Rob Coulter: Property Revaluation and Subjectivity
I had a very helpful conversation with a gentleman from the property revaluation vendor for Tiverton last night, and I learned quite a bit about the process. By the way, he was very patient and cordial, and I was very impressed with him, even if we may arrive a different conclusions. I agree with Justin that this should be an exploratory dialogue, and I do not pretend to have all the answers either.
The truth is somewhat in the middle of what I’m reading from comments here. As far as I can tell, they are using a multivariable regression computer model. It is susceptible to error because the sample sizes are not statistically robust enough for so many variables. When this happens, judgment calls have to necessarily be made. In a sense, the “methodology” has not changed, but there are still many, many variables calling for subjectivity on the appraiser’s part.. I don’t want to go so far as to call these judgment calls arbitrary, but there is definitely enough play between the joints for the appraiser to “skew” (if that’s the right word) a result based on assumptions being made.
Although it sounds fancy and complicated, the idea of using multivariable regression is to let the computer try to find the impact of one variable while holding all others constant. It’s like algebra on acid. This can’t be done by hand when there are dozens and dozens of variables, as there are, here, so we let a computer do it.
I do not believe that it is incorrect to use this type of modeling, but there are two very important qualifiers:
- The model only works if there are enough samples for each variable. I’m not sure there are here.
- More importantly, this model and all models have assumptions built into them. These assumptions are necessary for any model but are at the end of the day subjective and subject to dispute. For example, I learned last night that (roughly speaking) all taxpayers are taxed at nearly one acre of land no matter how much less they have, and owners with additional acres are only taxed at a very low cost per acre. So if you own one-third of an acre or one full acre, you pay about the same tax on land. Do you think that’s fair? Maybe yes, maybe no, but these are some of the assumptions that lurk behind the “methodology.”
There are myriad assumptions and they have a major impact. They do not involve only objective things such as acreage and square footage, but multiplying factors applied based on the style of the house. These are very subject to debate. For example, I argued that a solar panel on a roof should add value to a house based on fuel costs. The vendor suggested that it might detract because of decreased curb appeal. I replied that a new buyer could simply remove the panel. And so on. You can see how very quickly a lot of error and assumptions can creep into a system that otherwise sounds so impressive.
Again, I want to stress that I don’t think anyone is trying any funny business here. I was very impressed with the vendor, and I also very much respect David Robert, Tiverton’s tax assessor. But I do have experience with multivariable regression, and if that is the model behind this, I can tell you that we can’t trust it wholesale. I don’t think the “methodology” has changed, but there are many assumptions under this methodology that can be adjusted and are essentially subjective.
Rob Coulter is a member of the Tiverton Budget Committee as well as Tiverton Citizens for Change.