South Africa and Values Professional Writing

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Method to Improve Municipal Real Estate Valuations, Increase Municipal Revenue Generation and Income Loss Reduction Through Enhanced Computer Assisted Mass Appraisal Systems (CAMA) Methodology

Overview

The Computer Assisted Mass Appraisal System (CAMA) is a widely-used system of appraisal found all around the world. As the International Association of Assessing Officers (IAAO, 2014) notes, “mass appraisal (valuation) is required when many properties need to be valued economically and en masse for a purpose such as annual property taxation” (p. 5). CAMA systems are designed to make that appraisal process simple. The Massachusetts Department of Revenue Division of Local Services/Bureau of Assessment (2016) adds that CAMA valuation “involves automated applications of the sales comparison, cost, and income approaches to value. A good system should support all three approaches.” Mass valuation practices are common globally, from North America to Europe to South Africa and to the East. To give the scope of how prevalent mass appraisal systems have become, a study from 2001 found that among countries of the UN ECE Region, the majority (72%) reported having systems of mass valuation of land for taxation purposes, while a further 14% have reported that they are currently developing systems of mass valuation for taxation purposes (Federal Land Cadastre Service of Russia, 2001). Clearly, mass appraisal systems are applied by Municipalities globally as an accepted system of valuation.

How does CAMA work? Simply put, CAMA determines real estate values. The exact method that the CAMA system will use will differ according to the inputs and variables that are used by the system to derive values. Most systems will use a combination of cost trends, land/property values, standard statistical procedures, and sales comparisons to arrive at a valuation. The valuation derived from CAMA is, in other words, only as good as the data that goes into the system.

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The typical Municipality will use statistical analysis, geographical information systems, Pictometry, and other qualitative and quantitative data collection instruments. As SAIV (2015) makes clear, “Data is necessary to support the valuation process and data may be formulated for collection, capture, analysis and reporting by qualitative (subjective) and quantitative (objective) data variables. The object of mass appraisal is to produce equitable valuations at reduced valuation fees” (p. 52). To summarize, mass valuation via CAMA “is the process of valuing a group of properties as of a given date using common data, standardised methods, and statistical testing” (SAIV, 2015, p. 52). Worth noting, however, is the fact “that certain properties may not be suitable for the application of CAMA techniques and these properties will need to be valued individually” (SAIV, 2015, p. 52). When CAMA is applied, in South Africa, the municipal valuer “must include all CAMA models, methodologies, calculations and formulas in the market report and submit with the certified valuation roll, where CAMA has been applied” (SAIV, 2015, p. 76).

CAMA has many benefits to Municipalities, as the above makes clear: it is a time-saving, user-friendly system that reduces a lot of the pain and toil of going into the field to obtain data to be used in a valuations process. Because Municipalities are so pressed for time when it comes to performing valuations, CAMA presents an easy and low-cost way to produce valuations for the Valuation Roll. The problem, though, is that CAMA valuations are not always representative of the actual market value. More shall be said on this in the next section.….....

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