If you own property in Tennessee, you are probably aware that your county undergoes a countywide reappraisal of real property every 4, 5, or 6 years. The reappraisal process allows county appraisals to be adjusted, up or down, to reflect the current real estate market. In theory, once a reappraisal has been completed, property appraisals should represent what a property would sell for on the open market—at least for a short while.
So, what happens to the appraisals between reappraisals? Even though the market value of property is ever-changing, the county property appraisals typically do not change between reappraisals. (For the sake of brevity, the exceptions to this rule will not be discussed in this article). And as long as the county or city tax rates do not increase, a real property owner may temporarily pay taxes on an appraised value that is less than the current market value –at least until the next reappraisal.
What about tangible personal property and public utilities? They do not receive the same benefit of having an appraisal that does not change between reappraisals. These property types are reassessed on an annual basis. Are these property owners being treated unfairly? Are they effectively paying more tax because their appraisals are updated annually? We are glad you asked. The state legislature and board of equalization have addressed these questions by requiring ratio studies and equalization.
Between reappraisals, the Division of Property Assessments (DPA) has the statutory responsibility to conduct sales ratio studies in all counties in Tennessee at least once every two years. As you would expect, different counties have ratio studies from year to year. The division coordinates all phases of the study including data collection, sales data review, and analysis. A sales ratio study measures the relationship between appraised value and market value of real property. As time passes between reappraisals, the disparity between these values may increase which creates the sales ratio. The appraised value divided by the sale price produces the sales ratio. Example: Appraised Value $225,000 ÷ Sale Price $250,000 = Sales Ratio .90 (When the median ratio for all of the sales in the study fall below 1.00 this will prompt an equalization adjustment to personal property and public utility assessments.) 
Once the ratio study has been completed, the DPA submits each county’s median ratio to the State Board of Equalization (SBOE) for final approval. Once approved the tangible personal property and public utility appraisals will be equalized (adjusted downward) by the median ratio for each respective county. This step guarantees that these property types are treated equitably with the real property.
From a county budgeting standpoint, it is important to note that the equalization of tangible personal property and public utilities always reduces appraised value and assessments. In most cases, there is enough growth (typically real property new construction) to absorb the loss in value created by the equalization. In rare cases where there is not enough growth, the county legislative body might be challenged with reducing spending or increasing the tax rate to generate the same revenue as the year before the ratio study.
For questions related to reappraisal, ratio studies, or equalization contact your CTAS Property Assessment Consultant.
For additional information on ratio studies look for Real Estate Appraisal Ratio Reports at: https://comptroller.tn.gov/office-functions/pa/tax-resources/reports-handbooks-reference.html
or Appraisal Ratios at: https://comptroller.tn.gov/boards/state-board-of-equalization/sboe-resources/rules-and-manuals.html