Mr. Knecht did not really
attempt to explain how those items related to the subject property’s market
value-in-use as of January 1, 2008. ...
There is another problem
with relying on the subject property’s auction price—it does not appear to meet
the conditions of a market value sale. As explained in the Manual, 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 and knowledgably, and assuming the price is not affected by undue
stimulus. Implicit in this definition is the consummation of a sale as of a
specified date and the passing for title from seller to buyer under conditions
whereby:
o The buyer
and seller are typically motivated;
o Both parties
are well informed and advised and act in what they consider their best
interests; o A reasonable time is allowed for exposure in the open market;
o Payment is made in terms of cash or in terms of financial arrangements comparable thereto;
o The price is unaffected by special financing or concessions.
MANUAL at 10.
The evidence in this case
shows that two key indicia of a market value sale were missing—the seller was
atypically motivated and the property was not exposed to the market for a
reasonable time. The Knechts bought the property at auction in what all the
witnesses described as a “short sale.” Although the parties did not explain what they meant
by that term, the Board assumes that they were describing a sale in which the
sale price was less than the amount that the seller owed on the property. See
In re Booth, 417 B.R. 820, 824 n.3 (Bankr. M.D. Fla, 2009) (quoting In
re Fabbro, 411 B.R. 407, 413 n.7 (Bankr. D. Utah 2009) (defining a “short
sale” as “a sale by a willing seller to a willing buyer for less than the total
encumbrances of the home with the consent of the underlying lienholders who
agree to take less than what they are owed.”). The seller was under financial
duress and the property sold for significantly less than both the seller’s
original asking price of $2,690,000 and his last asking price of $2,490,000. Pet’rs
Ex. 3. Plus the property was twice offered at auction, each time after
having been exposed to the market for significantly less than the average
marketing time for lakefront properties on Lake Wawasee. Indeed, Mr. Knecht
acknowledged that the property was auctioned partly because of “complications” with the seller
proposing a short sale.
That is not to say that an
auction or short sale automatically fails to qualify as a reliable indicator of
a property’s market value-in-use. The same is true regarding sales for
significantly less than a property’s list price. The Board also recognizes that
there may be situations where enough properties in an area are sold in forced
sales or are otherwise sold under duress as to effectively constitute the
market. But that is not the case here. Given the totality of the circumstances,
the weight of the evidence shows that the seller in this case was under duress
and the price that the Knechts paid for the subject property is not, by itself,
probative of the property’s market value-in-use.
Because the Knechts offered
no probative evidence relating to the subject property’s market value-in-use as
of January 1, 2008, they failed to make a prima facie case for changing the
property’s assessment.
