STATE TAX COMMISSION OF MISSOURI
|XIAOGANG AND SHERRI CHENG,||)|
|Complainants,||)||Appeal No. 21-10187|
|)||Parcel No. 18K24146|
|JAKE ZIMMERMAN, ASSESSOR,||)|
|ST. LOUIS COUNTY, MISSOURI,||)|
DECISION AND ORDER
Xiaogang and Sherri Cheng (Complainants) appeal the St. Louis County Board of Equalization’s (BOE) decision finding the true value in money (TVM) of the subject property on January 1, 2021, was $680,000. Complainant alleges overvaluation and argued that the TVM as of that date was $650,000. Complainant did not produce substantial and persuasive evidence of overvaluation. The BOE decision is affirmed. The TVM of the subject property on January 1, 2021, was $680,000.
The evidentiary hearing was held on March 31, 2022, via Webex. Complainant Xiaogang Cheng appeared pro se. Respondent was represented by counsel, Tim Bowe.
FINDINGS OF FACT
- The Subject Property. The subject residential real property is located at 200 Brighton Way, Clayton, Missouri. The subject property consists of a 10,454 square foot lot that includes a 2,257 square-foot one-story single family home, with four bedrooms and three bathrooms. The home was built in 1951. Complainants testified that they purchased the subject property in 2013 for around $550,000.
- Assessment and Valuation. The BOE determined the TVM of the subject property as of January 1, 2021, was $680,000. The BOE decision indicates this value represents a reduction from the Assessor’s appraised value of $737,000.
- Complainants’ Evidence. Complainants introduced Exhibit A, a nine-page document consisting of pictures and descriptions of condition issues with the subject property. Exhibit A also contains a summary of the three comparable properties Respondent used in his assessment, as well as a list of ten comparable properties that Complainants believe are better comparables to use for valuation than those used by Respondent. Respondent did not object to Exhibit A’s admissibility, and Exhibit A was admitted into evidence.
Complainant testified the subject property has several permanent condition issues which affect its market value. These are described in detail in Exhibit A and summarized as follows:
- Garage flooding. The garage is located on the rear side of the home and its drainage system is not connected to the storm sewer on the street. As a result, when it rains water accumulates in and around the garage. There is only one drainage hole in the garage. While there is a sump pump to pump the rainwater out, Complainant’s testified that it is inefficient and cannot handle the volume of water during a continuous heavy rain.
- Basement leak. As the house was built in 1951, there is no draining system built around the foundation of the basement. As a result, rainwater leaks into the basement from the side and lowest point of the basement, causing damage, unpleasant odors, and an environment susceptible to mold growth.
- Roof leak. There is a roof leak around the chimney, despite Complainants replacing the roof after they purchased the home. The leak causes wall and ceiling bubbling and other damage, requiring frequent refinishing and painting.
- Bathtub leaks. The plumbing systems of two bathtubs on the ground floor are leaking, causing damage to the ceiling above the garage. Complainants have hired plumbers to try and determine the exact nature of the problem, but the plumbers are not sure what is causing the leaks.
- Exposed pipes. Being an older home, all the water pipes are exposed either outdoors or in the garage. In 2014, one of the pipes in the garage burst causing damage. Being exposed, there is a higher risk of the water pipes freezing and bursting during winter temperatures.
- Termites. Termites have caused damage to the house, particularly in the basement ceiling. Complainants hired an exterminator to control the presence of termites.
- Narrow driveway. The driveway leading to the garage entrance in the rear of the home is very narrow, making it difficult to park vehicles in the garage. Complainants therefore rarely use the garage for vehicles. Instead, they use it primarily for storage.
Complainants did present all of these condition issues to the BOE.
Complainant Xiaogang Cheng testified that he is not a licensed appraiser and has no professional training or experience making market-based adjustments to comparable properties. However, Complainants researched the area around their neighborhood and found ten comparable sales which are listed in Exhibit A. Complainants selected these ten sales after examining the listings of these properties on Zillow and deeming them to be similar to the subject property. After adding up the total sales prices and dividing by ten, Complainants calculated the average sale price of these properties to be $643,000. Complainants used this figure to assert a proposed value of $650,000 for the subject property as of January 1, 2021. Complainants argue that two of the Respondent’s comparables are from 2018 and therefore out of date, and that in general the three comparable properties selected by Respondent are very different in size, structure, features, and other amenities.
- Respondent’s Evidence. Respondent introduced Exhibit 1, the BOE’s October 29, 2021, Decision Letter. Complainant did not object. Exhibit 1 was admitted into evidence.
- Value. The TVM of the subject property as of January 1, 2021, was $680,000.
CONCLUSIONS OF LAW
- Assessment and Valuation. Pursuant to Article X, Sections 4(a) and 4(b), Mo. Const. of 1945 real property and tangible personal property is 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. Residential real property is assessed at 19% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(a). The TVM is “the fair market value of the property on the valuation date[.]” Snider v. Casino Aztar/Aztar Mo. Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted). The fair market value is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.” Mo. Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993). “True value in money is defined in terms of value in exchange not value in use.” Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 7 (Mo. App. S.D. 2020) (internal quotation omitted). “Determining the true value in money is an issue of fact for the STC.” Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider, 156 S.W.3d at 346. The three generally accepted approaches are the cost approach, the income approach, and the comparable sales approach. Id. at 346-48. The STC has wide discretion in selecting the appropriate valuation method but “cannot base its decision on opinion evidence that fails to consider information that should have been considered under a particular valuation approach.” Id., at 348.
