From the Lafayette Journal & Courier:
The person living next door to you might be your neighbor, but when it comes to assessing property for tax purposes, your “neighbor” might live nowhere near you.
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To an assessor, the term neighborhood isn’t limited to a group of houses in the same vicinity. It also can mean a group of houses with similar features and marketability.
The neighborhood concept is a key part of trending, which is a method of mass appraisal used to annually adjust assessed values up or down without physically examining every property.
In trending, sales of a sample of homes are used to estimate how all parcels in the same neighborhood have changed in market value. Trending is used to estimate assessed values in years between general assessments.
Phillips said at least five home sales in a neighborhood are needed to create a trending factor that can be reliably used for trending. But rural neighborhoods consisting of a dozen or so houses typically won’t yield enough sales transactions to be used for trending.
She said it’s more useful to think of neighborhood as a “market” of houses with common development characteristics in the same school taxing district.
“Particularly for properties in the 10 rural townships, … We had a lot of little, tiny neighborhoods, and they only had 15 houses, 20 houses,” Phillips said. “We were never going to have enough sales to get a trending factor for those.
“So we created markets, and we helped redefine the neighborhoods of the rural houses to put them with their like ‘friends’.
“We might have a neighborhood that had 15 houses, and it’s now being trended with a similar neighborhood in the same school system that has 25 houses,” she said.
In a handful of cases, a single house is its own neighborhood because similar houses cannot be found in the area, Phillips said.
http://www.jconline.com/apps/pbcs.dll/article?AID=2013301060017