Janice Marting v. Zimmerman (SLCO)

 

JANICE MARTING,)

)

Complainant,)

)

v.                                                                            ) Appeal No.11-10109

)

JAKE ZIMMERMAN, ASSESSOR,)

ST. LOUIS COUNTY, MISSOURI,)

)

Respondent.)

 

DECISION AND ORDER

 

HOLDING

 

Decision of the St. Louis County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE.Evidence on the record was substantial and persuasive to rebut the presumption of correct assessment by the Board of Equalization and establish value as of January 1, 2011.

True value in money for the subject property for tax years 2011 and 2012 is set at $87,500, residential assessed value of $16,630.

Complainant appeared by Counsel, Daniel R. DeFosset, St. Louis, Missouri.

Respondent appeared by Associate County Counselor, Paula J. Lemerman.

Case heard and decided by Senior Hearing Officer W. B. Tichenor.

ISSUE

Complainant appeals, on the ground of overvaluation, the decision of the St. Louis 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, 2011.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.Complainant timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.

2.Evidentiary Hearing.The Evidentiary Hearing was held on August 28, 2012, at the St. Louis County Government Center, 41 South Central Avenue, Clayton, Missouri.

3.Subject Property.The subject property is identified by locator number 21L230720.It is located at 1218 Gilbert Ave., Rock Hill, Missouri.The subject house has not had any updating since its construction.It suffers from significant deferred maintenance, especially in the nature of foundation and basement cracking and water seepage.[1]

4.Assessment.The Assessor appraised the property at $99,400, a residential assessed value of $18,890.[2]The Board of Equalization sustained the assessment.[3]

5.Complainant’s Evidence.Complainant presented the appraisal report (Exhibit A) and testimony of Lynn E. Politte Haack.[4]Ms. Politte Haack arrived at a fair market value of $79,000, utilizing the sales comparison approach.

Complainant offered into evidence Exhibit B.[5]Objection was made and the objection was sustained.See, Ruling on Exhibit B, infra.

There was no evidence of new construction and improvement from January 1, 2011, to January 1, 2012, therefore the assessed value for 2011 remains the assessed value for 2012.[6]

6.Respondent’s Evidence.Respondent presented the appraisal report (Exhibit 1) and testimony of Terry Kraus.[7]Exhibit 1 was received into evidence.Relying on the sales comparison approach, Mr. Kraus concluded a fair market value of $97,000.

7.Evidence Substantial and Persuasive.The evidence of each appraiser standing on its own constituted substantial and persuasive evidence to rebut the presumption of correct assessment and establish the respective values advocated, had there been no countervailing evidence on the record.Collectively, Complainant’s and Respondent’s appraisal evidence was substantial and persuasive for the Hearing Officer to determine value.See, Determination of Value, infra.

8.Conclusion of Value.The true value in money of the subject property as of January 1, 2011, is $87,500, a residential assessed value of $16,630.See, Determination of Value, infra.

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.[8]

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.[9]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.[10]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.[11]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.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.[12]The presumption is not evidence of value.

The presumption of correct assessment is rebutted when the taxpayer , or the Respondent when advocating a value different than the value determined by the Board, 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.[13]Upon presentation of the Complainants’ evidence[14] the presumption in this appeal disappeared.The submission of the appraisal report, performed by a state certified real estate appraiser, established prima facie that the Board’s value was in error.In like manner, Respondent’s evidence also rebutted the presumption that the Board’s value was correct.Accordingly, the Hearing Officer takes the appeal free of the presumption.Each of the appraisals on its own would have established the individual value proffered.However, the Hearing Officer must weigh all of the evidence on the record and conclude the fair market value of the property under appeal as of January 1, 2011.

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.[15]True value in money is defined in terms of value in exchange and not value in use.[16]It is the fair market value of the subject property on the valuation date.[17]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.[18]

 

Both appraisers valued the property under the Standard For Valuation.[19]

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.[20]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.[21]Complainant’s appraiser concluded a value after the development of the sales comparison approach.Respondent’s appraiser also reached his final opinion of value relying on the sale comparison methodology that he utilized.Accordingly, both appraisers reached their indicated value relying on an appraisal methodology that is recognized by the Commission and the courts of this state.

Opinion Testimony by Experts

If specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert on that subject, by knowledge, skill, experience, training, or education, may testify thereto.

