State Tax Commission of Missouri
FRANK & JANE SLECHTER,)
)
Complainants,)
)
v.) Appeal Number 10-50504
)
DAVID STOKELY, ASSESSOR,)
CHRISTIAN COUNTY, MISSOURI,)
)
Respondent.)
DECISION AND ORDER
HOLDING
Decision of the Christian County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE.True value in money for the subject property for tax year 2010 is set at $600,000, residential assessed value of $114,000.Complainants appeared in person and by Counsel Harry Styron, Branson, Missouri.Respondent appeared in person and by County Counselor John Housley.
Case heard and decided by Senior Hearing Officer W. B. Tichenor.
ISSUE
Complainant appeals, on the ground of overvaluation and discrimination, the decision of the Christian County Board of Equalization, which sustained the valuation of the subject property.The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2009.The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
1.Jurisdiction.Jurisdiction over this appeal is proper.Complainants timely appealed to the State Tax Commission from the decision of the Christian County Board of Equalization.A hearing was conducted on December 7, 2010, at the Christian County Courthouse, Ozark, Missouri.
2.Assessment.The Assessor appraised the property at $887,421, a residential assessment of $168,610.[1]The Board of Equalization sustained the assessment.[2]
3.Subject Property.The subject property is located at 1743 Copper Creek Dr., Nixa, Missouri.The property is identified by map parcel number 10-5-16-55.The property was purchased by Citimortgage in foreclosure on January 8, 2008, for $818,170.30.[3] The property consists of a 3 acre tract improved by brick single-family residence constructed in 2006.The home has a gross living area above grade of 5,499 square feet and 2,673 square feet of finished basement area.There are ten rooms, including six bedrooms and three and a half baths.There is an attached three-car garage.The property is in average condition.There are no major repairs items needed.[4]
4.Complainant’s Evidence. Mr. Slechter testified in his own behalf.He testified that Complainant purchased the property on November 10, 2008, for $500,000.Complainants also presented the testimony and appraisal report[5] of Al Berry, state certified residential real estate appraiser.Mr. Berry concluded a value of $502,000 as of January 1, 2010, under the sales comparison approach and a value of $553,623 under the cost approach.The final conclusion of value was based upon the sales comparison approach.
There was evidence of new construction and improvement during 2009 by the addition of a 30 x 60 heated pole barn, with 2 – overhead doors, addition of a patio, sidewalks, landscaping and blacktopping of driveway.The total cost of the 2009 new construction and improvements was approximately $77,000.[6]Therefore, the assessed value for 2010 must be based upon the property as it existed on January 1, 2010, valued under the economic conditions that existed on January 1, 2009.[7]Mr. Berry did not account for the new construction and improvements in his appraisal.
Complainant’s evidence was substantial and persuasive to rebut the presumption of correct assessment by the Board and provide a basis for the Hearing Officer to establish the true value in money as of January 1, 2009, to be $600,000.See, Presumption In Appeals and Hearing Officer Finds Value, infra.
5.Respondent’s Evidence.Respondent presented the testimony of Marian Matthews, Deputy Assessor.She testified to the valuation history of the subject property.Respondent offered into evidence Exhibit 1[8] which was received. Respondent relied upon the presumption of correct assessment by the Board and did not offer sales evidence to establish value.[9]
CONCLUSIONS OF LAW AND DECISION
Jurisdiction
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.The hearing officer shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.[10]
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.[11]The constitutional mandate is to find the true value in money for the property under appeal. By statute real and tangible personal property is assessed at set percentages of true value in money.[12]In an overvaluation appeal, true value in money for the property being appealed must be determined based upon the evidence on the record that is probative on the issue of the fair market value of the property under appeal.
