STATE TAX COMMISSION OF MISSOURI
| APS REAL ESTATE SERVICES, LLC, | ) | |
| ) | ||
| Complainant, | ) | |
| ) | ||
| v. | ) | Appeal No. 16-10300 |
| ) | ||
| JAKE ZIMMERMAN, ASSESSOR | ) | |
| ST. LOUIS COUNTY, MISSOURI, | ) | |
| ) | ||
| Respondent. | ) |
DECISION AND ORDER
HOLDING
The assessment made by the Board of Equalization of St. Louis County (BOE) is SET ASIDE. Complainant APS Real Estate Services, LLC, (Complainant) did not present substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. Respondent Jake Zimmerman, Assessor, St. Louis County, Missouri, (Respondent) presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE.
Complainant appeared by counsel Ben Keathley.
Respondent appeared by counsel Steven Robson.
Case heard and decided by Senior Hearing Officer Amy S. Westermann (Hearing Officer).
ISSUE
Complainant appealed on the ground of overvaluation. Respondent initially set the true market value (TMV) of the subject property, as residential property, at $90,200. The BOE sustained Respondent’s valuation at $90,200. The value as of January 1 of the odd numbered year remains the value as of January 1 of the following even numbered year unless there is new construction or improvement to the property. Section 137.115.1 RSMo The State Tax Commission (STC) takes this appeal to determine the true value in money for the subject property as the property existed on January 1, 2016, under the economic conditions for January 1, 2015.
The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the STC.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing on February 15, 2017, at the St. Louis County Government Administration Building, 41 South Central Avenue, Clayton, Missouri.
- Identification of Subject Property. The subject property is identified by parcel/locator number 09G320960. It is further identified as 2533 Hackman Drive, St. Louis County, Missouri. (Exhibit A; Exhibit 1)
- Description of Subject Property. The subject property consists of a 7,980 square-foot residential lot improved by a 1,213 square-foot, ranch style single-family home built in 1962. (Exhibit 1) The subject property includes three bedrooms; two full bathrooms; a 1,213 square-foot basement with 800 square feet of finished space; a two-car attached garage; and a covered patio. (Exhibit 1) The exterior consists of brick and frame construction. (Exhibit 1)
- Assessment. Respondent set a TMV for the subject property of $90,200 residential, as of January 1, 2016.
- Board of Equalization. The BOE sustained Respondent’s TMV of the subject property at $90,200.
- Complainant’s Evidence. Pari Sheath (Mr. Sheath), owner and managing partner of Complainant, testified on behalf of Complainant. Mr. Sheath testified that Complainant had purchased the subject property on September 25, 2015 for $41,000. Mr. Sheath testified that a realtor had provided the listing to Complainant and that the purchase had been an open sale. Mr. Sheath testified that Complainant had bid on the subject property and that several offers had been made by other potential buyers but only Complainant’s offer was accepted. Mr. Sheath testified on cross-examination that Complainant’s only contact with the seller of the subject property was through Complainant’s realtor, who bid on the property with a short sale contract. Mr. Sheath testified that Complainant had made more than $1,400 of “basic finish” improvements to the subject property after purchasing the property in order to make it “rent ready” for tenants.
Mr. Sheath testified that Complainant’s opinion of the subject property’s TMV as of January 1, 2016, was $41,000.
To support its opinion of value, Complainant offered the following as evidence:
| Exhibit A | Settlement statement for the purchase of the subject property showing a contract sale price of $41,000 |
| Exhibit B | MARIS Matrix sale listing for the subject property |
| Exhibit C | List of renovations Complainant performed to make the subject property “rent ready” |
| Exhibit D | Residential lease agreement between Complainant and tenant of the subject property, dated November 3, 2015, showing a rent amount of $1,300 per month |
| Exhibit E | BOE Notice of Decision letter |
| Exhibit F | Affidavit of Mr. Sheath as custodian of records for Complainant attesting that the records related to the subject property are kept in the regular course of business |
Respondent did not object to Complainant’s’ exhibits, which were received into the record.
- Respondent’s Evidence. Respondent offered as evidence the testimony of Missouri State Certified Residential Real Estate Appraiser Debbie Freukes (the Appraiser). The Appraiser opined that the subject property’s TMV as of January 1, 2016, was $62,500, which was lower than the BOE’s valuation. To support the Appraiser’s opinion of value, Respondent offered the following as evidence:
| Exhibit 1 | Written Direct Testimony of the Appraiser |
| Exhibit 2 | Professional qualifications of the Appraiser |
| Exhibit 3 | The Appraiser’s Report for the subject property |
| Exhibit 4 | MLS listing of the subject property |
Complainant did not object to Respondent’s Exhibits 1, 2, and 4, which were received into the record. Complainant objected to Exhibit 3 on the ground of relevance. The Hearing Officer overruled the objection and received the report to be given the weight deemed necessary when viewed in light of the other evidence.
