not as common as individual property appraisal but they do exist and their use is recognized by the Appraisal Institute of Canada. In some cases, they are the best option to use when dealing with high volume and time constraints.
-Ken Penner, Keystone Appraisals
