Real Property: Stratification & Classes

Instructor: Eileen Cappelloni

Eileen worked for the Orange County Asssociation of Realtors for 31 years. She has written real estate courses and exams for other publishing companies

What is stratification of real property? This lesson will explain its use for data collection and management, appraisal analysis, and quality assurance, as well as identify the main criteria for stratification.

What is Real Property Stratification?

Janice wants to buy a three-bedroom, two-bathroom house. She asks her agent Tess how much that would cost, but Tess can't possibly give her an accurate range without knowing the size, location, area, use, taxes, and other critical data.

It sure would be easier if the market value of a house was equal to the cost of building it! However, Tess explains to Janice that there is stratification to consider, which is the division of real property populations or samples into several groups based on specified criteria.

This specific criteria generally includes area, location, zoning codes, and property characteristics. These designated property groups are not only useful for appraisers; they are also used by states and local municipalities to arrive at fair prices for the purposes of taxation.

Seven Classes of Real Property

To be able to compare apples to apples, most state statutes specify seven classes of real property that are used to complete a just and accurate comparison. These classifications are:

  • Residential property that consists of one primary living unit, including single-family residences, condominiums, cooperatives, and mobile homes.
  • Residential property that consists of two or more primary living units.
  • Agricultural, high-water recharge parcels, historic property used for commercial or certain nonprofit purposes, and other use-valued property.
  • Vacant lots.
  • Nonagricultural acreage and other undeveloped parcels.
  • Improved commercial and industrial property.
  • Taxable institutional or governmentality, utility, locally assessed railroad, oil, gas and mineral land, subsurface rights, and other real property.

What is a Mass Appraisal?

A mass appraisal is the process of evaluating a group of properties at a certain date and uses standardized testing backed by statistics. Often, this requires a great deal of research and is usually used by taxing agencies.

A single property appraiser like Tess meanwhile is mostly concerned about the neighborhood, nearby services, and a property's general appeal, since Janice's interests are shaped more by a target price range and type of property.

Stratification Requirements

Most states require that property appraisers utilize a market area code on each real property parcel that they are assessing. Market areas are generally the first level of geographic stratification.

Other levels may include sub-market areas and neighborhoods. Tess has used a corridor as a geographic tag that can be applied to all similar properties, such as all commercial property located along a major street.

Other categories of geographic stratification can be based on natural or man-made features; i.e., canals, rivers and oceans, or nearby neighborhoods that utilize different construction quality or maintenance materials, zoning classifications, county lines, etc.

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