Presumption In Appeals
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[13]This presumption is a rebuttable rather than a conclusive presumption.It places the burden of going forward with some substantial evidence on the taxpayer – Complainant.The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value should have been placed on the property.[14]When some substantial evidence is produced by the Complainant, “however slight”, the presumption disappears and the Hearing Officer, as trier of facts, receives the issue free of the presumption.[15]In this instance, Complainant presented evidence of the actual purchase of the property and an appraisal report valuing the property as of January 1, 2010.This constituted substantial evidence to rebut the presumption.Accordingly, the presumption in this appeal disappeared.The case is decided free of the presumption.See, Hearing Officer Finds Value, infra.
Standard for Valuation
Section 137.115, RSMo, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so.[16]True value in money is defined in terms of value in exchange and not value in use.[17]It is the fair market value of the subject property on the valuation date.[18]Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.
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:
1.Buyer and seller are typically motivated.
2.Both parties are well informed and well advised, and both acting in what they consider their own best interests.
3.A reasonable time is allowed for exposure in the open market.
4.Payment is made in cash or its equivalent.
5.Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.
6.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.[19]
This is the standard for valuation utilized by Mr. Berry in his January 1, 2010 appraisal of the subject property.[20]
Methods of Valuation
Proper methods of valuation and assessment of property are delegated to the Commission.It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case.[21]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.[22]
Complainant presented a conclusion of value based upon an appraisal which developed both the cost and sales comparison approaches.Complainant also testified as to the owner’s opinion of value based upon the purchase of the property in November, 2008.Evidence of the actual sales price of property is admissible to establish value at the time of an assessment, provided that such evidence involves a voluntary purchase not too remote in time.The actual sale price is a method that may be considered for estimating true value.[23]
Hearing Officer Finds Value
In order to prevail, Complainants must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2009.[24]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.”[25]
Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[26]Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact.The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief.[27]
2008 Purchase
The Hearing Officer is presented with the purchase of the property by the taxpayer less than two months prior to the assessment date of January 1, 2009.The circumstances of this purchase are that Complainants were looking to buy a large home.The Realtor who was working with the Slechters informed them that the subject property could be purchased for $500,000.The Bank that had purchased the property in foreclosure on January 8, 2008, had the property for sale.Mr. Slechter had no personal knowledge as to any listing history on the property or the history of any attempts to sell the property.No other evidence was presented which established anything further relative to the offering of the property for sale from the time the bank foreclosed until Complainant’s purchase some ten months later.
Complainants have the benefit of a presumption that the November 2008 purchase was in fact a market transaction.A price agreed to between a willing buyer and seller creates a presumption that the transaction was a market transaction.[28]Mr. Slechter considered the purchase an arm’s length transaction and had no basis to conclude that the bank was under any undue motivation to sell the property for $500,000.[29]Implicit in the November 2008 transaction is that the parties are typically motivated, well informed and advised and acting in what they considered their own best interests.[30]Assertions as to the possible motivation of the seller fall under the caption of speculation and have no probative weight.It is not required that a taxpayer prove the elements of the Standard of Valuation for the purchase of the property that is being appealed.If Respondent wishes to challenge the purchase as a market transaction, the burden falls to Respondent to present evidence to rebut the presumption created by the purchase.[31]
Complainants’ opinion[32] of value of $500,000 for the value of the property at the time of their purchase in November 2008 and subsequently for January 1, 2009, is founded upon reasonable and proper elements and appropriate foundation.[33]Accordingly, while not conclusive, it is entitled to probative weight in arriving at a conclusion of value in this appeal.
Exhibit B – Berry Appraisal
The appraisal performed by Mr. Berry arrived at a value of the subject property of $502,000 as of January 1, 2010, based upon his development of the sales comparison approach to value.The appraiser utilized the sales of three properties which he deemed to be the best comparables sales available through a market search.The three sales occurred on 6/30/08, 2/27/09 and 4/8/08 respectively.Mr. Berry had no basis upon which to conclude it was necessary to make a time of sale adjustment for his valuation as of 1/1/10.There was not market data to support any such adjustment.The appraisal did not include the new construction and improvements that had occurred during 2009.The appraisal did not address the November 2008 purchase of the subject property.[34]
Objections
Counsel for Respondent objected to Exhibit B on the ground of the valuation date being the wrong date and that the three sales were not comparable properties.The objection was overruled.The objection goes to the weight that can be given the appraisal, not to its admissibility.
