This case study requires students to apply the process of mass appraisal typically used in rating and taxation for residential properties.
This case study requires students to apply the process of mass appraisal typically used in rating and taxation for residential properties. Students will follow the process through data cleaning, model creation, quality assurance testing, application and audit, providing advice on all of these in client-focused written outputs.
Course objectives to meet in this assessment.
This case study addresses two of the specific course objectives.
CO1 – Apply international best practice to analyse and evaluate the accuracy and uniformity of assessed values.
CO6 – Demonstrate Business School Enterprise Skills in the context of the Property discipline: i) Problem Solving (advanced level); and ii) Written Communication (advanced level).
Graduate Qualities to be demonstrated in this assessment.
This case study addresses 4 graduate qualities:
GQ1. operates effectively with and upon a body of knowledge of sufficient depth to begin professional practice.
GQ3. is an effective problem solver, capable of applying logical, critical, and creative thinking to a range of problems.
GQ6. communicates effectively in professional practice and as a member of the community.
GQ7. demonstrates international perspectives as a professional and as a citizen.
We are assessing your ability to solve a problem in a systematic and professional manner. Thus, the instructions are quite broad and require you to act as an effective problem solver at an advanced level commensurate with your stage of curriculum in a professionally-orientated bachelor’s degree. The level of communication will also be at a higher level than in earlier courses. This is a final year University course and the standard needed will reflect the level of problem-solving and communication typically expected of graduates at the point at which they enter the workforce as qualified valuers, which will be the case on your graduation.
Introduction
South Australia operates a Purchaser/Provider Model for the provision of values under the Valuation of Land Act 1971 with the Valuer General being the purchaser of assessments from the provider, Land Services SA. In this assignment, you have two tasks, one as the provider and one as the auditor.
Instructions
As the provider of Capital Values in Australia, you have received a letter from your client who is the purchaser of capital value assessments. You may imply the specific steps for part 1 from this letter. Part 2 will involve you in the audit process that would be carried out by the purchaser to ensure that the provider’s assessments meet the assessment criteria.
NOTE: this letter and the instructions are fictitious, however, the problem uses real data, and you should use all supporting data available.
Specific Steps
PART 1 (PROVIDER TASK) – MODEL CALIBRATION, TESTING AND APPLICATION.
You are tasked with creating two models in regard to the 2024 Capital Value assessments for all improved residential properties in Morphett Vale. You have been provided with an Excel sheet with a set of transactions for all properties from Jan 1, 2022, to December 10, 2023, and shown in the Sales Data Tab.
In professional practice, acting as the provider you would create Capital Value estimates for all properties with a valuation date of January 1, 2024, but you would be required to send your valuations to the purchaser by December 10, 2023, to enable them to audit the assessment prior to the release on April 1st, 2024. For this assignment you do not need to apply the model to ALL properties, but just the sample of properties provided on the Sample Assessments Tab.
Step 1: Data familiarisation and cleaning. The data provided are directly from the SA Govt Sales History File and you will already be familiar with this format. It would help if you familiarised yourself with the data and then clean the data to remove any obviously non-market transactions or those that will not be useful in your modelling. You must report the systematic procedure(s) you used to remove these sales.
Step 2: Model Estimation. You must estimate (and calibrate) two models using the transaction data that you feel is appropriate. This will involve estimating an indexation model from the previous CV and a hedonic model using whatever variables you feel are appropriate – but NOT the previous CV. You only need to build a basic hedonic model using 4 to 6 variables including at least 1 dummy variable and briefly (and correctly) summarise each. Your Excel workbook should include the models and data used to create them. If you remove further sales from your analysis, you need to specifically state the reason for removing each. The Rubric shows what steps you should take to get a higher-than-pass mark in this part.
Step 3: Quality test the assessments knowing that the purchaser will audit the values once they receive them to a set of criteria that were provided to you in the client letter. Remember this needs to be delivered by December 10th, 2023. In other words, so you cannot use any transaction data that occurs after that date.
Step 4: Apply your two models to the sample of properties provided. Calculate the proposed 2024 CV for both models making sure the proposed values are rounded to the nearest one thousand dollars and apply a 5% reduction factor to allow for statutory adjustments. Your assessments should be included in the Excel sheet with commentary in the report. Show the assessments side by side for comparison and comment in the report where the assessments vary greatly from each other and from the existing CV.
You need to provide the purchaser (Valuer General) with an Excel Workbook and summary in the form of a short report. This should include:
An Excel Sheet/s showing the models created. You can add comments on the models to this sheet.
An Excel Sheet/s showing any quality control testing that you have done, together with comments.
An Excel Sheet showing the sample properties together with the new CVs.
A short report outlining the outcomes (not the process) from your work and recommend the best model.
PART 2 (PURCHASER TASK) – AUDIT
You will now take the role of the purchaser and audit the assessments that have been provided. The provider will supply a summary of the IAAO ratio studies (you did that as part 1 when you took the role as the provider) but you now need to test this independently using a holdout sample.
