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Board of Appeal and Equalization Handbook The sales ratio study The sales ratio study is a tool assessors use to help determine values for properties. The study helps assessors plan the upcoming assessment and evaluate the current assessment. If results of the study are not within acceptable guidelines, the assessor is required by law to either decrease or increase values so that they more closely reflect the market. The sales ratio study period includes sales that have occurred in a twelve month period. For the January 2, 2013 assessment, the assessor reviews sales that occur between October 1, 2011 and September 30, 2012. By design, there is a lag between the sale and when it is used to help estimate value so it can be verified and reviewed for accuracy. The assessor only considers sales that have been verified as typical and open market. This means the buyer and seller are typically motivated, both parties are acting in their own best interests and a reasonable time is allowed for marketing. According to state law, the assessor must not use sales that cannot be verified as open market sales. This means sales between family members, for example, are not included. This also means that foreclosure sales are very rarely (if ever) included. The assessor completes a sales ratio study by gathering basic data and screening and editing information to make any adjustments and exclude all sales that do not represent arm’s-length transactions. The remaining data is put into an acceptable format for processing (usually done by computer) and sorted by similar property types within each city or township (or neighborhood if possible). Finally, statistics are computed to describe the information and determine results of the assessor’s work. There are numerous calculations in a sales ratio study that describe the overall levels and quality of the assessment. An important one is the sales ratio; it shows the relationship between the EMV and a property’s sale price. It is the EMV divided by the sales price. EMV Sale Ratio= Sale Price The median sales ratio is the midpoint (middle) of all the individual ratios that are included for that property type in that city or township for that study period when they are put in order. In Minnesota, this median sales ratio should be between 90% and 105%. This means that when all sales from that study period for that property type in that city or township are put in order from smallest to largest ratio, the middle ratio should be between 90% and 105%. In Minnesota, six sales of each property type in each jurisdiction are required to complete a sales ratio study. In fact, just because a property sells does not mean its sale price should be its EMV. Assessors look at all sales in a study to arrive at conclusions and value estimates in mass. When there are limited sales to study, the assessor uses other tools, e.g. expanding the time and/or geographic areas. 11