Nicholas Kasoff & Eugenia Kasoff v. Jake Zimmerman, Assessor St. Louis County

November 13th, 2018

STATE TAX COMMISSION OF MISSOURI

 

NICHOLAS KASOFF & EUGENIA KASOFF, )

)

Appeal Nos.
               Complainants, )

)

17-10022

17-10023

  ) 17-10024
v. ) 17-10025
  ) 17-10027
JAKE ZIMMERMAN,  ASSESSOR,

ST. LOUIS COUNTY, MISSOURI,

)

)

 
               Respondent. )  

 

DECISION AND ORDER

 

HOLDING

 

The decisions of the St. Louis County Board of Equalization (BOE) with regard to these appeals are AFFIRMED.  Nicholas Kasoff and Eugenia Kasoff (Complainants) did not present substantial and persuasive evidence to rebut the presumption of correct assessments by the BOE.        Complainants appeared pro se.

Jake Zimmerman, Assessor, St. Louis County, Missouri, (Respondent) appeared by counsel Steven Robson.

Case heard and decided by Senior Hearing Officer Amy S. Westermann (Hearing Officer).

ISSUE

Respondent and the BOE, respectively, set the true value in money (TVM) of the subject properties, as residential property, as of January 1, 2017, as follows:

Appeal No. Parcel/Locator No. Assessor’s value BOE’s value
17-10022 12H540372 $51,700 $45,900
17-10023 12H540327 $84,000 $84,000
17-10024 11H410225 $72,800 $72,800
17-10025 13H630272 $63,700 $63,700
17-10027 11H330493 $66,700 $66,700

 

Complainants appealed to the State Tax Commission (STC) on the ground of overvaluation.  The STC takes these appeals to determine the TVM for the subject properties as of January 1, 2017, under the economic conditions as they existed on January 1, 2017.  The value as of January 1 of the odd numbered year remains the value as of January 1 of the following even numbered year unless there is new construction or improvement to the property.  Section 137.115.1 RSMo.

The 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.
  2. Evidentiary Hearing. The issue of overvaluation was presented at an evidentiary hearing on December 6, 2017, at the St. Louis County Government Administration Building in Clayton, Missouri.
  3. Identification of Subject Properties. The subject properties are identified as follows:
Appeal No. Parcel/Locator No. Address
17-10022 12H540372 228 South Barat Avenue
17-10023 12H540327 230 South Barat Avenue
17-10024 11H410225 102 Robert Avenue
17-10025 13H630272 7457 Castro Drive
17-10027 11H330493 222 Argent Avenue

 

  1. Description of Subject Properties. The subject properties are described as follows:
Appeal No. Parcel/Locator No. Address Description
17-10022 12H540372 228 South Barat Avenue 1,094 square feet; two bedrooms; one bathroom
17-10023 12H540327 230 South Barat Avenue 1,310 square feet; three bedrooms; one bathroom
17-10024 11H410225 102 Robert Avenue 1,750 square feet; three bedroom; one full bathroom; one half bathroom
17-10025 13H630272 7457 Castro Drive 1,104 square feet; two bedrooms; one bathroom
17-10027 11H330493 222 Argent Avenue 1,306 square feet; three bedrooms; one bathroom

 

  1. Assessment of the Properties. Respondent and the BOE, respectively, set the TVM of the subject properties, as residential property, as of January 1, 2017, as follows:
Appeal No. Parcel/Locator No. Assessor’s value BOE’s value
17-10022 12H540372 $51,700 $45,900
17-10023 12H540327 $84,000 $84,000
17-10024 11H410225 $72,800 $72,800
17-10025 13H630272 $63,700 $63,700
17-10027 11H330493 $66,700 $66,700

 

  1. Complainants’ Evidence. Complainants opined that the TVM of the subject properties, as of January 1, 2017, was as follows:
Appeal No. Parcel/Locator No. Complainant’s opinion of TVM
17-10022 12H540372 $25,466
17-10023 12H540327 $30,496
17-10024 11H410225 $38,804
17-10025 13H630272 $29,597
17-10027 11H330493 $42,155

