STATE TAX COMMISSION OF MISSOURI
| JASPER A. ENGEL & SUZANNE M. ENGEL, | )
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| Complainants, | ) | ||
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| v. | ) | Appeal No. 17-32503 | |
| ) | Parcel/Locator No. A965000362 | ||
| SCOTT SHIPMAN, ASSESSOR, | ) | ||
| ST. CHARLES COUNTY, MISSOURI,
Respondent. |
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DECISION AND ORDER
HOLDING
The assessment made by the Board of Equalization of St. Charles County (BOE) is SET ASIDE. Complainants Jasper A. Engel (Mr. Engel) and Suzanne M. Engel (referred to collectively as Complainants) presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE.
Mr. Engel appeared pro se; Suzanne M. Engel appeared not.
Respondent Scott Shipman, St. Charles County Assessor, (Respondent) appeared by Amanda M. Jennings, Associate County Counselor.
Case heard and decided by Senior Hearing Officer Amy S. Westermann.
ISSUE
Complainants appealed on the ground of overvaluation. Respondent initially set the true market value or true value in money (TVM) of the subject property, as residential property, at $277,096. The BOE valued the subject property at $277,096, thereby sustaining Respondent’s valuation. The State Tax Commission (STC) takes this appeal to determine the TVM for the subject property as of January 1, 2017.
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. Complainants timely appealed to the State Tax Commission.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing, which was held on November 6, 2017, at the St. Charles County Government Administration Building, 201 N. Second Street, St. Charles, Missouri.
- Identification of Subject Property. The subject property is identified by parcel/locator number A965000362. It is further identified as 232 East Governor Place, St. Charles, Missouri. (Complaint; Exhibit 1)
- Description of Subject Property. The subject property consists of an approximately .23 acre (10,025 square feet) lot improved by a 2,640[1] square foot, single family, two-story residence built in 1996. (Exhibit A) The subject property includes a full, unfinished, walk-out basement; four bedrooms; two full bathrooms; one half bathroom; a fireplace; a deck, a patio, and a porch; and a two car garage. (Exhibit A; Exhibit 1) The exterior consists of vinyl and brick finishes. (Exhibit 1)
- Assessment. Respondent set a TVM for the subject property of $277,096, residential, as of January 1, 2017.
- Board of Equalization. The BOE set a TVM of the subject property at $277,096, residential, as of January 1, 2017.
- Complainants’ Evidence. To support Complainants’ opinion of value, Complainants offered as evidence the following exhibits:
| Exhibit A | Appraisal Report of John T. Burghoff |
| Exhibit B | Comparable Sale 225 Kingdom, St. Charles, MO |
| Exhibit C | Four Comparable Sale Listings from the Multi-Listing Service |
| Exhibit D | Bids for Home Improvement/Upgrade Projects |
Respondent objected to Exhibits B and D as hearsay and Exhibit C as irrelevant. The objection to Exhibit B was overruled and the exhibit admitted into the record to be given the weight deemed necessary in context with all of the other evidence. The objection to Exhibit D was sustained, in part, and overruled, in part. The objection to Exhibit D was sustained with regard to an email from an individual who had provided general estimates for various repairs, replacements, and upgrades. The objection to Exhibit D was overruled with regard to specific, detailed bids printed on identifiable company proposal forms. The objection to Exhibit C was sustained because the listings were merely listings advertising properties on the market for sale but were not listings representing closed sales.
Mr. Engel testified for Complainants. Complainants purchased the subject property new from a developer in 1996 for $160,000. Mr. Engel testified that the subject property is encumbered by a mortgage in the amount of approximately $100,000. Mr. Engel testified that the subject property had not been listed for sale during the three years prior to the evidentiary hearing and that Complainants had not received any offers to purchase the property. Mr. Engel testified that the only improvement Complainants had made to the subject property between January 1, 2015, and January 1, 2017, was the replacement of the master bathroom flooring. Mr. Engel opined that the subject property had a value of $250,000, as of January 1, 2017 (assessed valuation $47,500).
