STATE TAX COMMISSION OF MISSOURI
| MOHAMED I. FAKHANI & MONA RAJAB, | ) | |
| ) | ||
| Complainants, | ) | |
| ) | ||
| v. | ) | Appeal No. 15-13712 |
| ) | ||
| JAKE ZIMMERMAN, ASSESSOR | ) | |
| ST. LOUIS COUNTY, MISSOURI, | ) | |
| ) | ||
| Respondent. | ) |
DECISION AND ORDER
HOLDING
The assessment made by the Board of Equalization of St. Louis County (BOE) is SET ASIDE. Complainants Mohamed I. Fakhani and Mona Rajab did not present substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE. Respondent Jake Zimmerman, St. Louis County Assessor, (Respondent) presented substantial and persuasive evidence to rebut the presumption of correct assessment by the BOE and to establish the true market value of the subject property at $528,000 residential ($100,320 assessed).
Complainant Mohamed I. Fakhani appeared pro se. Complainant Mona Rajab appeared not.
Respondent appeared by Steven Robson, Assistant County Counselor.
Case heard and decided by Senior Hearing Officer Amy S. Westermann.
ISSUE
Complainant appealed on the ground of overvaluation. Respondent initially set the true market value (TMV) of the subject property, as residential property, at $545,000. The BOE sustained Respondent’s valuation at $545,000. The Commission takes this appeal to determine the TMV of the subject property on January 1, 2015.
The Senior Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
- Jurisdiction. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission.
- Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing on June 15, 2016, at the St. Louis County Government Administration Building, 41 South Central Avenue, Clayton, Missouri.
- Identification of Subject Property. The subject property is identified by parcel/locator number 23Q130045. It is further identified as 712 Joyce Ann Dr., Manchester, Missouri. (Complaint; Exhibit 1)
- Description of Subject Property. The subject property consists of a 35,632 square foot residential lot improved by a 4,336 square foot, single-family, two-story home built in 2014. (Exhibit 1) The subject property includes four bedrooms; three full bathrooms and one half bathroom; a 1,909 square-foot unfinished basement; a three-car attached garage; one fireplace; a deck; and a patio. The exterior consists of frame, vinyl, and minimal brick construction. (Exhibit 1)
- Assessment. Respondent set a TMV on the subject property at $545,000 residential, as of January 1, 2015.
- Board of Equalization. The BOE sustained Respondent’s TMV of the subject property.
- Complainant’s Evidence. Complainant testified in his own behalf. Complainant testified that he had purchased the land in 2013 then constructed the residence, which was completed in November 2014. Complainant testified that he paid $146,500 for the land and $384,500 for the residence for a total cost of approximately $531,000. Complainant testified that the lot had not been publicly advertised for sale and that he had purchased it from the owner. Complainant testified that the subject property was encumbered by a mortgage of $416,000. Complainant testified that the subject property had appraised for $446,000 in 2014. Complainant testified that his opinion of the subject property’s TMV as of January 1, 2015, was $416,000.
Complainant offered as evidence a photograph of the subject property along with information obtained from the St. Louis County Real Estate Information database (Exhibit A); photographs of comparable properties along with information obtained from the St. Louis County Real Estate Information database concerning those properties (Exhibits B through K); the cost breakdown for the construction of the residence on the lot (Exhibit L); an appraisal report dated March 6, 2014, with an indicated value by the sales comparison approach of $446,000, which had been based on the appraiser’s review of the blueprints for the residence (Exhibit M); copies of the disbursements of loan funds used to pay for the construction of the residence (Exhibit N); loan statements for the time period that the residence was under construction (Exhibit O); and photographs taken in December 2015 and June 2016 showing cracks in the foundation and in the basement floor of the subject property(Exhibit P).
Respondent objected to Exhibit M on the ground that it lacked foundation because the appraiser who had prepared the report was not present to be cross examined. The Senior Hearing Officer overruled the objection and received the exhibit into the record to be considered in the context of all of the evidence presented. Respondent did not object to Complainants’ other evidence, which was received into the record.