 

To support their opinions of value, Complainants offered the following exhibits:

Appeal No. Exhibit Description Ruling
17-10022 and 17-10023 Exhibit A1 Comparable sales data plus raw sales data on 104 sales near subject properties Admitted
17-10024 Exhibit A2 Comparable sales data plus raw sales data on 49 sales near subject property Admitted
17-10025 Exhibit A3 Comparable sales data plus raw sales data on 32 sales near subject property Admitted
17-10027 Exhibit A4 Comparable sales data plus raw sales data on 54 sales near subject property Admitted

 

Complainants testified that, with regard to all of the subject properties, Respondent’s and the BOE’s determinations of value were incorrect because between 75% and 97% of sales truly comparable to each of the subject properties were REO sales[1].  Complainants argued that Respondent and the BOE had excluded “open market, arm’s length sales of corporate owned property, conducted by independent real estate agencies, through the publicly accessible local multi-list service” to make comparisons in order to value the subject properties.  Complainants argued that Respondent and the BOE had relied on non-REO properties, which were not appropriate comparables due to their ages, sizes, updates, and renovations.  Complainants argued that the chaotic real estate market of the previous 10 years had affected some areas of St. Louis County more than other areas to the extent that some areas were dominated with foreclosures and REO sales.  Complainants testified that Respondent’s use of certain comparable properties used by Respondent to support his values, which were upheld by the BOE in all but one case, resulted from the exclusion of true comparables that were REO sales.  Complainants argued that this policy of excluding REO sales should not be used.

Appeal No. 17-10022 – 228 South Barat Avenue

and Appeal No. 17-10023 – 230 South Barat Avenue

 

Complainants opined a TVM of $25,466 and $30,494, respectively.  With regard to these subject properties on Barat Avenue, which are neighboring properties, Complainants testified that Respondent had used traditional sales as “comparable” properties and disregarded bank sales.  Complainants testified that the correct approach for valuing these properties was to use REO/bank sales as comparable properties.

In conjunction with the presentation of Exhibit A-1, Complainants testified that a total of 104 sales had occurred within a .25 mile radius of these subject properties during the relevant time period.  Complainants argued that only 12 of these sales were considered “market sales” by Respondent while “[n]early 90% of nearby sales were REO.”  (Exhibit A-1)  Complainants described the 12 “market sales” as larger, older, and updated as opposed to the subject properties and, therefore, inappropriate for comparison to the subject properties.

Complainants selected four physically comparable properties located within a few hundred feet of the subject properties.  The comparable properties ranged from 750 square feet to 1,575 square feet.  (Exhibit A-1)  Three of the comparable properties had two bedrooms and one bathroom; one of the comparable properties had three bedrooms and two bathrooms.  (Exhibit A-1)  The sale prices of the comparable properties ranged from $16,500 to $45,030.

To compare the subject property in Appeal No. 17-10022, Complainants made adjustments to the comparables resulting in adjusted sale prices ranging from $20,668 to $31,278.  To compare the subject property in Appeal No. 17-10023, Complainants made adjustments to the comparables resulting in adjusted sale prices ranging from $24,749 to $37,453.  Exhibit A-1 did not make specific line-item adjustments for individual charcteristics or conditions but showed only a lump sum adjustment to the sale price of each of the comparable properties.  According to Complainants, the lump sum adjustment was based on square footage.  (Exhibit A-1)  However, the price per square foot adjustment was different for each comparable, and the exhibit did not explain how Complainants determined the amount of each adjustment.  With regard to the subject properties in both Appeal No. 17-10022 and Appeal No. 17-10023, Complainants based their opinions of TVM on a calculation of approximately $23.278 per square foot.  (Exhibit A-1)

According to Exhibit A-1, Respondent had valued the subject property in Appeal No. 17-10022, 228 South Barat Avenue, at $30,000 in 2015 and at $51,700 in 2017, an increase of 72%.  The BOE thereafter reduced Respondent’s value to $45,900 in 2017.

