Contrary to common sense, the Estimated Fair Market Value (EFMV) shown on your tax bill WAS NEVER meant to be an actual estimate of your home’s value to buyers in the real estate market today.
In fact, neither the assessment ratio nor the EFMV appeared on tax bills before 1987; it was considered to be unnecessary since the tax due is calculated using just the assessment and the tax rate (Mil rate).
In1987 the State Legislature had decided to bring property assessments all around the State to some common level of assessment to protect the idea that taxation must be Uniform under our Constitution. The change they enacted to accomplish this was to require that total assessments in a community could be no more than 10% above or below market levels overall.
Prior to that change, assessments in every town, village or city were different and could be any fraction of the overall market level depending on where you went across the State. It was not uncommon to find nearby communities whose assessments were 25%, 38%, 57% or 82% of their actual market levels.
The assessment ratio on the tax bill was included as a way to show taxpayers that their Towns, Villages and Cities were adjusting assessments periodically to keep up with real estate market changes. The EFMV was added as well as a misguided attempt to help taxpayers decide if their assessment was on the right track.
The EFMV is calculated simply by dividing the assessment by the assessment ratio. The assessment ratio is an overall comparison of the market sale prices of all properties that sold the previous year with their assessment at the time of sale to see how far apart they are. This comparison gives us an idea of how the overall market had changed over that time, but unfortunately not much about a single home.
The Assessment ratio is calculated by the Department of Revenue by statistically mashing up the sales prices of all the property that sold in a municipality, including residential, commercial and industrial parcels, even though these kinds of properties perform very differently from each other. It is then compared to the assessed value of these properties to find the ratio between the two.
At the end of the day, the EFMV and assessment ratio are meant to help City and State officials know when a market-adjusted Citywide Revaluation is necessary rather than anything specific about any individual property.