Valuation Date
Under the controlling statute, the subject property must be valued under the economic conditions that existed on January 1, 2009.[35]Therefore, on its face the Berry appraisal is for a date one year after the correct valuation date and therefore did not value the property under the 1/1/09 economic conditions.However, the sale dates of the properties show that in fact, the economic conditions on 1/1/09 were covered.The sales occurred in a period from nine months prior to 1/1/09 to less than two months after that date.The first comparable sold six months prior to 1/1/09.No evidence was presented to establish a basis for any upward or downward time adjustment.Therefore, any assertion that such should be made presents nothing but conjecture.Given that all three sales occurred at a time relevant to the valuation date of January 1, 2009 and no time adjustment was warranted based upon the testimony and research of Complainant’s appraiser the Berry valuation, although given for 1/1/10 is likewise a valid valuation for 1/1/09, the failure to address new construction and improvements notwithstanding.
Comparability of Sales
As has been previously noted, Complainants’ appraiser deemed his three sales to be the best available based upon his search of the market.Mr. Berry only deemed it necessary to make adjustments to each comparable for bedroom/bathroom count and square footage of living area.[36]In fact, it appears that the only differences in features between the comparables and the subject were these two factors.The adjustment to sales # 1 and # 2 of +$5,250 to account for the subject having two more bedrooms and a bath and a half more than the sales properties seems reasonable.The adjustment to sale # 3 of +$6,000 to account for it having three less bedrooms and one bathroom less than the subject is likewise reasonable.No evidence was presented upon which the Hearing Officer could justify any further adjustment for these features.
The challenge by Counsel for Respondent to the sales used by Mr. Berry was based upon the large variance in the gross living area between the sales and the subject.The Slechter’s home has a gross living area of 5,499 square feet.The gross living areas of the three sales respectively are 4,465, 2,965 and 2,788.Generally, when comparable sales are available, appraisers prefer to use sale properties that come within 500 square feet of living area to the property being appraised.
There is another factor which must be considered from the market data.Sale 1 while being 1,500 square feet larger in living area then Sale 2 and 1,677 square feet larger than Sale 3, sold for the exact amount as Sale 2 ($450,000) and for only $9,000 or about 2% less than Sale 3.In other words, the size variance among the sale properties did not account for a great variance in the unadjusted sale prices.
In any case, an appraiser does not have the luxury to craft sales to neatly fit the appraised property.The appraiser simply cannot manufacture a sale with extremely similar square footage if it does not exist.Such appears to be the case in this instance.There were no other sales of homes otherwise similar to the subject in a size range from 5,000 to 6,000 square feet of living area.If Respondent had information on sales occurring during 2008 and 2009 of homes in the county from 5,000 to 6,000 square feet, it would have been appropriate to have provided such evidence and other supporting information to establish the comparability of such sales.[37]There are some appraisal problems where the appraiser must simply work with the best market data that he or she has.The best market data in this instance were the three sales utilized.
Adjustment for Gross Living Area
The only problem the Hearing Officer has with Mr. Berry’s methodology to account for the difference in living area is the amount of the per square foot adjustment for the comparables.The appraiser adjusted each sale for difference in square footage based upon $25.00 per square foot.Mr. Berry felt that this was appropriate and represented the general standard for this type of adjustment.The Hearing Officer is not so persuaded.