Mr. Engel testified that the comparable sale in Exhibit B was “excellent” because of its proximity and similarity to the subject property. The comparable sale in Exhibit B shared part of the back property line with the subject property and was situated within the same subdivision as the subject property. Mr. Engel testified that the comparable sale in Exhibit B sold for $240,000. Mr. Engel testified that the comparable sale in Exhibit B was superior in the nature of its details but had sold for a price lower than the appraised value of the subject property. The final page of Exhibit B indicated that the sold price of the comparable sale was $240,000 and that the sale date was October 19, 2017. Mr. Engel testified that the improvements contemplated by the project bids in Exhibit D would increase the market value of the subject property but the improvements had not been made as of January 1, 2017.
On cross examination Mr. Engel testified that he did not know of a specific rise in market value that the improvements contemplated by the project bids in Exhibit D would give to the subject property. Mr. Engel further testified that the bids were for replacements of certain items as well as upgrades to the existing improvements. Mr. Engel testified that the existing windows and flooring in the subject property were 20 years old and in a deteriorated condition that would cause a typical buyer to want those items to be upgraded. Mr. Engel testified that he had not been inside the comparable sale in Exhibit B but that he had witnessed the roof being installed. Mr. Engel acknowledged that the interior condition of the comparable sale in Exhibit B might have scared away potential buyers, thereby causing the initial list price of $300,000 to be reduced to an amended list price of $249,900.
Complainants presented the testimony of state certified residential real estate appraiser John T. Burghoff (Mr. Burghoff) along with his appraisal report, Exhibit A. Mr. Burghoff opined that the subject property had a TVM of $250,000 as of January 1, 2017.
Mr. Burghoff testified that he has been an appraiser for 35 years and also is a hearing officer for the St. Louis County Board of Equalization. Mr. Burghoff testified that an appraisal based on a viewing of only the exterior of a property is inferior to a full appraisal that takes the interior into account. Mr. Burhoff testified that the sketch and the recorded square footage of the subject property had minor errors that had minimal impact on the value of the subject property. Mr. Burghoff testified that the upgrades and updates like the ones made to the comparable sale in Exhibit B, which the subject property lacks, would affect market value.
On cross examination, Mr. Burghoff testified that he used professional judgment for adjustments made to the comparables based on variances in the market. Mr. Burghoff testified that it was important to itemize granite countertops because “buyers all seem to want this” and because to “break out” specific characteristics of a property was standard practice in his professional experience. Mr. Burghoff testified that he is a real estate broker and formerly rehabilitated homes and hired agents to sell them. Mr. Burghoff further testified that he had used comparables sold in 2016 within the same neighborhood as the subject property. Mr. Burghoff testified that the comparable sale in Exhibit B would have been a good indicator of the TVM of the subject property if the timing of its sale would have allowed it to be included in an appraisal of the subject property. Mr. Burghoff testified that he did not use the same comparables that Respondent had used to value the subject property, some of which had occurred in 2015.
The narrative portion of the appraisal report, Exhibit A, described the subject property as “well kept” and “spotless,” which “has a positive impact upon the overall value.” (Exhibit A) The appraisal report further described the subject property’s interior as “starting to show its age” with original carpet, original kitchen cabinets, and shiny brass light fixtures and plumbing fixtures, which buyers would “discount” due to “these older features.”
In arriving at his opinion of the subject property’s TVM, Mr. Burghoff utilized the sales comparison approach. He did not use the cost approach due to the age of the subject property. He did not use the income approach because the subject property was owner occupied. (Exhibit A)
Mr. Burghoff analyzed four comparable properties that had sold between April 2016 and September 2016. (Exhibit A) All four of the comparables were located within approximately one-half of one mile of the subject property. The sale prices of the comparable properties ranged from $269,000 to $345,000. (Exhibit A) Comparable Nos. 1, 2, and 4 were colonial-style two-story homes; Comparable No. 3 was a ranch-style home. Comparable Nos. 1, 2, and 3 all were located in the same “tract development” as the subject property, but Comparable No. 2 was located in a subdivision “generally considered to be a notch superior by most buyers.” Comparable No. 4 was located nearby but in a “generally equal subdivision” as the subject property.