According to Exhibit A-1, Respondent had valued the subject property in Appeal No. 17-10023, 230 South Barat Avenue, at $38,500 in 2015 and at $84,000 in 2017, an increase of 118%.

Appeal No. 17-10024 – 102 Robert Avenue

Complainants opined a TVM of $38,804.  Complainants argued that the BOE’s value was based on Respondent’s use of comparable sales “which are inappropriate to the subject property” because the comparable properties had received “substantial and costly improvements, which the subject property lacks.”  Complainants testified that they could not locate one of the comparable sales on MARIS or determine whether it had been publicly advertised.  Complainants purchased the subject property in 2012 for $28,288 “in an arms length sale of corporate property which was listed in the multi-list service, and conducted through an independent real estate agent.”  Complainants made no improvements to the subject property but performed routine maintenance.  Complainants rented the subject property to tenants.

In conjunction with the presentation of Exhibit A-2, Complainants testified that a total of 49 sales had occurred within a .25 mile the subject property during the relevant time period.  Complainants argued that only 12 of these sales were considered “market sales” by Respondent while “[m]ore than 75% of nearby sales were REO.”  (Exhibit A-2)  Complainants described the 12 “market sales” as larger, updated, in a different neighborhood, and “best on the block” as opposed to the subject property and, therefore, inappropriate for comparison to the subject property.  Complainants acknowledged that two of the “market sales” were either representative of market value or a possible comparable to the subject property:  125 Robert Avenue, $65,400, and 211 Robert Avenue, $67,000.  (Exhibit A-2)

Complainants selected four physically comparable properties located within a couple of blocks of the subject property.  The comparable properties ranged from 1,418 square feet to 1,730 square feet.  (Exhibit A-2)  Two of the comparable properties had three bedrooms and one bathroom; one of the comparable properties had two bedrooms and one bathroom.  (Exhibit A-2)  One of the comparable properties had four bedrooms, one full bathroom, and two half bathrooms.  (Exhibit A-2)  The sale prices of the comparable properties ranged from $25,500 to $91,900.[2]  To compare the subject property in Appeal No. 17-10024, Complainants made adjustments to the comparables resulting in adjusted sale prices ranging from $32,116 to $48,025.  Exhibit A-2 did not make specific line-item adjustments for individual charcteristics or conditions but showed only a lump sum adjustment to the sale price of each of the comparable properties.  To the extent that the lump sum adjustments were based on differences in square footage, the price per square foot differed for each comparable.  (Exhibit A-2)  The exhibit did not explain how Complainants determined the amount of each adjustment.  Complainants based their opinion of the subject property’s TVM on a calculation of approximately $22.1740 per square foot.  (Exhibit A-2)

According to Exhibit A-2, Respondent valued the subject property in Appeal No. 17-10024, 102 Robert, at $43,000 in 2015 and at $72,800 in 2017, an increase of 69%.

Appeal No. 17-10025 – 7457 Castro Drive

Complainants opined a TVM of $29,597.  Complainants argued that the BOE’s value was based on Respondent’s use of comparable sales “which are inappropriate to the subject property” because “[v]alues have declined substantially in the relevant area since” 2006.  Complainants testified that they could not verify the terms of the sales of these comparables or of their conditions.  Complainants purchased the subject property in 2006 for $48,500 “in an arms length sale of corporate property which was listed in the multi-list service, and conducted through an independent real estate agent.”  Complainants made no improvements to the subject property but performed routine maintenance.  Complainants rented the subject property to tenants.