The better methodology is to apply a per square foot dollar adjustment derived from a percentage of per square foot of living area sales prices for the comparables being used.In this instance sale # 1 sold for $100.78 per square foot, sale # 2 sold for $151.77 per square foot and Sale # 3 sold for $164.63 per square foot.The utilization of an arbitrary amount of $25 per square foot shows that the adjustment for Comp 1 would represent 24.8% of its per square foot sale price.However, the $25 factor only represents 16.5% of Comp 2’s per square foot sale price.The adjustment factor for Comp 3 is only 15.1% of the per square foot sale price.This great variance for the adjustment is not acceptable.
The average of the three per square foot sales prices calculates to $139.06.A percentage of this amount provides a more uniform adjustment factor.A per square foot dollar adjustment based on 25% to 30% of the average per square foot comparable sales price is reasonable and is recognized by appraisers for the valuation of owner occupied homes.Therefore a dollar adjustment factor of $35.00 to $42.00 would be appropriate.The factor of $38.50 will be utilized to make the adjustment to each comparable.
The respective Gross Living Area adjustments based on $38.50 per square foot are: $39,810, $97,560, & $104,370.When these adjustments are applied with the other adjustments made by Mr. Berry in his appraisal, the Adjusted Sale Price of Comparables are: $545,060, $532,810 and $569,370.
Conclusion of Value as of January 1, 2009 – Without Improvements
Based on the foregoing and taking into account and giving some weight to the November, 2008 purchase by Complainants, giving additional probative value to the adjusted sales prices as calculated based on the $38.50 per square foot adjustment factor, and giving consideration to the conclusion of value under Mr. Berry’s cost approach,[38] the evidence supports a conclusion of value of $532,800.
Conclusion of Value as of January 1, 2009 – With Improvements
During 2009, approximately $77,000 of new construction and improvement was made to the Slechter’s property.The valuation for the 2010 tax year must be based upon a finding of value as if those improvements had been in place on January 1, 2009, and the property had sold at that time.Mr. Berry did not appraise the new construction and improvements.However, the Hearing Officer understood his testimony to support that the market would most likely account for a significant portion of the cost of those improvements.The Hearing Officer agrees.It seems unlikely that the market would account for the entirety of the $77,000 of new construction and improvements.However, it seems reasonable that approximately $65,000 to $70,000 of the cost would be captured by the market.Accordingly, the true value in money of the subject property for the 2010 tax year is concluded to be $600,000, assessed residential value of $114,000.
ORDER
The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for Christian County for the subject tax day is SET ASIDE.
The assessed value for the subject property for tax year 2010 is set at $114,000.
Application for Review
A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service.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, MO65102-0146, 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. [39]
Disputed Taxes
The Collector of Christian 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.If no Application for Review is filed with the Commission within thirty days of the mailing date set forth in the Certificate of Service, the Collector, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.
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 January 24, 2011.
STATE TAX COMMISSION OFMISSOURI
_____________________________________
W. B. Tichenor
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 24th day of January, 2011, to:Harry Styron, P.O. Box 7297, Branson, MO 65615, Attorney for Complainant; John Housley, 901 St. Louis, 20th Floor, Springfield, MO 65806, Attorney for Respondent; David Stokely, Assessor, 100 W. Church, Room 301, Ozark, MO 65721-0334; Kay Brown, Clerk, 100 W. Church, Room 206, Ozark, MO 65721-0549; Ted Nichols, Collector, P.O. Box 579, Ozark, MO 65721.
___________________________
Barbara Heller
Legal Coordinator
[1] Residential property is assessed at 19% of true value in money (fair market value), Section 137.115.5(1), RSMo
[2] Complaint for Review of Assessment, BOE Decision Letter, Exhibit 1.
[3] Exhibit 1; Testimony of Mr. Slechter.
[4] Exhibit B.
[5] Exhibit B. Complainant offered as an exhibit an appraisal report by Mr. Berry, dated 11/5/08 on the subject property prepared for Liberty Bank. It was marked for identification as Exhibit A. However, Counsel for Complainant informed the Hearing Officer that Mr. Berry could not testify concerning Exhibit A. Counsel for Respondent objected on the ground of inability to cross-examine the appraiser as to the exhibit. Objection was sustained. Exhibit A is hearsay, absent the proper foundation being laid for its admission into evidence and the tendering of the appraiser for cross-examination. Exhibit A is preserved in the Commission file only as an offer of proof and not as evidence upon which a decision can be based in this appeal.