Mr. Burghoff made market-based adjustments to the sale prices of the comparables to account for the differences between them and the subject property. Mr. Burghoff made a downward adjustment to Comparable Nos. 1 and 4 for sale concessions and a downward adjustment to Comparable No. 2 for its location in a more prestigious subdivision. Mr. Burghoff made downward adjustments to Comparable Nos. 1, 2, and 3 for their larger lot sizes and to all of the comparables for their updated flooring. Mr. Burghoff made downward adjustments to Comparable Nos. 1 and 2 for square footage and to Comparable Nos. 1, 2, and 4 for finished basements. Mr. Burghoff made downward adjustments to Comparable Nos. 1 and 3 for three-car garages. Mr. Burghoff made negative adjustments to Comparable Nos. 2 and 3 for patios/decks/pools/porches/waterfalls and for kitchens with granite countertops. Mr. Burghoff made negative adjustments to Comparable Nos. 1 and 2 for additional fireplaces and to Comparable No. 1 for minimally updated bathrooms. Mr. Burghoff made positive adjustments to Comparable No. 3 for bathroom count, square footage, and an in-ground unfinished basement. Mr. Burghoff made positive adjustments to Comparable No. 4 for square footage, an in-ground unfinished basement, and patio/porch. Comparable No. 3 was a ranch-style home while the other comparables were all two-story colonial style homes. Comparable No. 4 was most similar to the subject property in terms of physical characteristics. The adjusted sale prices of the comparables ranged from $238,160 to $298,480. (Exhibit A)
- Respondent’s Evidence. Respondent offered as evidence the testimony and appraisal report (Exhibit 1) of state certified residential real estate appraiser Christina A. Aguilar (Ms. Aguilar). Ms. Aguilar testified that she has been employed as a review appraiser for nearly five years and has been state certified since 2007. Complainant did not object to Respondent’s Exhibit 1, which was received into the record.
Ms. Aguilar opined that the subject property had a TVM of $295,000 as of January 1, 2017, which supported the BOE’s valuation of $277,096 as of January 1, 2017.[2] Ms. Aguilar considered both the cost approach and the sales comparison approach in conducting the appraisal. Ms. Aguilar found the income approach to be inapplicable to the subject property.
Based on the cost approach, Ms. Aguilar opined the subject property had a TVM of $271,004 (total replacement cost new of the improvements minus the total accrued depreciation of the improvements left a cost value of $211,004 plus the site value of $60,000). (Exhibit 1)
Ms. Aguilar subsequently found that the sales comparison approach “best recognizes the actions between buyers and sellers and demonstrates a defendable indication of value.” (Exhibit 1) Based on the sales comparison approach, Ms. Aguilar opined the subject property had a TMV of $295,000 as of January 1, 2017. Ms. Aguilar analyzed six comparable properties within one-third of one mile to the subject property that had sold between August 2015 and June 2017. (Exhibit 1) The sale prices of the comparables ranged from $280,000 and $308,000. (Exhibit 1)
Ms. Aguilar made market-based adjustments to the sale prices of the comparables to account for the differences between them and the subject property. Ms. Aguilar made adjustments to the sale prices of all of the comparables for date of sale. The sale dates of Comparable Nos. 3, 5, and 6 occurred in 2015. The sale date of Comparable No. 2 occurred in September 2016. The sale date of Comparable No. 4 occurred in February 2017, and the sale date of Comparable No. 1 occurred in June 2017. The sales occurring prior to January 1, 2017, were given positive adjustments; the sales occurring after January 1, 2017, were given negative adjustments. (Exhibit 1)