The facts or data upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing and must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject and must be otherwise reliable, the facts or data need not be admissible in evidence.[22]

In this particular instance, the facts and data relied upon by each of the experts are deemed to have been of the type reasonably relied upon by appraisers in the appraisal of single-family residential homes.Furthermore, those facts and data are found to have been otherwise reliable.

Burden of Proof

In order to prevail, Complainant 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, 2011.[23]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.”[24]A valuation which does not reflect the fair market value (true value in money) of the property under appeal is an unlawful, unfair and improper assessment.

Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the Board of Equalization, 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.[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]

Ruling on Exhibit B

Exhibit B consists of (1) a bid estimate for the installation of a sum pump system by HELITECH in the amount of $6,924; and (2) a bid estimate for foundation repairs by HELITECH in the amount of $19,575.Both documents are dated 2/14/12.Complainant sought to offer this exhibit to establish the cost of the cited work to the subject property to address the problem of basement foundation cracks.Counsel for Respondent objected on the ground of lack of foundation.Counsel for Complainant offered to have an individual testify, who was present when the bid estimates were presented by a representative of HELITECH.

Respondent’s objection was sustained.Exhibit B was not received into the record.It was only considered as an offer of proof and is maintained in the Commission file only for that purpose and not as evidence upon which the Hearing Officer can rely in arriving at a conclusion of value.

The documents are hearsay.The unidentified employee of HELITECH who prepared the estimates was not present to identify the documents and be subject to cross-examination relative to the matters addressed therein.Counsel for Complainant asserted that the documents should come in under the business records exception to the hearsay rule.

The reception into evidence of documents under the business records exception to the hearsay rule is governed by §§490.660 to 490.690, RSMo – The Uniform Business Records as Evidence Law.Under the statute, a record of an act, condition or event, insofar as relevant, can be competent evidence if the custodian or other qualified witness testifies to its identity and the mode of its preparation, and if it was made in the regular course of business, at or near the time of the act, condition, or event.[28]No such witness was present to testify.The proffered witness was not the person who prepared the documents and was not the custodian of same for HELITECH.Upon the timely objection of Counsel for Respondent, the documents could not be received.

Had the documents not been objected to and thereby have come into the record, there is little the Hearing Officer could do with the information contained therein, since neither appraiser relied upon the bid estimates.There is no basis in the record upon which the Hearing Officer could utilize the dollar amounts for the proposed repairs to conclude value under either appraisal.Had such information been obtained earlier and provided to each appraiser, then each expert could have utilized the data in the manner deemed most appropriate for addressing the foundation issue in the subject house.

Politte Haack Appraisal

Complainant’s appraiser presented sales of three properties she deemed to be appropriate comparables for the appraisal problem. Those sale properties have the following characteristics in comparison to the subject:

 

The appraiser made the follow observation relative to the condition of the subject house:[30]

“The subject is in overall fair condition.Older kitchen and bath, furnace and central air systems; hardwood floors need refinishing; multiple vertical and horizontal cracks in basement foundation appear to be long standing however water seepage is apparent.Peeling paint on exterior aluminum gable siding.Physical depreciation for wear and lack of routine updates and basement foundation condition.”

 

It is clear that the appraiser considered and accounted for the overall condition and specifically the foundation issue in her appraisal.Ms. Politte Haack concluded a value as of 2/18/11 of $79,000 or a per square foot value of $91.44.

The Hearing Officer finds these three sales were appropriate to be used in developing the sales comparison approach.Furthermore, the adjustments made by the appraiser appear appropriate for the present appraisal problem.The conclusion of value as of 2/18/11 instead of 1/1/11 is not fatal to the conclusion of value by the appraiser, nor does it have a negative impact on the final conclusion of value.The dates of sale for the three comparables are as applicable for a 1/1/11 valuation as the 2/18/11 valuation.The appraiser concluded no time of sale adjustments were necessary for her sales, accordingly, it would not appear that factor would be applicable to a valuation some 49 days earlier.

Each sale was given a negative adjustment for condition due to the subject only being in fair condition and each of the comparables being in slightly superior condition.The range of net and gross adjustments is within generally accepted standards for an appraisal of this type.The adjusted per square foot values fell within a narrow range.The final conclusion of value provided an indicated per square foot value within the unadjusted per square foot value range, and slightly toward the upper end of the range.

