92 MASS. EXPERIMENT STATION BULLETIN 235 



value of the property. Commenting upon this situation in a special letter to 

 assessors under date of February 9, 1926, the Tax Commissioner says:— 

 It is plain in such cases that either the officers of the bank or the 

 assessors have grievously erred. There seems to be a widespread be- 

 lief that assessors generally do not begin to value property at "its 

 full and fair value." It is strikingly evident that investment boards of 

 savings banks, who deal with at least 40 per cent of all real estate 

 in Massachusetts, in the shape of mortgages, pay no attention what- 

 soever to valuations placed by assessors The assessors' valua- 

 tions are seemingly held in low esteem. The only course left open 

 when the Courts and the Legislature indicate a feeling that assessors 

 are not valuing property at its full and fair cash value, is for the 

 assessors themselves to set their house in order by making a real effort 

 to value property in accordance with the law and by so doing not only 

 fulfil their oath of office, distribute more equally the burden of taxa- 

 tion, but as well bring back to a position of respect the valuations 

 made by assessors. 

 AVhile it is true that assessed values are often below first mortgage loans, it 

 is not fair to assume that savings bank loans should be only 60 per cent of 

 assessed values. The basis on which the savings bank loan is made is not 

 always the same as that on which assessments are made. 



In the smaller towns, especially, under-assessment is the rule rather than 

 the exception. Few assessors admit assessing at less than 60 per cent of 

 actual value, but property in most towns and cities is assessed below 75 per 

 cent of its cash value, and in some cases at about half value. This is par- 

 ticularly true where tliere are few actual sales to guide tlie assessors in esti- 

 mating a fair value. 



The Basis of Appraisal. 



Assessment is merely appraisal for purposes of taxation. Appraisals by 

 assessors, savings banks, land banks, real estate agencies, and property owners 

 are all for the purpose of determining "value." 



Evidently value varies with the individual appraiser. Three things are 

 usually considered in determining "fair value." 



1. Present market value or the possibility of resale. 



2. Productive value, based on earning power. 



3. Speculative value, or probable value in the future. 



The man looking for a farm on which to make a living is interested in the 

 productive value of the property. He does not care about resale value or 

 future speculative value. The bank making a loan on property must consider 

 resale value in addition to productive value. Practice varies with the bank, 

 but some banks also consider the character and reputation of the borrower, 

 and to some extent the probable increase in the value of the pro]ierty on 

 which the loan is made. They must also consider the possibility of foreclosure 

 and the price at a forced sale. Assessors do not consider speculative value, 

 and sale value is not always a good basis for assessments. Too many current 

 sales anticipate future values and are consequently above productive value. 

 Productive value appears to be the most important factor considered by 

 assessors; at least, assessed values appear to follow productive values closer 

 than sales values, although both are considered in making assessments. In 

 any case, assessed values are evidently less than either sales values or valua- 

 tions of property owners, due to differences in the basis of appraisal. 



There are certain difficulties connected with the accurate appraisal of 

 farm property in Massachusetts. The numerous types of farming make gen- 

 eral rules impossible, since each farm must be considered as an individual 