All of Respondent’s comparable properties were two-story homes built between 1995 and 1997. No adjustments were made to any of Respondent’s comparables for lot size, location, or view. (Exhibit 1) Ms. Aguilar made negative adjustments to Comparable Nos. 1, 4, and 5 for superior condition. Ms. Aguilar made positive adjustments to Comparable Nos. 1, 2, 4, 5, and 6 for inferior exterior wall finishes. (Exhibit 1) Ms. Aguilar made a negative adjustment to Comparable No. 4 for more living area while Comparable Nos. 2, 3, 5, and 6 were given negative adjustments for a third full bathroom. Ms. Aguilar made negative adjustments to Comparable Nos. 2, 3, and 5 for finished square footage in their basements. Ms. Aguilar made a negative adjustment to Comparable No. 2 for a second fireplace and to Comparable Nos. 2 and 4 for a third garage stall. Ms. Aguilar made a negative adjustment to Comparable No. 1 for the presence of an enclosed porch while Comparable Nos. 4, 5, and 6 were given positive adjustments for the lack of a deck. Ms. Aguilar made positive adjustments to Comparable Nos. 1, 4, and 6 for the lack of a walk-out basement. Ms. Aguilar made a negative adjustment to Comparable No. 5 for the presence of an in-ground pool. The adjusted sales prices ranged from $286,528 to $301,920. (Exhibit 1)
On cross examination, Ms. Aguilar testified that home sale prices in St. Charles County were increasing after January 1, 2017.
- Presumption of Correct Assessment Rebutted – True Market Value Established.
Complainants presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE and to establish the TVM of the subject property as of January 1, 2017, to be $250,000.
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.
The BOE Presumption
There exists a presumption of correct assessment by the BOE – the BOE presumption. The BOE presumption requires the taxpayer to substantial and persuasive 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 BOE’s valuation is assumed to be an independent valuation.
In the present appeal, the BOE determined a TVM the same as the initial valuation of Respondent, and Complainant is seeking to lower the BOE’s assessment; therefore, the BOE presumption applies to Complainant.
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 STC 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).
In this case, Mr. Engel testified that the TVM of the subject property was $250,000 as of January 1, 2017. Complainant’s also presented the appraisal report of Mr. Burghoff, Exhibit A, and his testimony as evidence that the TVM of the subject property was $250,000, as of January 1, 2017.
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 appraisal report of Ms. Aguilar, Exhibit 1, and her testimony as evidence indicating a higher valuation than the value finally determined by the BOE and higher than the value previously determined by Respondent. However, Ms. Aguilar’s report and testimony were received to be considered in light of Respondent’s argument that the BOE’s valuation of the subject property should be sustained at $277,096, as of January 1, 2017.
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). If the evidence would support either of two opposed findings, a reviewing court is bound by the STC’s determination. Nance v. STC, 18 S.W.3d 611, 615 (Mo. App. W.D. 2000). The STC is the judge of the credibility of the witnesses and of the evidence. Nance, 18 S.W.3d at 615, citing Equitable Life Assur. Soc’y of U.S./Marriott Hotels, Inc. v. State Tax Comm’n of Missouri, 852 S.W.2d 376, 380 (Mo. App. E.D.1993).