Kraus Appraisal

Respondent’s appraiser presented sales of four properties he deemed to be appropriate comparables for the appraisal problem. Those sale properties have the following characteristics in comparison to the subject:

FEATURES	SUBJECT	COMP 1	COMP 2	COMP 3	COMP 4
Proximity to Subject		.09 mile	.15 mile	.05 mile	0.01 mile
Sale Price		$162,500	$157,900	$167,000	$152,000
Sale Price Per Sq. Ft.		$188.08	$193.50	$173.96	$175.93
Date of Sale		10/10	4/10	6/09	1/11
Site	7,623	6,674	12,650	7,562	7,632
Design	Ranch	Ranch	Ranch	Ranch	Ranch
Age	56	57	59	57	56
Condition	C5	C3	C3	C4	C3
Rooms/Bed/Baths	4/2/1	4/2/1	5/2/1	5/3/1	4/2/1
Gross Living Area	864	864	816	960	864
Basement	864/0 finish	864/425 fin	816/400 fin	960/400 fin	864/650 fin
Garage	None	None	2 Car – Det	2 Car – Det	None
Net/Gross Adj.		-36.2/36.2	041.1/42.9	-43.4/43.4	-41.1/41.1
Adjusted Sale Price		$103,700	$93,000	$94,500	$89,500
Adjusted Per Sq. Ft.		$120.02	$107.64	$109.38	$103.59

 

Mr. Kraus addressed the matter of the subject’s condition as follows:

“Many of the fixtures in the kitchen and bath appear to be original, dated with some needing replacement/repair.The hardwood floors are worn and need to be reconditioned.The plaster walls appear to be well maintained with minor cracks that appear to be typical given the age of the home.A major concern is the concrete foundation walls which have several horizontal cracks and some vertical cracks.”[31]

“The condition of this property was rated C5 (obvious deferred maintenance).No functional obsolescence was observed, however the home has not been updated, and appears to have the original kitchen cabinets and dated bathroom fixtures.The basement foundation has several noticeable horizontal cracks and some vertical (repairs) cracks. . . .”[32]

“Due to the number of foundation cracks, it is believed that if the foundation repairs were to be made, the subject home would still carry a negative stigma if it were to compete with other properties for sale that do not have such foundation issues.A negative 5 – 10% of the sale price would be considered appropriate for this condition.In this instance a value of $12,500 was used.”[33]

 

Mr. Kraus, like Complainant’s appraiser, recognized and accounted for the foundation issue, although in a manner that differed from Ms. Politte Haack.The concluded value by Respondent’s appraiser was $97,000, or $112.27.

The Hearing Officer finds the four Kraus sales to be appropriate as comparables for the present appraisal problem.However, it is clear that these sales are all at the upper end for sales comparable to the subject.Each of these comps had updates which the subject does not.Although adjusted for by Mr. Kraus, it is clear that the comparables updating placed them in a level of the market superior to the subject as it existed on 1/1/11.[34]

The range of net and gross adjustments is higher than the Hearing Officer generally finds in appraisals for properties such as the subject.They are also greater than what the Hearing Officer would like to see.However, the explanation is clear that the additional level of gross and net adjustments is due to the need to account for the overall inferior condition of the subject, and in particular to account for the foundation issue.At the same time, the higher range of adjustments is a further indicator to the Hearing Officer’s mind that the comparables were generally significantly superior to the subject.

Determination of Value

The responsibility of the Hearing Officer is to weigh the evidence, not to perform an appraisal.Accordingly, deference is given to each of the experts in their respective adjustments to comparables and conclusions of value based upon their individual development of the sales comparison approach.Two particular elements come to play in this particular case when weighing the evidence – Location and Condition.

Location, Location, Location

“Location, Location, Location” is the mantra of real estate agents and appraisers alike.Certainly, the location of the property being appraised in relation to the comparable sale properties used for the appraisal must be given significant consideration.In this instance, the Hearing Officer has three sales which are within .28 to .53 of a mile of the subject – Haack comparables.The Kraus comparables are within .01 to .15 of a mile of the subject.Both sets of sales are within the preferred one mile distance for a sound appraisal.On this factor, the Kraus comparables would appear to warrant slightly more weight.

However, a sale from a similar neighborhood or subdivision although a slightly greater distance from the property being appraised can be just as sound of a comparable as one somewhat closer to the subject.In such cases, no adjustment is generally deemed necessary for the location element.The location of comps must be weighed against another important factor.

