What is the formula for the Price Related Differential (PRD)?

The Price Related Differential (PRD) is a measure used in property assessment to evaluate how uniformly assessments are distributed relative to market values. It provides insight into the relationship between the assessed value of properties and their selling prices.

The correct formula for calculating the PRD is the mean ratio divided by the aggregate ratio. The mean ratio refers to the average of assessed values relative to sale prices across a sample of properties. The aggregate ratio is calculated as the total assessed value of the properties divided by the total sale price of those properties.

Using this formula, the PRD helps assessors identify potential bias in property assessments. A PRD of 1 indicates a perfectly equitable assessment, while a PRD significantly above or below 1 can indicate disparities that may require attention.

The importance of this measure lies in its ability to provide an overview of the assessment performance, making the understanding of PRD critical for ensuring fairness in the property tax system.