Complainants presented the expert testimony and appraisal report of Mr. Burghoff, who opined the TVM of the subject property was $250,000 as of January 1, 2017, primarily due to the aged and outdated nature of the interior of the home. Mr. Burghoff has 35 years of experience as an appraiser; is a state certified residential real estate appraiser; serves as an approved Veteran Administration Fee Appraiser; serves as an approved Federal Housing Authority Appraiser; is a member of the Real Estate Board of Metropolitan St. Louis; is a former employee of the St. Louis County Department of Revenue with duties that included market research and determination of land values for residential properties in St. Louis County; is a member of the Appraisal Institute; is designated as a Senior Residential Appraiser; is past president of the St. Louis Chapter of the Appraisal Institute; serves as an appointed hearing officer for the St. Louis County Board of Equalization; and serves as an appointed expert witness for the Attorney General of Missouri/Missouri Appraisal Commission. (Exhibit A)
Respondent presented the expert testimony and appraisal report of Ms. Aguilar, who opined the TVM of the subject property was $295,000 as of January 1, 2017, to support the BOE’s value of $277,096. Ms. Aguilar’s opinion was based on a review of sales of similar properties situated near the subject property but not an interior inspection of the subject property. Ms. Aguilar has approximately 10 years of experience as an appraiser and is a state certified residential real estate appraiser. (Exhibit 1)
Evidence of Increase in Value
In any case in charter counties or the City of St. Louis where the assessor presents evidence that indicates a valuation higher than the value finally determined by the assessor or the value determined by the BOE, whichever is higher, for that assessment period, such evidence will only be received for the purpose of sustaining the assessor’s or board’s valuation and not for increasing the valuation of the property under appeal. Section 138.060 RSMo (2000) as amended; 12 CSR 30-3.075.
Respondent presented the testimony and appraisal report of Ms. Aguilar to support the presumption of correct assessment by the BOE and to establish the fair market value of the property under appeal, as of January 1, 2017, to be $277,096.
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. See, Nance, 18 S.W.3d at 615; 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, Complainants presented substantial and persuasive evidence rebutting the presumption that the BOE’s valuation was correct and supporting Complainants’ opinion of the TVM of the subject property was $250,000 as of January 1, 2017.
Appraisal Reports
In particular, Mr. Burghoff, a state certified residential real estate appraiser with approximately 35 years of experience in the field of appraisal, testified that an appraisal of only the exterior of a property is inferior to a full appraisal that incorporates a review of the interior and the exterior. Mr. Burghoff conducted a full appraisal by viewing both the interior and the exterior of the subject property. Ms. Aguilar conducted an appraisal by viewing only the exterior of the subject property. Both appraisers based their opinions of value upon the sales comparison approach. [3] In both his appraisal report, Exhibit A, and in his testimony, Mr. Burghoff noted the dated and original interior of the subject property and testified that it negatively impacts the market value of the subject property because “[t]oday’s buyers want more updating and will discount a home which has these older features.” (Exhibit A) All four of the comparable properties analyzed in Exhibit A contained updates and/or upgrades from which Mr. Burghoff concluded that “the middle to lower value range” of the adjusted sale prices would be accurate. (Exhibit A)
Notably, both appraisers included a common comparable sale in their appraisal reports: 208 Kingdom Drive. According to Mr. Burghoff’s appraisal report, 208 Kingdom Drive required more than $65,000 of negative adjustments due to the superior nature of the comparable to the subject property, resulting in an adjusted sale price of $238,160. Mr. Burghoff reported that the comparable had a total gross living area of 3,086 square feet, including a basement recreation room, basement full bathroom, and walk-out basement. The largest individual adjustments to 208 Kingdom Drive were for gross living area and the amount of finished square footage in the basement. (Exhibit 1) According to Ms. Aguilar’s appraisal report, 208 Kingdom Drive required $17,472 of negative adjustments, resulting in an adjusted sale price of $286,528. Ms. Aguilar reported that the comparable had a gross living area of 2,495 square feet, which required no adjustment, and 208 square feet of finished area in the basement, which required a $2,000 negative adjustment.
