Board Finds One Appraisal Unreliable and a Second Appraisal Untimely but Lowers Assessed Value of the Improvements Based on the Condition of the Cottage

The Wolfs rely primarily on two appraisal reports prepared by Ronald Matthews. In the first report, Mr. Matthews estimated the value of the land only at $257,200 as of September 20, 2008. He used a generally accepted valuation approach—the sales-comparison approach—and certified that he prepared his appraisal in conformance with USPAP. And he estimated the property’s value as of a date that was within nine months of the valuation date for the March 1, 2009 assessment based solely on sales that occurred during the period used by assessors for computing March 1, 2008 assessments. Thus, at first blush, Mr. Matthews’s appraisal appears to be probative of the subject property’s true tax value for two of the three assessment years under appeal.

Nonetheless, while Mr. Matthews’s appraisal might be probative in form, it is not probative in substance. As the Assessor points out, Mr. Matthews did not adjust his comparable properties’ sale prices to account for key ways in which those properties differed from the subject property. Indeed, Mr. Matthews did not make any adjustments whatsoever. While the Assessor focused on Mr. Matthews’s failure to adjust the first comparable property’s sale price to account for its triangularly shaped lot and location near a business, Mr. Matthews’s treatment of that sale had an even more glaring problem—the comparable property had 170 feet of lake frontage compared to 59 feet for the subject property.

That difference is significant because the value for a residential lot often does not increase in direct proportion to its size. See GUIDELINES, ch. 2 at 78 (recognizing an "excess frontage" influence factor to account for "[a] decrease based on the lower utility value of frontage that is significantly in excess of the base lot frontage"); see also, id. at71-73 (providing an Acreage Size Adjustment Table to account for the proportionally higher per-acre value of smaller lots than of lots that are closer to one acre). Of course, that is not necessarily true in every case. But Mr. Matthews own data strongly supports the inference that it is true here—the two lots that were close to the subject property’s size sold for $6,700 and $4,736 per front foot, respectively, while the lot with 170 front feet sold for only $1,641 per front foot.

Despite the huge per-unit price disparity, Mr. Matthews simply averaged the three sales to estimate the subject property’s value. And that profoundly affected his valuation opinion. If one simply excludes the first comparable property’s sale price, the average for the other two would be $5,718 per front foot, or $337,362 when multiplied by the subject property’s 59 front feet. That is remarkably close to the subject property’s land assessment ($348,700) for the two years to which Mr. Matthews’s appraisal arguably relates. By contrast, including the first comparable property’s sale price brings the average down to $4,360 per front foot, or $257,000.

In light of that disparity, and the absence of any explanation as to why Mr. Matthews failed to adjust his comparable properties’ sale prices, the Board gives the overall valuation opinion from Mr. Matthews’s first appraisal report no weight.

The Wolfs also offered a second appraisal report from Mr. Matthews in which he estimated the subject property’s land value at $244,850 as of January 29, 2012. But unlike Mr. Matthews’s first report, that second report does not even arguably relate to any of the valuation dates at issue in these appeals. The Wolfs tried to provide the missing relationship by plotting straight-line depreciation between the land values contained in the two reports. Even if the Board were to generally accept the Wolfs’ underlying premise of straight-line depreciation, one would have to start with a reliable valuation in year one. And the Board has already found that the Wolfs’ year-one valuation—Mr. Matthews’s first appraisal—is too unreliable to be given any probative weight.

That leaves the Wolfs’ evidence about the condition of subject property’s shoreline and cottage. While the shoreline’s condition is relevant to the subject property’s value, it does little by itself to quantify the property’s market value, or even to quantify a likely range of values.

The evidence about the cottage’s condition, however, is another matter. Mr. Wolf testified to extreme deterioration as well as to an environmental hazard—the cottage’s asbestos siding. Indeed, in light of those factors, Mr. Matthews believed that the cottage contributed nothing to the property’s overall value, and that the cottage might actually have detracted from the property’s value. Mr. Wolf supported Mr. Matthews’s opinion, testifying that the cottage’s condition made it unusable and led to the Wolfs demolishing it. While the record is a little unclear as to date on which the cottage became unusable, Mr. Matthews found it to be valueless on September 20, 2008. It was likely in similar condition on the March 1, 2007 and March 1, 2008 assessment dates. The Board therefore finds that the cottage had only nominal value and that the cottage’s assessment should be reduced to $100 for each assessment year.

http://www.in.gov/ibtr/files/David_K_Wolf_Trustee_76-011-07-1-5-00326_et_al.pdf