Condition, Condition, Condition

“Condition, Condition, Condition” can in any given instance trump the location factor.The condition factor may be more critical when dealing with either a subject that has recently had significant updates or is the victim of deferred maintenance.For example, a subject that has had updates to kitchen, baths and flooring, or other amenities, might be in a neighborhood of very similar homes and sufficient sales data is available for the appraisal.However, the universe of sales in the neighborhood does not contain any homes that had updates comparable to the house being appraised.In that instance, an appraiser might look to other close by areas to draw upon recent sales of update homes to use a comparables.In such a case, the appraiser is making a judgment that no real location adjustment has to be made, and the adjustment for condition, to account for the updating will not be required to be as great as having to adjusted for comps without the updates.

The reverse is also true.A property that is lacking in updates and even has significant deferred maintenance issues might be better appraised by deferring to sales with more similarity of condition, as opposed to opting for the nearest sales.That is the situation the Hearing Officer has determined exists in the present weighing of appraisals.Ms. Politte Haack clearly opted to rely upon sales of homes more similar, although only slightly superior to the subject on the element of condition.To do so, she elected to forgo utilization of sales that would have been in a closer proximity to the subject.Mr. Kraus on the other hand, felt that location was a more important consideration than condition.Consequently, he selected four sales of properties which were the closest to the subject, however, each were clearly and significantly superior to the subject in their conditions.

The practical result of this is that Complainant’s appraiser did not deem that her comparables required a larger condition adjustment due to the fact that they were only slightly superior to the subject in this factor.Respondent’s appraiser was required to make more significant adjustments to account for the subject very inferior condition.The condition adjustment generally involves more subjectivity than objectivity in the absence of information on the costs for updating in either the subject or comparables, or the cost for repairs for either the subject or comparables.

The adjusted per square foot values under the Haack appraisal place the subject solidly in the range of the comparables, as does the final conclusion of value by Complainant’s appraiser.The Kraus adjusted per square foot values and the final conclusion of value provide substantiation in the Hearing Officer’s mind that the comparables while otherwise comparable to the subject in the basic elements of site, age, construction quality and living area, were significantly superior in condition to the subject.Complainant’s appraiser properly recognized the subject’s inferior condition to each of the comparables and made a significant adjustment to each comparable.However, the Hearing Officer does not have a settled conclusion in his mind that the full degree of difference was accounted for in the condition adjustment, even including the foundation stigma adjustment.

Conclusion

The variance between the opinions of the two experts is not small, but neither is it extremely substantial to the Hearing Officer.Complainant’s expert comes in with an opinion of value just over 18% below the value opined by the opposing expert.Respondent’s expert concluded a value just below 23% above the value tendered by Complainant’s expert.The difference in the two opinions presented rests upon what each appraiser determined was the more important element of comparison in the appraisal problem.Ms. PolliteHaack erred on the side of selecting comparables closer in condition to the subject.Mr. Kraus elected to place greater reliance on location.Neither appraiser should necessarily be considered to be right or wrong as opposed to their colleague in the profession and his or her exercise of their professional judgment.

The Hearing Officer is clearly persuaded that the condition of the subject and the existence of foundation/basement cracks and a water seepage issue would be the factor which would most impact upon the hypothetical purchaser on 1/1/11.It would be this element, more than the subject’s location that would drive what a buyer would have offered for the property.Accordingly, the Hearing Officer gives greater weight on the conclusion of value arrived at by Complainant’s appraiser, with some weight given to the Kraus appraisal, and determines the fair market value as of January 1, 2011, to be $87,500.

ORDER

The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE.

The assessed value for the subject property for tax years 2011 and 2012 is set at $16,630.

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. [35]

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 September 12, 2012.

STATE TAX COMMISSION OFMISSOURI

_____________________________________

W. B. Tichenor

Senior Hearing Officer

w.b.tichenor@stc.mo.gov

Certificate of Service

 

I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 12thday of September, 2012, to:Daniel DeFosset, 11105 Hermitage Hill Road, St. Louis, MO 63131, Attorney for Complainant; Paula Lemerman, Associate County Counselor, Attorney for Respondent, 41 South Central Avenue, Clayton, MO 63105; Jake Zimmerman, Assessor, 41 South Central Avenue, Clayton, MO 63105; Eugene Leung, Director of Revenue, County Government Center, 41 South Central Avenue, Clayton, MO 63105.

___________________________

Barbara Heller

Legal Coordinator

Barbara.Heller@stc.mo.gov

 

Contact Information for State Tax Commission:

Missouri State Tax Commission

301 W. High Street, Room 840

P.O. Box 146

Jefferson City, MO 65102-0146

573-751-2414

573-751-1341 Fax