The Appraiser testified that, in arriving at her opinion of TMV, she evaluated the subject property in the condition it would have been in as of January 1, 2016. The Appraiser testified that condition was a factor and that she had made market based adjustments based on its condition. The Appraiser testified that Complainant had purchased the subject property in a short sale, which did not represent a sale involving a typical buyer and seller because the sale was subject to the approval of the lien holder.
According to the Appraiser’s report, the Appraiser considered the cost approach and the income approach in developing an opinion of value but determined these approaches were neither reliable nor applicable to the subject property due to its age and due to the lack of homes rented at the time of their sale. The Appraiser relied on the sales comparison approach to developing an opinion of value of the subject property because that approach reflected the actions of typical buyers and sellers in the local market, which was relatively stable. (Exhibit 1) In her report, the Appraiser noted the sale of the subject property occurring on September 25, 2015. The Appraiser further noted that the listing agent had confirmed that the sale was a short sale and that Complainant had paid a $2,500 short sale processing fee. (Exhibit 1)
The Appraiser conducted an exterior and interior inspection of the subject property on January 20, 2017. (Exhibit 1) The Appraiser noted that, at the time of viewing, “[n]o repairs were considered necessary. At the time of viewing, the home was clean, appeared maintained and was considered to be consistent with the C4 rating.” (Exhibit 1) The C4 rating was defined in the report:
The improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. All major building components have been adequately maintained and are functionally adequate.
The Appraiser’s report analyzed five comparable sales. The comparables had been sold between December 2013 and September 2015. (Exhibit 1) The sale prices of the comparables ranged from $55,000 to $76,900. The Appraiser made a market-based negative adjustment to all of the comparables due to the fact that none of those sales were short sales. All of the comparables were located within one-fifth of a mile of the subject property and had been built between 1958 and 1963. (Exhibit 1)
Similar to the subject property, all of the comparables were ranch-style homes; had three bedrooms; had basements with some finished space; had garages and patios; and had either brick and frame or brick and vinyl exterior construction. (Exhibit 1) The Appraiser made negative market based adjustments to Comparable Nos. 2, 4, and 5 for their superior C3 condition rating. The Appraiser made market based adjustments to all of the comparables for having only one full bathroom and one half bathroom as compared to the subject property’s two full bathrooms.[1] The Appraiser made a negative market based adjustment to Comparable Nos. 1, 2, and 3 because those properties had between 89 square feet and 387 square feet more than the subject property. The Appraiser made a positive market based adjustment to Comparable Nos. 4 and 5 because those properties had 161 square feet and 205 square feet less than the subject property. The Appraiser made a negative market based adjustment to Comparable Nos. 1 and 4 because those properties had more finished area in their basements. The Appraiser made a positive market based adjustment to Comparable Nos. 2, 3, and 5 because those properties had less finished area in their basements. The subject property and all of the comparables had Q5 quality of construction ratings, which the report defined as:
Dwellings with this quality rating feature economy of construction and basic functionality as main considerations. Such dwellings feature a plain design using readily available or basic floor plans featuring minimal fenestration and basic finishes with minimal exterior ornamentation and limited interior detail. These dwellings meet minimum building codes and are constructed with inexpensive, stock materials with limited refinements and upgrades.
The adjusted sale prices of the comparables ranged from $53,800 to $68,146. The Appraiser noted that all of the comparables were considered good indicators of value given their close proximity to the subject property. The Appraiser considered and weighted all of the comparables equally.
- Presumption of Correct Assessment Rebutted – True Market Value Established. Complainant’s’ evidence was not substantial and persuasive to rebut the presumption of correct assessment by the BOE. However, Respondent’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the BOE and to establish the TMV of the subject property as of January 1, 2016, to be $62,500.
CONCLUSIONS OF LAW AND DECISION
Jurisdiction
The STC has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious, including the application of any abatement. The Hearing Officer shall issue a decision and order affirming, modifying or reversing the determination of the BOE, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious. Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.
Basis of Assessment
The Constitution mandates that real property and tangible personal property be assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass. Article X, Sections 4(a) and 4(b), Mo. Const. of 1945. The constitutional mandate is to find the true value in money for the property under appeal. By statute, real property and tangible personal property are assessed at set percentages of true value in money: residential property at 19%; commercial property at 32%; and agricultural property at 12%. Section 137.115.5 RSMo (2000) as amended.
Investigation by Hearing Officer
In order to investigate appeals filed with the STC, the Hearing Officer may inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification, or assessment of the property. Section 138.430.2 RSMo (2000) as amended. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon his inquiry and any evidence presented by the parties or based solely upon evidence presented by the parties. Id.