[6] Testimony of Mr. Slechter
[7] Section 137.115.1, RSMo.
[8] Exhibit 1 consisted of a summary of the assessment history of the property, photographs and a floor plan of the subject, copy of the Successor Trustee’s Deed Under Foreclosure, dated 1/8/08, copy of Special Warranty Deed, dated 11/10/08, copy of property record card on subject, copy of letter to Complainants dtd 11/24/09, copy of letter from Deputy Assessor, dated 7/16/10, copy of portion of section 137.115.1, RSMo.
[9] Respondent was under no burden to present any evidence, as the Assessor may simply rest upon the Board presumption as was done in this instance. The property record card is simply a record of the mass valuation record on the property. It does not provide sales data of comparable properties adjusted to arrive at value. It reflects a mass valuation cost approach.
[10] Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.
[11] Article X, Sections 4(a) and 4(b), Mo. Const. of 1945
[12] Section 137.115.5, RSMo
[13] Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958)
[14] Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959)
[15] United Missouri Bank of Kansas City v. March, 650 S.W.2d 678, 680-81 (Mo. App. 1983), citing to State ex rel. Christian v. Lawry, 405 S.W.2d 729, 730 (Mo. App. 1966) and cases therein cited.
[16] St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).
[17] Daly v. P. D. George Company, et al, 77 S.W.3d 645, 649 (Mo. App E.D. 2002), citing, Equitable Life Assurance Society v. STC, 852 S.W.2d 376, 380 (Mo. App. 1993); citing, Stephen & Stephen Properties, Inc. v. STC, 499 S.W.2d 798, 801-803 (Mo. 1973).
[18] Hermel, supra.
[19] 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.
[20] Exhibit B, DEFINITION OF MARKET VALUE, Page 4 of 6
[21] See, Nance v. STC, 18 S.W.3d 611, at 615 (Mo. App. W.D. 2000); Hermel, supra; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975).
[22] 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. Div. 2 1974).
[23] St. Joe Minerals Corp., supra.
[24] Hermel, supra.
[25] See, 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). Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).
[26] See, Cupples-Hesse, supra.
[27] Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).
[28] Phoenix Redevelopment Corporation v. Walker, 812 S.W.2d, 881, 883-4 (Mo. App. W.D. 1991).
[29] Testimony of Mr. Slechter
[30] See, Standard For Valuation, supra
[31] See, Phoenix, supra
[32] Rigali v. Kensington Place Homeowners’ Ass’n, 103 S.W.3d 839, 846 (Mo. App. E.D. 2003); Boten v. Brecklein, 452 S.W.2d 86, 95 (Sup. 1970).
[33] Cohen v. Bushmeyer, 251 S.W.3d 345, (Mo. App. E.D., March 25, 2008); Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992); State, ex rel. Missouri Hwy & Transp. Com’n v. Pracht, 801 S.W.2d 90, 94 (Mo. App. E.D. 1990); Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965).
[34] Exhibit B; Testimony of Mr. Berry
[35] Section 137.115.1, RSMo.
[36] A negative $20,000 adjustment was made to Comparable Sale # 2 due to it having a pool and the subject not having this amenity.
[37] The Hearing Officer is not suggesting that Respondent had a burden to present any evidence to prove value. This observation is simply to address that in the absence of Complainant’s appraiser finding sales closer to the subject in living area than the three comparables, and the absence of other market data on this matter from Respondent, it is reasonable to conclude that in fact there were no better comparables available to address this appraisal problem.
[38] The concluded value of $553,623 was considered, however, it was not found to be persuasive in light of the actual purchase price, as well the comparable sales data.
[39] Section 138.432, RSMo.