Check the quality of the proposed assessment using the following criteria based on the IAAO standards.
Median A/S Ratio between .93 to .97
A/S Ratio COV between 6 and 12 OR COD between 6 and 10 (you may use either criterion)
A/S Ratio PRD between .98 and 1.02 or PRB below .1 (you may use either criterion).
80% of Proposed CVs must have an AS ratio between .87 and 1.03.
The tracking chart should show no significant change in assessments across the year.
Spatial Distribution of the A/S ratios (note this is not needed to pass the work, this is to meet the HD requirements)
Using the data from the Excel Sheet on the Audit tab, use sales from December 10th 2024 onwards to test the earlier models provided to you. You will need to apply the models from Part 1 to create assessments for this holdout data. These should be the models provided in Part 1.
Test these holdout assessments against the criteria above and comment if the assessment meets the criteria and if there is any evidence of sales chasing.
Outputs
Report (Part 1)
From Part 1 write a short report to the purchaser presenting the models and outlining the ratio studies for both sets of assessments (indexation and hedonic). Provide a short discussion of which of the two models you feel is superior and why.
Structure the report as shown below. You should carefully read the full report details together with the marking rubric, to see the extent of work required to achieve specific grades in each section. For example, it is not appropriate to spend 30% of your time and report length on a section with a 10% weighting.
Report Sections:
Introduction. Make this very brief but client-focused. It will be included in the marking of the Report/References/Structure/Use of Language.
Data and data cleaning. Remember to explain any systematic removal of data.
Model Estimation (calibration) Remember to report the results, not the process of finding them. The client should see 2 distinct models and a summary of their statistical suitability.
Assessment Testing Remember to address each issue and make it clear what process you used in terms of doing in sample testing or using a holdout sample.
Assessment Application Make sure your report includes the table showing a sample of properties that have been applied and include the full set in the Excel sheet.
Conclusion and recommendations. This part of the report is assessed as a part of the Report/References/Structure/Use of Language. Make sure that you specifically answer your client’s questions in this section. This will include a recommendation as to the best model and its fitness for purpose.
Letter (Part2)
Write a letter to the purchaser of the assessments providing the outcomes of your audit. Include the results of the ratio study for the hold-out sample and compare this to the results provided by the purchaser (from part 1). Provide a table of any property that would have changed in the CV (2023 CV to 2024 proposal) of greater than 10% above or below the average change. E.g. if the average is a 20% change report those less than 10% or greater than 30% change.
Excel workings.
Provide all of your working in an Excel Workbook as discussed in the instructions for parts 1 and 2. All calculations must be completed in Excel using relevant functions and formulae. Correct workings with formulas will attract marks. No marks will be given for simply typing numbers in the spreadsheet or leaving out formulae.
Report/References/Structure/Use of Language
Throughout the report, you must substantiate your findings with relevant data, appropriate analysis and clear, concise arguments. This is a business report and should be client-focused, appropriately structured and set out. This should answer “what you found”, not “what you did”. You should refer to the work that you have done previously (e.g. Professional Development in Property and Property Economics) as regards the requirements for a professional business report. Use APA 7 Style referencing.
Submitting your Report
You should submit two PDF documents, one report and one letter together with one Excel workbook with your working in Excel. Only 3 files can be submitted. Students should refer to the rubric for an indication of the level of work required for each section. A mark and comment for this case study will be provided through the learnonline gradebook system. This will include a grade for each section as well as a comment about each section. There will also be an overall grade and comment. Each section will be marked against the standards specified in the report details shown on the “Assessment-Report” link on the “Assessment and Info” tab on the course learnonline page.
There is a due date for the report, and you should aim to submit this report by the due date. As unforeseen issues sometimes occur (e.g. problems with submitting the work, power outages, minor ailments), a grace period of 3 days will apply for you to submit your work. During this period, there will be no late penalty. This should not be seen as a later due date as no support will be available for students nor will extensions be allowed during this period. Once the grace period is over, the submission portal will close, and no further submissions will be accepted. Once feedback from on-time reports has been provided, no further work can be accepted even with extensions.
Staff will aim to mark all reports submitted by the due date within 10 working days of receiving them. Reports submitted after the due date will be marked once on-time reports are returned with comments.
As this is a professional course, we expect you to work with a professional work ethic. This means answering all the client’s questions and doing this work to a professional standard before submission. On this basis, resubmission is not available for this report.
If you require a variation to the assessment (including more time to complete the work) based on a circumstance for which you are aware (e.g. a disability access plan), then you are required to request that variation in writing to the course coordinator within the first 2 weeks of the course as per the university’s assessment policies and procedures: variations to the assessment procedure. We cannot consider variations to assessment (including disability access plans) on or around the deadline, as we will need to work across the study period to give you appropriate adjustments.
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