In conjunction with the presentation of Exhibit A-3, Complainants testified that a total of 29 sales had occurred within a .25 mile the subject property during the relevant time period.  Complainants argued that only one of these sales was considered a “market sale” by Respondent while “[n]early 97% of nearby sales were REO.”  (Exhibit A-3)  Complainants further argued that REO sales dominate the market for the subject property and should be used as the basis for valuation.  (Exhibit A-3)  Complainants described the five comparable properties used by Respondent to value the subject property.  The sale prices of Respondent’s comparables ranged from $48,600 to $75,400.  (Exhibit A-3)  Complainants argued that each of Respondent’s comparables had been updated and/or were not market sales.  (Exhibit A-3)

Complainants selected one physically comparable property located next door to the subject property because “[e]very other comparable sale in the neighborhood was in such poor condition that the property sold for less than $10,000, or was sold in a multi-property sale. Vacant and seriously deteriorated properties abound in the neighborhood.”  (Exhibit A-3)  The comparable property had 1,175 square feet; three bedrooms; one full bathroom; and one half bathroom.  (Exhibit A-3)  The sale price of the comparable property was $31,500.  To compare the subject property in Appeal No. 17-10025, Complainants made an adjustment to the comparable resulting in adjusted sale price of $29,597.  Exhibit A-3 did not make specific line-item adjustments for individual charcteristics or conditions but showed only a lump sum adjustment to the sale price of the comparable property.  The square footage of the comparable property was within 100 square feet of the size of the subject property.  Complainants based their opinion of the subject property’s TVM on a calculation of approximately $26.809 per square foot.  (Exhibit A-3)

According to Exhibit A-3, Respondent valued the subject property in Appeal No. 17-10025, 7457 Castro, at $38,000 in 2015 and at $63,700 in 2017, an increase of 68%.

Appeal No. 17-10027 – 222 Argent Avenue

Complainants opined a TVM of $42,155.  Complainants argued that the BOE’s value was based on Respondent’s use of comparable sales that are inappropriate because “one is more than [three] miles away, on the other side of [Interstate] 270, in a different municipality”; “[a]nother was a ‘down to the studs’ rehab with $130,000 in insurance money” after a tornado; and “[o]thers show substantial and costly improvements, which the subject property lacks.”  (Exhibit A-4)  Complainants purchased the subject property in 2007 for $54,200 “in an arms length sale of corporate property which was listed in the multi-list service.”  Complainants argued that values in the area of the subject property have declined since 2007.  Complainants made no improvements to the subject property but performed routine maintenance.  Complainants rented the subject property to tenants. 

In conjunction with the presentation of Exhibit A-4, Complainants testified that a total of 54 sales had occurred within a .25 mile radius of the subject property during the relevant time period.  Complainants argued that only six of these sales were considered “market sales” by Respondent while “[m]ore than 88% of nearby sales were corporate owned property.”  (Exhibit A-4) 

Complainants selected four comparable properties located within .25 miles of the subject property.  The properties were “reasonably comparable in type, condition, and use” to the subject property.  The comparable properties ranged from 1,152 square feet to 1,815 square feet.  (Exhibit A-4)  Three of the comparable properties had three bedrooms and at least one full bathroom and one half bathroom; one of the comparable properties had two bedrooms, one full bathroom, and one half bathroom.  (Exhibit A-4)  One of the comparable properties had been renovated with a new kitchen, bathroom, and HVAC.  (Exhibit A-4)  The sale prices of the comparable properties ranged from $35,000 to $64,500.  To compare the subject property in Appeal No. 17-10027, Complainants made adjustments to the comparables resulting in adjusted sale prices ranging from $28,216 to $73,122.  Exhibit A-4 did not make specific line-item adjustments for individual charcteristics or conditions but showed only a lump sum adjustment to the sale price of each of the comparable properties.  To the extent that the lump sum adjustments were based on differences in square footage, the price per square foot differed for each comparable.  (Exhibit A-4)  The exhibit did not explain how Complainants determined the amount of each adjustment.  Complainants based their opinion of the subject property’s TVM on a calculation of approximately $32.278 per square foot.  (Exhibit A-4)

According to Exhibit A-4, Respondent valued the subject property in Appeal No. 17-10027, 222 Argent, at $43,400 in 2015 and at $66,700 in 2017, an increase of 54%.