- Respondent’s Evidence. Respondent offered as evidence the testimony of Residential Real Estate Appraiser Sharon Kuelker, (Appraiser) along with the Appraiser’s report (Exhibit 1). The Appraiser opined that the TMV of the subject property as of January 1, 2015, was $528,000. [1] The Appraiser testified that she utilized the sales comparison approach to arrive at her opinion of value because that approach was a more reliable indicator of value. The Appraiser viewed part of the exterior of the subject property from the street but was unable to view the interior and portions of the exterior because she was unable to gain access from Complainant. Based on her observations, the Appraiser concluded that the exterior appeared consistent with the C1 rating, recently constructed. The Appraiser conducted the appraisal based on the “extraordinary” assumption that the interior condition was the same as the observed exterior condition.
The Appraiser chose three comparable properties that had sold between September 2013 and November 2014. Due to the lack of similar sales in close proximity to the subject property, the Appraiser chose comparables located between .43 miles and 1.55 miles from the subject property. The comparables were situated within the subject property’s general market area and in the same school district, so the Appraiser made no adjustment for location. The sale prices of the comparables ranged from $478,000 to $565,000.
The Appraiser made market based adjustments to the comparable properties based on the square footage of the lots; the year Comparable Nos. 2 and 3 were built (2009); square footage of gross living area; the number of bedrooms; the amount of finished square footage in the basements and whether the basements included a full bathroom; patios and screened porches; and whether the comparable properties had stone work on the exterior. (Exhibit 1) The adjusted sale prices of the comparables ranged from $505,300 to $564,600. The Appraiser placed the most weight on Comparable No. 1 because of its “overall similarities to the subject property.” The adjusted sale price of Comparable No. 1 was $505,300. Complainant did not object to Respondent’s evidence, which was received into the record.
- Presumption of Correct Assessment Rebutted – Value Established. The evidence presented by Respondent was substantial and persuasive to both rebut the presumption of correct assessment by the Board and to establish the fair market value of the subject property at $528,000, assessed (residential) value of $100,320.
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, including the application of any abatement. The Senior 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. 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 Commission, 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.
During the hearing, the Senior Hearing Officer inquired of 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.
A presumption exists that the assessed value fixed by the BOE is correct. Rinehart, 363 S.W.3d at 367; Cohen, 251 S.W.3d at 348; Hermel, Inc., 564 S.W.2d at 895. “Substantial and persuasive controverting evidence is required to rebut the presumption, with the burden of proof resting on the taxpayer.” Cohen, 251 S.W.3d at 348. Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact. Cupples Hesse Corp., 329 S.W.2d at 702. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975). See also, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003).
There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a Commission appeal still bears the burden of proof. The taxpayer is the moving party seeking affirmative relief. Therefore, the Complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.” Westwood Partnership, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. W.D. 1991).
Generally, a property owner, while not an expert, is competent to testify to the reasonable market value of his own land. Cohen, 251 S.W.3d at 348-49; Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992). “However, when an owner’s opinion is based on improper elements or foundation, his opinion loses its probative value.” Carmel Energy, Inc., 827 S.W.2d at 783. A taxpayer does not meet his burden if evidence on any essential element of his case leaves the Commission “in the nebulous twilight of speculation, conjecture and surmise.” See Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. E.D. 1980).
Respondent’s Burden of Proof
Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the BOE, must meet the same burden of proof to present substantial and persuasive evidence of the value advocated as required of the Complainant under the principles established by case law. Hermel, Cupples-Hesse, Brooks, supra.
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).
Board Presumption and Computer-Assisted Presumption
There exists a presumption of correct assessment by the BOE – the BOE presumption. In charter counties or the City of St. Louis, there exists by statutory mandate a presumption that the Assessor’s original valuation was made by a computer, computer-assisted method or a computer program – the computer-assisted presumption. These two presumptions operate with regard to the parties in different ways.
The BOE presumption operates in every case to require the taxpayer to present evidence to rebut it. If Respondent is seeking to prove a value different than that set by the BOE, then it also would be applicable to the Respondent.