At first glance, the appraisers’ treatment of the same comparable might have been based upon their respective professional judgments. However, upon closer scrutiny of Exhibit A and Exhibit 1 and investigation by the Hearing Officer, the circumstances surrounding the reporting of the data for 208 Kingdom Drive compels the conclusion that the county’s data regarding the comparable is flawed. Although both appraisers reported using county records and multi-listing service data for analyzing 208 Kingdom Drive, the county’s records differ significantly from the data provided in the multi-listing service. According to the St. Charles County Assessor’s Real Estate Database, 208 Kingdom Drive has a total area of 2,495 square feet and 208 square feet of finished area in the basement. (See https://lookups.sccmo.org/assessor/details/A965000343, Last retrieved January 22, 2018.) According to the multi-listing service data reported on Trulia.com and Realtor.com, 208 Kingdom Drive has “over 4700 sq ft finished space.” The listings further include the statement “Tax records are incorrect, the home has 3086 sq ft on main floor and upstairs areas . . . added 4 foot bump out to home.” (See https://www.trulia.com/homes/Missouri/Saint_Charles/sold/327281-208-Kingdom-Dr-Saint-Charles-MO-63301, Last retrieved January 22, 2018; see also https://www.realtor.com/realestateandhomes-detail/208-Kingdom-Dr_Saint-Charles_MO_63301_M83080-32509, Last retrieved January 22, 2018.)[4]
Consequently, one can reasonably infer that the analysis contained in Exhibit A is more persuasive than Exhibit 1 in establishing the TVM of the subject property as of January 1, 2017.
Exhibit B
Although Mr. Burghoff did not utilize the comparable property in Exhibit B in his appraisal report, Mr. Burghoff testified that the subject property lacked the updates and upgrades included in the comparable property in Exhibit B. Mr. Burghoff testified that he had compared properties in the same tract development as the subject property and had utilized 2016 sales in preparing his appraisal report because those sales represented the “competition.” Mr. Burghoff testified that he might have looked at the comparable property in Exhibit B as a comparable to include in the appraisal report but did not because the appraisal report was rendered on May 2, 2017, and sale of the comparable property in Exhibit B did not occur until October 2017. According to the sales listing data in Exhibit B, the comparable property in Exhibit B was originally listed for sale in April 2017 for $300,000. The sales listing data also provided a detailed description of numerous updates and upgrades to the comparable property in Exhibit B, including new flooring; Granite Transformations solid-surface countertops, new lighting fixtures; newer windows; newer roof; replaced furnace; and a partially finished walk-out basement that included two legal bedrooms and bathrooms. On cross examination, Mr. Burghoff testified that he did not know if “something big was probably wrong” to keep the comparable property in Exhibit B from selling sooner or for a higher market price.
Later, during Respondent’s case-in-chief, Ms. Aguilar testified on cross examination that the prices of home sales in St. Charles County after the January 1, 2017, tax date had been increasing.
Consequently, in light of the fact that the comparable property in Exhibit B, with its updates and upgrades and shared property line with the subject property, sold for $249,000, nearly 10 months after the relevant tax date, one can reasonably infer that the BOE’s valuation was incorrect.
Conclusion
Based on Complainant’s substantial and persuasive evidence, it is reasonable to find and conclude that the TVM of the subject property on January 1, 2017, was $250,000.
ORDER
The valuation for the subject property as determined by Respondent for the subject tax day and sustained by the BOE is SET ASIDE. The assessed value for the subject property for tax years 2017 and 2018 is set at $47,500 residential ($250,000 TVM).
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 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. Charles 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 January 30, 2018.
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 30th day of January, 2018, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.
Jacklyn Wood
Legal Coordinator
[1] Respondent’s records indicated that the improvement had 2,574 square feet. (Exhibit 1)
[2] Respondent did not advocate increasing the BOE’s valuation and corresponding assessed valuation of the subject property’s value.
[3] In Exhibit 1, Ms. Aguilar also conducted a cost approach analysis using mass appraisal techniques. In the narrative portion of the cost approach analysis, Ms. Aguilar noted that the “interior information was gathered from the property owner at the time of the original inspection or through a correspondence letter returned by the owner. The condition and quality features of the interior are considered similar to the exterior as of the date of the appraisal.” The valuation of $271,004 based on the cost approach using mass appraisal techniques was lower than the TVM assigned to the subject property by the BOE but was not used by Respondent on the ground that the sales comparison approach was more reliable.
[4] Neither Complainant nor Respondent introduced the multi-listing service data directly into evidence but noted the use of the data as a source for the information reported and analysis conducted in the reports of their appraisers.