Cross Examination

On cross examination, Complainants testified that they are not licensed appraisers.  Complainants have been real estate investors in the Ferguson, St. Louis County, area for more than 10 years.  In their business, Complainants work closely with realtors, utilize county records, and look at the market in Ferguson “every day.”

Mr. Kasoff testified that he has had on-the job training as it relates to valuing properties.  Mr. Kasoff testified that his method for calculating an opinion of TVM of the subject properties involved reviewing the comparable properties that were reasonably close to the subject properites, adjusting the comparables for price and square feet, then extrapolating a median sale price to compare to the subject properties.  Mr. Kasoff testified that he did not exclude sales based on the type of sale.  Mr. Kasoff tesitifed that he knows Respondent verifies sales using a certificate of value form and that he knows and “X” is the code representing a valid sale.  Complainants testified that they get information on comparable properties through the website Realtor.com and through their realtor, who has access to the MARIS system.  Complainants further testified that St. Louis County provides information on nearby sales, which they believed to be complete information.  With regard to their exhibits, Complainants testified that they obtained information on the REO comparable sales from the multi-listing service (MLS) and by personally viewing them.

Complainants testified that the subject properties are rental properties occupied by tenants who did not provide Complainants with permission to allow Respondent to inspect the interiors.  Complainants testified that Respondent did not even need to perform interior inspections and otherwise would have known of any improvements to the subject properties because they pull permits with the City of Ferguson, who reports the permits to St. Louis County.

  1. Respondent’s Evidence.  Respondent opined that the BOE’s determinations of the TVM of the subject properties, as of January 1, 2017, should be upheld as follows:
Appeal No. Parcel/Locator No. Respondent’s opinion of TVM
17-10022 12H540372 $45,900
17-10023 12H540327 $84,000
17-10024 11H410225 $72,800
17-10025 13H630272 $63,700
17-10027 11H330493 $66,700

 

To support the BOE’s determinations of value, Respondent offered the following exhibits:

Appeal No.

 

Exhibit Description Ruling
17-10022 Exhibit 1 BOE Findings and Notice of Decision dated September 20, 2017, valuing subject property at $45,900 Admitted
17-10023 Exhibit 2 BOE Findings and Notice of Decision dated September 20, 2017, valuing subject property at $84,000 Admitted
17-10024 Exhibit 3 BOE Findings and Notice of Decision dated September 20, 2017, valuing subject property at $72,800 Admitted
17-10025 Exhibit 4 BOE Findings and Notice of Decision dated September 20, 2017, valuing subject property at $63,700 Admitted
17-10027 Exhibit 5 BOE Findings and Notice of Decision dated September 20, 2017, valuing subject property at $66,700 Admitted

 

  1. Presumption of Correct Assessment Not Rebutted. Complainants did not present substantial and persuasive evidence to rebut the presumption of correct assessment of the subject properties by the BOE.

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 that 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.

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/Respondent 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, Complainants seek to lower the BOE’s valuations while Respondent seeks to affirm the BOE’s valuations; therefore, the BOE presumption applies to Complainants.  The computer-assisted presumption does not apply in this case.

Presumption In Appeal

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.  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).   This presumption is a rebuttable rather than a conclusive presumption.  It places the burden of going forward with some substantial evidence on the taxpayer – the 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. 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.  The presumption is not evidence of value.  The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the BOE’s valuation is erroneous and what the fair market value should have been placed on the property. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

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).

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).  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; Daly, 77 S.W.3d 645; Reeves, 115 S.W.3d 375; Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. W.D. 1991).

Complainants advocated for the reduction of the BOE’s valuations of the subject properties.  Complainants, the owners of the subject properties, were competent to testify as to their opinions of the TVM of the properties.  Complainants bore the burden of rebutting the presumption that those valuations were correct and of establishing that their opinions of TVM were correct.

Respondent’s Burden of Proof

Respondent, when advocating a value different from that determined 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.

