How is the Price Related Differential (PRD) determined?

The Price Related Differential (PRD) is a measure used in property appraisal to assess equity in property taxation. It examines how the assessed value of properties compares to their sale prices. The formula to calculate the PRD is derived from comparing the mean of assessed values to the aggregate ratio of assessed values to market values.

The correct answer, which states that PRD equals the mean divided by the aggregate ratio, captures this relationship accurately. In practical terms, the mean represents the average assessed value of properties, while the aggregate ratio represents the total assessed value as a percentage of total sales prices. This calculation helps in understanding whether properties are assessed fairly across different price ranges.

When the PRD is calculated correctly, it provides insights into potential inequities in assessment practices. If the PRD is significantly above or below 1.0, it might indicate a need for adjustments in how assessments are conducted to ensure that similar properties are treated similarly, thus supporting fair treatment in property taxation.

This understanding is essential for appraisers to ensure that assessments reflect market trends accurately and promote equity in the taxation system, thereby assisting in maintaining public trust in the appraisal process.