Board Presumption and Computer-Assisted Presumption
There exists a presumption of correct assessment by the BOE – the BOE presumption. In charter counties or the City of St. Louis, there exists by statutory mandate a presumption that the Assessor’s original valuation was made by a computer, computer-assisted method or a computer program – the computer-assisted presumption. These two presumptions operate with regard to the parties in different ways.
The BOE presumption operates in every case to require the taxpayer to present evidence to rebut it. If Respondent is seeking to prove a value different than that set by the BOE, then Respondent is required to rebut the BOE presumption.
The computer-assisted presumption is applicable only if (1) the BOE lowered the value of the Assessor and Respondent is seeking to sustain the original assessment and (2) it has not been shown that the Assessor’s valuation was not the result of a computer assisted method. The BOE’s valuation is assumed to be an independent valuation.
In the present appeal, the BOE lowered the initial valuation of Respondent, and both Complainant and Respondent are now seeking to lower the BOE’s assessment; therefore, the BOE presumption applies.
Complainant’s Burden of Proof
To obtain a reduction in assessed valuation based upon an alleged overvaluation, the Complainant must prove the true value in money of the subject property on the subject tax day. Hermel, Inc., v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978). True value in money is defined as the price that the subject property would bring when offered for sale by one willing but not obligated to sell it and bought by one willing or desirous to purchase but not compelled to do so. Rinehart v. Bateman, 363 S.W.3d 357, 365 (Mo. App. W.D. 2012); Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008); Greene County v. Hermel, Inc., 511 S.W.2d 762, 771 (Mo. 1974). True value in money is defined in terms of value in exchange and not in terms of value in use. Stephen & Stephen Properties, Inc. v. State Tax Commission, 499 S.W.2d 798, 801-803 (Mo. 1973). In sum, true value in money is the fair market value of the subject property on the valuation date. Hermel, Inc., 564 S.W.2d at 897.
“’True value’ is never an absolute figure, but is merely an estimate of the fair market value on the valuation date.” Drury Chesterfield, Inc., v. Muehlheausler, 347 S.W.3d 107, 112 (Mo. App. E.D. 2011), citing St. Joe Minerals Corp. v. State Tax Comm’n of Mo., 854 S.W.2d 526, 529 (Mo. App. E.D. 1993). “Fair market value typically is defined as the price which the property would bring when offered for sale by a willing seller who is not obligated to sell, and purchased by a willing buyer who is not compelled to buy.” Drury Chesterfield, Inc., 347 S.W.3d at 112 (quotation omitted).
A presumption exists that the assessed value fixed by the BOE is correct. Rinehart, 363 S.W.3d at 367; Cohen, 251 S.W.3d at 348; Hermel, Inc., 564 S.W.2d at 895. “Substantial and persuasive controverting evidence is required to rebut the presumption, with the burden of proof resting on the taxpayer.” Cohen, 251 S.W.3d at 348. Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact. Cupples Hesse Corp., 329 S.W.2d at 702. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975). See also, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003).
There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a Commission appeal still bears the burden of proof. The taxpayer is the moving party seeking affirmative relief. Therefore, the Complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.” Westwood Partnership, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. W.D. 1991).
Generally, a property owner, while not an expert, is competent to testify to the reasonable market value of his own land. Cohen, 251 S.W.3d at 348-49; Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992). “However, when an owner’s opinion is based on improper elements or foundation, his opinion loses its probative value.” Carmel Energy, Inc., 827 S.W.2d at 783. A taxpayer does not meet his burden if evidence on any essential element of his case leaves the STC “in the nebulous twilight of speculation, conjecture and surmise.” See Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. E.D. 1980).
Respondent’s Burden of Proof
Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the BOE, must meet the same burden of proof to present substantial and persuasive evidence of the value advocated as required of the Complainant under the principles established by case law. Hermel, Inc., 564 S.W.2d at 895; Cupples-Hesse, 329 S.W.2d at 702; Brooks, 527 S.W.2d at 53.
In this case, Respondent presented the Appraiser’s report as evidence indicating a lower valuation than the value finally determined by the BOE and lower than the value previously determined by Respondent; thus, the Appraiser’s report was received to be considered in light of Respondent’s argument that the BOE’s valuation of the subject property should be lowered to $62,500 as of January 1, 2016.
Weight to be Given Evidence
The Hearing Officer is not bound by any single formula, rule, or method in determining true value in money and is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled. The relative weight to be accorded any relevant factor in a particular case is for the Hearing Officer to decide. St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).
