To ensure market level values within economic areas, the sale prices are compared to actual values. The acceptable market level, as established by the State, is an actual value within 5% +/- of a sale price. A sales ratio is used for this and it is calculated by taking the actual value divided by the sale price. The middle or median sales ratio of all the sales in an economic area must be between .95 and 1.05. In addition to testing by economic area, all neighborhoods are tested for their compliance to the same sales ratio standard.
Another test for market equity includes the amount of difference between all the sales ratios and the median sales ratio. A COD, or coefficient of dispersion, is used for this. It basically is a percentage of the average difference (absolute deviation) of all ratios with the median sales ratio. The COD indicates the amount of homogeneity or sameness there is in the market place. Some areas have a lot of variety, thereby having a higher COD, while others may have more similarity, indicating a lower COD. The law requires different COD levels, depending upon the property type. All residential property must have a COD less than or equal to 15.99. All other property, including vacant land must have a COD less than or equal to 20.99.
Uniformity of Assessment
The Assessor’s Office is audited annually by an independent auditor hired by the State Board of Equalization to ensure each county complies with the standards adopted by the State Board of Equalization for assessment level and uniformity. Colorado utilizes the Standards on Sales Ratio Analysis as adopted by the International Association of Assessing Officers (IAAO) for the criteria to measure compliance regarding assessment quality and uniformity.
Penalties for noncompliance require the Assessor to reappraise the affected properties again, with State supervision, and to pay the State for their costs of supervision. In addition, the county must levy taxes to “payback” any inappropriate school aid funding due to the inappropriately appraised properties.