The computer-assisted presumption is applicable only if (1) the BOE lowered the value of the Assessor and Respondent is seeking to sustain the original assessment and (2) it has not been shown that the Assessor’s valuation was not the result of a computer assisted method. The BOE’s valuation is assumed to be an independent valuation.
In the present appeal, the BOE sustained the initial valuation of Respondent, and both Complainant and Respondent are now seeking to change the BOE’s valuation; therefore, the BOE presumption applies to both parties while the computer-assisted presumption is not applicable.
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 v. STC, 18 S.W.3d 611, 615 (Mo. App. W.D. 2000); Hermel, Inc., 564 S.W.2d at 897; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975). Missouri courts have approved the comparable sales or market approach, the cost approach, and the income approach as recognized methods of arriving at fair market value. St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. 1974).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005), citing St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977). “Each valuation approach is applied with reference to a specific use of the property—its highest and best use.” Snider, 156 S.W.3d at 346-47, citing Aspenhof Corp., 789 S.W.2d at 869. “The method used depends on several variables inherent in the highest and best use of the property in question.” Snider, 156 S.W.3d at 347. “Each method uses its own unique factors to calculate the property’s true value in money.” Id. “The ‘comparable sales approach’ uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties. Id. at 348. “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.” Id. (quotation omitted). The comparable sales 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.
Market value is the most probable price in terms of money which a property should bring in a 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:
- 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
Here, the parties presented evidence grounded in two competing approaches to determine the TMV of the subject property. Complainants presented evidence of the cost to purchase the land and to build the residence of the subject property, data regarding several comparable properties, and an appraisal report. However, this evidence was neither substantial nor persuasive to support an opinion as to the true market value of the subject property as of January 1, 2015. Substantial evidence is that which is relevant, adequate, and reasonably supports a conclusion. Cupples Hesse Corp., 329 S.W.2d at 702. Persuasive evidence is that which causes the trier of fact to believe, more likely than not, the conclusion advocated is the correct conclusion. Id.
First, using the cost of constructing the residence is not the proper approach to determining true market value in this case because there is an active market with sufficient data available to make a comparative analysis; thus, the market approach is more appropriate under the circumstances. However, even if the cost approach were appropriate, the evidence indicated that the cost of constructing the residence added to the cost of the land exceeded Complainants’ opinion of the TMV of the subject property.
Second, although Complainants presented evidence of “comparable” properties, upon closer examination of the information provided, Complainants did not conduct any analysis of similarities and differences between the subject property and the comparables from which one could conclude that the sale prices of these comparables could be used to determine the TMV of the subject property. Notably, several of the comparables presented only included assessed values as reported in the St. Louis County Real Estate Information database.
Third, the appraisal report presented by Complainants does not support their opinion of true market value of the subject property as of January 1, 2015, because the appraisal was performed on behalf of Complainants’ lender in March 2014, prior to the construction of the residence and for the purpose of securing financing to build it.
Conversely, Respondent presented evidence of comparable sales to estimate the value of the subject property. The Appraiser analyzed three comparable sales, all of which were located in the subject property’s general market and in the same school district as the subject property. (Exhibit 1) After analyzing the market data tied to the similarities and differences between the subject property and the comparables, the Appraiser concluded that the subject property had a value of $528,000 on January 1, 2015. The Appraiser testified that she used the multi-listing service to find sales data of comparables closest in age and in the same general market area and school district as the subject property. The Appraiser testified that she then made market-based adjustments to the comparables to arrive at an opinion of value.
Given the evidence presented, it is reasonable to find and conclude that Respondent rebutted the presumption of correct valuation by the BOE and that the TMV of the subject property on January 1, 2015, was $528,000.
ORDER
The true market valuation for the subject property as determined by the BOE is SET ASIDE. The assessed value for the subject property for tax years 2015 and 2016 is set at $100,320 residential ($528,000 TMV).
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. 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 20, 2016.
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 20th day of September, 2016, 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 proposed valuation following the Appraiser’s analysis was lower than the BOE’s assessment of the subject property’s value.