108 MASS. EXPERIMENT STATION BULLETIN 2a5 



Twenty-six properties in Springfield used principally for residence purposes 

 were assessed at 74 per cent of their selling price. Assessments are closer to 

 sale value in the older sections of the city, and reports from assessors indicate 

 that this is true in most cities. As with business property, there is consider- 

 able variation in the assessments, some property being assessed at only 50 per 

 cent of sale value, while a few parcels were assessed at more than 100 per 

 cent. The number of sales is not sufficient to show more than a rough aver- 

 age. The sales covered a period of one year only and can not be considered 

 a representative sample. Several of the transactions were evidently to rela- 

 tives, while a few sales were apparently transfers to holding or operating 

 companies under the former management. Since some of the conditions of 

 the sales were unknown, these figures should be considered merely as indi- 

 cative of the ratio of sales to assessed values. 



Further differences between assessed and sales values in various cities are 

 shown in the following quotations from replies to questionnaires made by 

 members of the Massachusetts Association of Real Estate Boards^ 



"Largest office building in city sold three years ago at less than 

 assessed valuation. In general, central business properties assessed 

 about 80 per cent of present market value. Many instances, however, 

 where assessment is greater than sound value. Speculative sales where 

 owners hold small equities have misled assessors. Readjustment 

 period bound to come and sound values will be less than many of 

 these sales prices." Another correspondent asserts: "Not much atten- 

 tion paid by assessors to real values." Another reports: "In many in- 

 stances, especially down-town higher than market — suburban property 

 below market value." One says: "Valuations 40 per cent below sales" 

 and they run along thus: "Valuations as a whole come within 70 to 

 80 per cent of present values, with small dwellings only 50 per cent;" 

 "Nearly every sale in excess of taxed value;" "Assessments much less 

 than market, in some cases 50 per cent;" "In older parts of city 

 assessments liigher than asking price but in 75 per cent of cases 

 below actual values:" "Assessments about ti6 per cent of sale price;" 

 "Shore assessed 80 per cent of market, inland 60 per cent." 

 Assessments of apartment houses are more difficult to determine than for 

 some types of city real estate. Market values of such property are often 

 speculative and are likely to be relatively higii when compared with total rents 

 Instances have been reported where apartments were returning only 8 pei 

 cent of their sale value in gross rents. Assessed values in such cases are 

 lower than sales values and are based on the non-speculative value repre- 

 senting a fair return on the investment. Building lots are assessed at a low 

 percentage of their sale value because frequently sale value is not a fair index 

 of value in a section. A temporary boom, or sale of particular lots for spe- 

 cial purposes often tends to inflate values. Assessors consider these facts in 

 the assessment of such property and inflated values are properly discounted. 



Causes of Inequalities in Assessment. 



The most important cause of undervaluation of farm property is a lack of 

 knowledge of the things which determine values. The assessor has no yard- 

 stick with which to measure value. He is told to use his best judgment in 

 determining fair cash value when there is usually very little information on 

 which judgment can be based. The factors affecting property values in cities 

 have been studied and various attempts to put assessments on a systematic 



^ Speech by Mr. Henry Whitniore before the Association of Massachusetts Assessors, 

 December 15, 1926. Reprinted in "Instructions to Assessors" No. 7, Massachu- 

 setts Department of Corporations and Taxation. 