Respondent specifically advocated that the BOE’s valuations of the subject properties should be affirmed.  Respondent did not have the burden of proof in these appeals.  However, in an effort to better serve the public, generally, and Complainants, specifically, Respondent could have presented supporting documentation and information to aid Complainants’ and the Hearing Officer’s understanding the basis for the BOE’s determinations.

Although one may desire Respondent to present evidence to explain and establish the basis of the BOE’s determination of TVM, Respondent is under no legal burden to do so.  The determination of the BOE is presumed to be correct.  The BOE made a determination of TVM after presentation of evidence by both parties.  In appealing the BOE’s determination of TVM, Complainant carries the burden to establish, through substantial and persuasive evidence, the TVM of the property as of January 1, 2017.  Because Respondent is not advocating a value different from that determined by the BOE, Respondent is not required to enter into the record the basis of determination of the value by the BOE.  Respondent relied on the BOE determination of TVM as his only evidence of value and, if the presumption is not rebutted, Respondent carries no burden of presentation of evidence as to valuation of the subject property.

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).

Neither Complainants nor Respondent presented any expert witness testimony in these appeals.

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.

Comparable Sale Approach

“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:

  1. Buyer and seller are typically motivated.

 

  1. Both parties are well informed and well advised, and both acting in what they consider their own best interests.

 

  1. A reasonable time is allowed for exposure in the open market.

 

  1. Payment is made in cash or its equivalent.

 

  1. Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.

 

  1. 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 (IAAO), 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.

 

Foreclosure-Related Sales

A foreclosure is a legal process, not a sale.  Black’s Law Dictionary (10th ed. 2014) defines foreclosure as:

A legal proceeding to terminate a mortgagor’s interest in property, instituted by the lender (the mortgagee) either to gain title or to force a sale in order to satisfy the unpaid debt secured by the property.

 

“Real estate owned” or REO property is property acquired by a lender, usually through foreclosure, in satisfaction of a debt.  Black’s Law Dictionary (10th ed. 2014).

For foreclosure-related sales to be used for modeling, valuation, or ratio studies, they must first meet the market value test.  A Guide to Foreclosure-Related Sales & Verification Procedures, Executive Summary, IAAO Research Committee (2009).  The market value test requires verification of:

  • the foreclosure-related sale’s physical condition, which should be comparable to or the same as its condition on the tax date and to surrounding properties;
  • the foreclosure-related sale’s time on the market, which should be long enough to be exposed to all market participants;
  • the number of foreclosure-related sales in the market area, which allows for the application of the principal of substitution.

Id. at 12-13.

Market value is defined as the most probable price in money that 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 and knowledgeably, and assuming the price is not affected by undue stimulus.  Id. at 6, citing IAAO Standard on Ratio Studies (2007).  Traditionally, foreclosure-related sales have been precluded from use as comparable sales because those sales are affected by “undue stimulus.”  Id. at 2.  When the number of foreclosure-related sales is substantial and significantly affects the market of a particular class or group of properties, assessing officials must determine whether these sales need to be considered for modeling, valuation, or sales ratio anlysis, subject to mass appraisal and assessment guidelines established by the Uniform Standards of Professional Appraisal PracticeId.  Foreclosure-related sale prices may reflect market value or may be adjusted for use in modeling, valuation, or ratio studies; however, additional verification is necessary to determine whether a foreclosure-related sale could qualify as evidence of market value.  Id. at 6.  All sales are the result of varying amounts of stimuli, which can be external or internal.  Id.  “The price a buyer is willing to pay for any particular property can be influenced by any number of factors.”  Id.

In these appeals, Complainants used foreclosure-related or REO sales as comparables and argued that the BOE should have valued the subject properties based on such sales because they were the prevalent sale type in the market.  However, based upon the evidence before the STC, the Hearing Officer would be forced to speculate in order to conclude that the foreclosure-related comparable sales met the market value test.

Discussion

            In this case, Complainants’ evidence was substantial.  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).