The comparable sales approach “is most appropriate when there is an active market for the type of property at issue such that sufficient data are available to make a comparative analysis.” Snider, 156 S.W.3d at 348. For this reason, the comparable sales approach is typically used to value residential property. “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 347-48 (internal quotation omitted). “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.” Id. at 348.
- Evidence. “Although technical rules of evidence are not controlling in administrative hearings, fundamental rules of evidence are applicable.” Mo. Church of Scientology v. State Tax Comm’n, 560 S.W.2d 837, 839 (Mo. banc 1977). The hearing officer is the finder of fact and determines the credibility and weight of the evidence. Kelly v. Mo. Dep’t of Soc. Servs., Family Support Div., 456 S.W.3d 107, 111 (Mo. App. W.D. 2015). “It is within the purview of the hearing officer to determine the method of valuation to be adopted in a given case.” Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 9 (Mo. App. S.D. 2020). 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. 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.
- Complainant’s Burden of Proof. The taxpayer bears the burden of proof and must show by a preponderance of the evidence that the property was overvalued. Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161 (Mo. App. E.D. 2003). The BOE’s valuation is presumptively correct. Tibbs, 599 S.W.3d at 7. The “taxpayer may rebut this presumption by presenting substantial and persuasive evidence that the valuation is erroneous.” Id. (internal quotation omitted). The taxpayer also must prove “the value that should have been placed on the property.” Id. “Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.” Savage v. State Tax Comm’n, 722 S.W.2d 72, 77 (Mo. banc 1986) (internal quotation omitted). Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.” Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White v. Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”).
- Complainant Did Not Produce Substantial and Persuasive Evidence of Overvaluation.
Complainants did not produce substantial and persuasive evidence to support their $650,000 opinion of value.
The comparable sales approach is typically used to value residential properties improved with a single-family home. “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.” Snider, 156 S.W.3d at 347-48 (internal quotation omitted). While Complainants offered a list of ten comparable sales of properties which they believe to be superior to Respondent’s in determining the value of the subject property, these sales are not persuasive evidence as no adjustments are made to account for differences between the subject property and these other properties. For example, according to Complainant’s list, one of Complainants’ comparables, 230 Lancaster Dr., sold for $691,600 on March 3, 2019, despite having one less bedroom and a smaller square foot living area than the subject property.
Further, Complainants’ calculation of an average sale price of the comparables to determine the fair market value of the subject property is not a generally accepted approach to value property. Last, Complainant has not shown the specific source of the data for those sales included in Exhibit A, the reliability of such data, and other characteristics of the listed properties and sales, such as the style of home, amenities, and the conditions of the sale. Therefore, Complainants did not produce substantial and persuasive evidence that these other sales prove overvaluation.
Complainant also testified that the issues with the subject property, such as the garage flooding, etc. should be taken into account when concerning its market value. However, such evidence neither shows that such issues were not considered by the BOE, nor the monetary impact such issues have on the TVM of the subject property as of January 1, 2021.
While a property owner’s opinion of value is generally admissible, the opinion lacks “probative value where it is shown to have been based upon improper elements or an improper foundation.” Shelby Cty. R-IV Sch. Dist. v. Herman, 392 S.W.2d 609, 613 (Mo. 1965); see also Cohen v. Bushmeyer, 251 S.W.3d 345, 349 (Mo. App. W.D. 2008) (noting a property owner’s opinion of value loses probative value when it rests on an improper foundation).
Complainant did not produce substantial and persuasive evidence showing that the subject property was overvalued. Therefore, Complainant’s evidence does not provide the necessary foundation and elements to support his overvaluation claim. Because the STC “cannot base its decision on opinion evidence that fails to consider information that should have been considered” under a recognized approach to value, Snider, 156 S.W.3d at 348, the BOE decision is affirmed.
CONCLUSION AND ORDER
The BOE decision is affirmed. The TVM of the subject property as of January 1, 2021, was $680,000, with an assessed value of $129,200.
Application for Review
A party may file an application for review of this decision within 30 days of the mailing date set forth in the certificate of service for this decision. The application “shall contain specific detailed grounds upon which it is claimed the decision is erroneous.” Section 138.432. The application must be in writing, and may be mailed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, or emailed to Legal@stc.mo.gov. A copy of the application must be sent to each person 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.
The Collector of St. Louis County, and 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 the disputed taxes have been disbursed pursuant to a court order under the provisions of section 139.031.
SO ORDERED July 1, 2022.
Benjamin C. Slawson
Senior Hearing Officer
State Tax Commission
Certificate of Service
I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on July 1, 2022, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.
Amy S. Westermann
 Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeal. Mo. Const. art. X, sec. 14; Section 138.430.1, RSMo 2000. All statutory citations are to RSMo 2000, as amended.