The State Tax Equalization Board (STEB) establishes a Common Level Ratio annually for every county in Pennsylvania.  The result of their sales analysis contributes to the fair distribution of state subsidies to each school district.  More interestingly to real estate professionals may be that Common Level Ratios can also be used as an aid to approximate fair market value.

Common Level Ratios are determined by the arithmetic mean of individual sales ratios (assessed value to actual sale price) for every valid sale received from a county.  Real estate sales between family members, duplicate sales, corporate transfers, Sheriff's sales and so on are not considered valid sales and excluded from the statistical model.

Each county must report all property transfers for the previous calendar year to the STEB office by July.  These property sales are then analyzed to determine new Common Level Ratios which are applied in the upcoming calendar year.  We can see that the Common Level Ratios used this year were actually derived from properties that sold more than 12 months ago.

Here's how it works: Let's look at a fictitious property located in Adams County that is assessed in 2002 at $76,800.  Begin by looking up the 2000 Common Level Ratio for Adams County. (see Table)  The 2000 Common Level Ratio for Adams County which is to be applied to the 2002 Assessed Value is 38.4%  Divide the Assessed Value by the Common Level Ratio.  A little calculator magic (76,800 ÷ 0.384) tells us that the approximate fair market value for the subject of this example is $200,000.

Check it out!  It's amazing how often this method of determining fair market price falls within the range of value on an appraisal report.