The Hearing Officer, as the trier of fact, may consider the testimony of an expert witness and give it as much weight and credit as deemed necessary when viewed in connection with all other circumstances. Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. W.D. 1991). The Hearing Officer, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony or accept it in part or reject it in part. Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. W.D. 2012).
Methods of Valuation
Proper methods of valuation and assessment of property are delegated to the STC. It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case. See, Nance v. STC, 18 S.W.3d 611, 615 (Mo. App. W.D. 2000); Hermel, Inc., 564 S.W.2d at 897; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975). Missouri courts have approved the comparable sales or market approach, the cost approach, and the income approach as recognized methods of arriving at fair market value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. 1974).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005), citing St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977). “Each valuation approach is applied with reference to a specific use of the property—its highest and best use.” Snider, 156 S.W.3d at 346-47, citing Aspenhof Corp., 789 S.W.2d at 869. “The method used depends on several variables inherent in the highest and best use of the property in question.” Snider, 156 S.W.3d at 347.
“Each method uses its own unique factors to calculate the property’s true value in money.” Id. “The ‘comparable sales approach’ uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties. Id. at 348. “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.” Id. (quotation omitted). “This approach is most appropriate when there is an active market for the type of property at issue such that sufficient data [is] available to make a comparative analysis.” Id.
Implicit in this definition are the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:
- Buyer and seller are typically motivated.
- Both parties are well informed and well advised, and both acting in what they consider their own best interests.
- A reasonable time is allowed for exposure in the open market.
- Payment is made in cash or its equivalent.
- Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.
- The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.
Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; see also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.
Discussion
In this case, Complainant’s’ evidence was neither substantial nor persuasive to rebut the presumption of correct assessment by the BOE. Substantial evidence is that which is relevant, adequate, and reasonably supports a conclusion. Cupples Hesse Corp., 329 S.W.2d at 702. Persuasive evidence is that which causes the trier of fact to believe, more likely than not, the conclusion advocated is the correct conclusion. Id.
Complainant primarily argued that the subject property’s TMV should be based upon the property’s purchase price in September 2015. However, the evidence established that the subject property had been sold under the terms of a short sale contract, implying that Complainant paid less than the true market value for the property. A short sale also indicates that the buyer is attempting to purchase a property for a price as low as the lien holder will consent. The evidence presented here showed that Complainant’s short sale offer to the seller was accompanied by a short sale rider. (Exhibit B) The evidence also showed that Complainant is the lessor of the subject property. This evidence does not represent normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction; rather, this evidence demonstrates that Complainant purchased the subject property at below market price as an investment.
On the contrary, Respondent presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. The Appraiser, a state certified residential real estate appraiser, used one of the three court-approved methods for valuing residential property to arrive at an opinion of TMV for the subject property, the sales comparison method. The Appraiser’s report analyzed sales data from five comparable properties close in proximity to the subject property. Significantly, the Appraiser’s report showed that on September 30, 2015, within only five days of Complainant’s purchase of the subject property, Comparable No. 3 sold for $68,200. This evidence establishing that Comparable No. 3 – a similar property of the same age, same quality of construction, and same condition as the subject property – had sold within five days of the subject property for approximately 60 percent more than Complainant’s purchase price of the subject property weighed heavily in favor of the Appraiser’s opinion of value.
Additionally, the Appraiser testified that she had performed an exterior and an interior inspection of the subject property. The Appraiser photographed the exterior and interior of the subject property and attached the photographs to her report. The photographs showed that the subject property’s condition was consistent with the Appraiser’s description of it and that the exterior was consistent in appearance with the photographs of the exterior of the comparables. The Appraiser also made market based adjustments to account for any differences, which were minimal, between the comparables and the subject property in order to conclude that the adjusted sale prices of the comparables ranged between $53,800 and $68,146. The Appraiser’s opinion of the subject property’s TMV fell within that range.
ORDER
The TMV for the subject property as determined by the BOE is SET ASIDE. The assessed value for the subject property for tax year 2016 is set at $11,875 residential ($62,500 TMV).
Application for Review
A party may file with the STC an application for review of this decision within 30 days of the mailing date set forth in the Certificate of Service for this Decision. The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
Failure to state specific facts or law upon which the application for review is based will result in summary denial. Section 138.432, RSMo
Disputed Taxes
The Collector of St. Louis County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8, RSMo.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED April 11, 2017.
STATE TAX COMMISSION OF MISSOURI
Amy S. Westermann
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 11th day of April, 2017, to: Complainant(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
Legal Coordinator
[1] The Appraiser’s report showed that the subject property also had a full bathroom in the basement of the home and that Comparable Nos. 1, 2, and 3 each had a full bathroom in the basement. (Exhibit 1) The basement bathrooms were not included in the overall bathroom count for the subject properties or the comparables on the Appraiser’s report.