50 IAC 27-5-10 Stratification

Sec. 10. (a) Stratification is the sorting of parcels into relatively homogeneous groups based on use, physical characteristics, and location. Stratification permits analysis of mass appraisal performance within and between property groups. Care must be taken not to over-stratify, that is, to create strata that are too small to achieve statistical reliability. Ultimately, the degree of stratification will be determined largely by available sales data, unless it is cost-effective and practical to add sufficient independent appraisals. A stratum must be combined with similar strata if sufficient sales or appraisals are not available for that stratum. Also, systematic sales chasing can occur if when creating adjustments for the market, characteristics are over-stratified. Over-stratification is most likely to occur with the creation of neighborhoods. (b) If, upon review of preliminary value calibration analyses, ratio studies, neighborhood delineations, and land values, the assessing official determines that further categorization of property types is necessary to promote uniform and equal assessments, the local assessing official shall attempt stratification before commencing a reassessment to adjust real property market valuations. (c) The assessing official will need to identify similar groups of property, by property class and property type within neighborhoods, based on criteria such as location, structure type, and age. This dividing of property into groups of similar or homogeneous types for analysis and value adjustment is stratification. Value calibration analyses are generated for various strata and adjustment factors are refined until the assessor determines that the coefficient of dispersion (COD) and the price-related differential (PRD) are within the requirements of this rule. The calibrated adjustment factors are then applied to the valuation of all similarly situated properties so that the assessment statistics fall within the requirements of the IAAO Standard on Ratio Studies. For example, if an examination of the sales indicates that properties on large acreage tracks are undervalued causing the COD to be out of line, and grouping by land size shows an acceptable COD within the group but the median ratio for the larger tracks is lower than the smaller tracks, the assessor might then adjust the excess acreage rate so that the median of the large acreage comes to the same median level as the remaining parcels. After this is accomplished in accordance with section 6 of this rule, the application of overall adjustment factors shall be applied based on the revised value calibration analyses. (d) In accordance with IC 6-1.1-4-39, stratification, if appropriate, and annual adjustment of real property regularly used to rent or otherwise furnish residential accommodations for periods of thirty (30) days or more and that has more than four (4) rental units shall take into account that the valuation of such property is to be determined by applying the least of the following appraisal approaches: (1) The cost approach. (2) The sales comparison approach. (3) The income capitalization approach. (e) In accordance with IC 6-1.1-4-39(b), stratification, if appropriate, and annual adjustment of real property that has at least one (1) and not more than four (4) rental units shall take into account that the gross rent multiplier method is the preferred method of valuing such property.