Complainants exhibits and testimony established that the increases in the assessed values of the subject properties between 2015 and 2017 were dramatic – ranging from a 54% increase in Appeal No. 17-10027 to as much as a 118% increase in Appeal No. 17-10023.  Given that the subject properties were surrounded by numerous properties sold in foreclosure or as REO sales on the relevant tax date, the evidence of the dramatic increases in assessed values between 2015 and 2017 reasonably supports the conclusion that the assessments were unlawful, unfair, improper, arbitrary, or capricious. 

However, under Missouri law, Complainants must meet both elements of the substantial and persuasive standard to prevail.  Upon close inspection, Complainants’ evidence was not persuasive to rebut the presumption of correct assessment by the BOE.  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.

            As owners of the subject properties, Complainants were entitled to provide their opinions as to the TVM of the properties.  Complainants used REO sales of generally comparable properties to arrive at their opinions of TVM.  Complainants argued that Respondent and the BOE should have used REO sales as comparbles to value the subject properties.  Complainants argued that their methodology for valuing the subject properties was correct and that Respondent and the BOE should have considered REO sales as comparables.

While Complainants’ evidence resembled the sales comparison approach in that Complainants analyzed generally similiar properties, as stated in the previous section of this Decision, Complainants’ evidence did not establish that the foreclosure-related comparable sales met the elements of the market value test in the first instance to justify their use as comparables.  Some of Complainants’ comparable properties had sale dates too far removed from the tax date at issue to be influential on the valuation of the subject properties.  One such example is the comparable Complainants identified as 5 Shireford in Exhibit A-2 (Appeal No. 17-10024).  The comparable sold three times between September 2014 and January 2015.  Complainants utilized the earliest sale, $39,000, which occurred on September 26, 2014, as the comparable sale.  (Exhibit A-2, page 1)  The sale closest in time to the relevant tax date, $91,900, occurred on January 26, 2015. (Exhibit A-2, page 8)  Notably, the sale price closest in time to the relevant tax date was 21% higher than the BOE’s determination of TVM of the subject property in Appeal No. 17-10024 as of January 1, 2017.

Furthermore,  even if the foreclosure-related sales had met the market value test, Complainants’ use of lump sum adjustments to the sale prices of their comparable properties without explanation as to the underlying reasons for the adjustments leaves the Hearing Officer “in the nebulous twilight of speculation, conjecture and surmise,” unable to determine whether Complainants’ opinion of TVM is correct.  Complainants made lump sum adjustments to the sale prices rather than line-item adjustments applied to particular characteristics of the comparable properties to account for the similarities and differences between them and the subject properties.  This evidence would require the factfinder to engage in impermissible guesswork to draw conclusions regarding value.  In particular, the lump sum adjustments to the sale prices of the REO-sale comparables were troubling because none of the adjustments were constant with regard to the comparables in a given appeal.

ORDER

The assessed values for the subject properties for tax years 2017 and 2018  as determined by the BOE are AFFIRMED as follows:

Appeal No. Parcel/Locator No. 2017-2018 TVM 2017-2018 Assessed value
17-10022 12H540372 $45,900 $8,721
17-10023 12H540327 $84,000 $15,960
17-10024 11H410225 $72,800 $13,832
17-10025 13H630272 $63,700 $12,103
17-10027 11H330493 $66,700 $12,673

 

Application for Review

A party may file with the STC 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 November 13, 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 13th day of November, 2018, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.

 

Jacklyn Wood

Legal Coordinator

 

[1]“Real estate owned” or REO property is property acquired by a lender, usually through foreclosure, in satisfaction of a debt.  Black’s Law Dictionary (10th ed. 2014).

[2] On page 1 of Exhbit A-2, Complainants reported that the sale price of the comparable at 5 Shireford Lane was $39,000.  However, page 8 of the exhibit revealed that the comparable sold three times in 2014 and 2015.  The sale referred to on page 1 of the exhibit occurred on September 26, 2014.  The sale closest in time to the relevant tax date was on January 26, 2015, in the amount of $91,900.