Does the N.O. Assessor Rely on ‘Sales Chasing’ to Set Property Values?

By Rich Collins

August 5, 2020

NEW ORLEANS – Orleans Parish Assessor Erroll Williams is responsible for determining the value of more than 167,000 properties that are expected to create roughly $650 million in 2020 tax revenue.

The office’s “open rolls” period lasts until Aug. 17, so property owners have until then to schedule a virtual or in-person appointment to debate their assessments. No doubt the assessor’s team is currently sifting through lots of pictures of un-renovated kitchens and outdated decor as homebuyers bid to lower their home’s assessed value.

Meanwhile, the Bureau of Governmental Research, a nonprofit watchdog group, recently released a report highlighting its recommendations for ways the assessor’s office can improve its operations. The report comes on the heels of a Louisiana Legislative Auditors report, released earlier this year, that drew similar conclusions. The scrutiny comes at a time when some property owners have seen their assessed values rise dramatically along with an increase in the market value of real estate in many parts of the city.

BGR’s Recommendations

BGR has several recommendations for Williams’ office. These include increasing transparency through internal audits and telling property owners in advance when there’s a re-evaluation scheduled for their area. The most important BGR finding, however, is that the assessor’s office relies too much on a practice known as “sales chasing” to determine a property’s value.

So what exactly is sales chasing? The answer depends on who you ask.

According to BGR vice president and research director Stephen Stuart, it’s the practice of relying too heavily on the sale prices of recently sold properties to determine a new assessed value – and it’s generally frowned upon in the industry.

“When you first look at it, sales chasing seems logical because a buyer and seller came together and agreed on a price so that’s a good representation of the value for the sole property – but the problem comes in when you’re not able to use that method to value unsold property,” said Stuart. “We took a sample of about 1500 recent [Orleans Parish] sales and we found that about 60% of the sold properties in the parish were valued at very near their recent sale price. And in a normal situation, even an occurrence of that happening about 5% of the time would indicate significant sales chasing.”

Williams, of course, doesn’t see it that way.

“The assessor’s office needs to collect sales information in order to develop our computer-assisted models that are the basis for our re-evaluations for each neighborhood,” he said. “Good assessor’s practices can be easily misconstrued as sales chasing depending on when and how the statistical analysis is used and for what purpose.”

Williams said that, if done properly, assessors can use sales prices along with other data – such as a property’s size, age and condition – to determine the estimated fair market value of properties in each neighborhood. Assessors also “grade” houses based on the quality of materials and level of craftsmanship used in their construction.

“So I’m in disagreement with them that this is sales chasing – I think it’s more a textbook reading of what it should be and [them] not understanding how it’s actually applied because I will not allow any non-government agency without oversight authority to come in and review,” he said. “I have to continue to follow what I think is fair and not be influenced by special interests.”

Still, BGR thinks the assessor’s office could better deploy its mass appraisal software to value large groups of properties at once.

“The best practice nationally for assessing property is [using] computer system technology that allows you to apply statistical models to groups of properties to value them at one time,” said Stuart. “So the model will build in things like recent sale activity in the neighborhood, characteristics of the properties, when the subdivision was built, the quality of the housing and things the inspections will pick up. Then you construct a model and apply it to the properties in the neighborhood.”

BGR said the assessor denied its request for an in-person demonstration of how its technology is currently being used so there’s no way of knowing exactly what’s going on. For his part, Williams said his office is inherently transparent because the values for all properties are available on the assessor’s office website. He said “armchair assessors” are entitled to their opinion but he believes he produces results that are as fair as can be.

“I have disclosed everything that I’ve done,” he said. “The data is out there and if I’m wrong each property owner has the right to challenge that evaluation and I encourage it. I can’t be any fairer than that. This is not an exact science. All we do is take the statistical data, trying to plot a line in between the guys who overpaid and those who underpaid and say this is what your property should be worth.”

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