The Petitioner contends that its property was over-valued for the 2011 assessment year based on an appraisal. Stout argument. In support of this contention, the Petitioner submitted an appraisal prepared by Steven R. Ingram that estimated the value of the property to be $800,000 as of March 1, 2011. Petitioner Exhibit 1. Mr. Ingram is an Indiana certified appraiser who attested that he prepared the Petitioner’s appraisal in accordance with USPAP using the sales comparison approach. Id.
Generally an appraisal is considered probative evidence of a property’s value when that appraisal is sufficiently related to the valuation date for an assessment. Kooshtard Property VI, 836 N.E.2d at 506 n.6. But here Mr. Ingram’s opinion of value suffers from a lack of credibility and reliability.
The Respondent’s review appraiser, Mr. Harris, explained several ways in which Mr. Ingram departed from USPAP. For example, he noted a discrepancy between the intended users of the appraisal in different sections of the appraisal report and he noted that the appraiser purported to comply with standards that do not apply. While such reporting issues may not affect the appraiser’s value conclusion, they can undermine the credibility of that conclusion.
The bigger issues, however, lie in the adjustments that the appraiser made in reaching his value conclusion.
First despite the subject property’s forty acre lot size, most of the appraiser’s “comparable” properties had lots that were less than an acre in size. And while those arguably may have been the best properties available for comparison purposes, Mr. Ingram failed to make any adjustment to the comparable properties for their significant differences in size. Although it is within an appraiser’s expertise to choose the properties that he or she deems comparable and to make adjustments to those properties, failing to adjust for difference between a 0.4 acre residential lot and a forty acre residential lot lacks credibility on its face.
The Respondent’s review appraiser also argued that the Petitioner’s appraiser failed to make any adjustment for the properties’ locations. And while Mr. Ingram testified that he had to use properties he otherwise might not have used because of the “estate-style property” he was appraising, he failed to explain why properties in Chesterton, Crown Point, Munster and Valparaiso were comparable to properties in Hebron without an adjustment. Again – while such adjustments are within the appraiser’s expertise, Mr. Ingram’s failure to sufficiently explain his valuation opinion detracts from the reliability and credibility of his valuation.
Equally troubling is the Petitioner’s appraiser’s adjustments for “physical loss,” “functional loss,” and for “quality.” On its face, these three adjustments appear to account for the same characteristics: the condition and quality of the property compared to other similar properties. But Mr. Ingram provides no definition for the adjustments. In fact, Mr. Harris – a certified general appraiser – stated in his review appraisal that “he had no idea what ‘functional loss’ referred to.” Respondent Exhibit 2. “[I]t is the taxpayer's duty to walk the Indiana Board . . . through every element of the analysis.” Indianapolis Racquet Club, Inc. v. Washington Township Assessor, 802 N.E.2d 1018, 1022 (Ind. Tax Ct. 2004). Mr. Ingram appeared as a witness at the Board’s hearing. He could have responded to the issues raised in the review report, but he did not. Thus, the Board is left to guess what each category of adjustment means or to conclude that Mr. Ingram made multiple adjustments for the same characteristics. At a minimum, Mr. Ingram’s adjustments for “physical loss” and “functional loss” are unexplained and therefore lack reliability and credibility. See Inland Steel Co. v. State Bd. of Tax Comm'rs, 739 N.E.2d 201, 220 (Ind. Tax Ct. 2000) (holding that an appraiser's opinion lacked probative value where the appraiser failed to explain what a producer price index was, how it was calculated or that its use as a deflator was a generally accepted appraisal technique).
Moreover, Mr. Ingram’s adjustments were inconsistent. For example, the Petitioner’s appraiser characterized his second, third and fifth comparable properties as being in “excellent” condition; however, the appraiser adjusted the second property by $400,000 while the adjustments on the third and fifth properties were only $250,000. And Mr. Ingram adjusted his first and fourth comparable $250,000 for being in “good” condition despite the fact that he had characterized the Petitioner’s property as being in “good” condition elsewhere in his report: “Exterior condition is good and quality is very good”. Petitioner’s Exhibit 1 at 15. In addition, the below grade areas of each of the comparable properties varied widely, ranging from 744 sq.ft. to 3,340 sq.ft., but the adjustment applied by Mr. Ingram for below grade area was the same for four of the five comparable properties. Id.
Ultimately, the Petitioner’s appraiser compared the Petitioner’s property – with 7,839 square feet of living space – to other, far smaller houses and in every case except one, found that the subject property would be worth less – in fact, $400,000 to $500,000 less in the case of two of the comparable properties. To reach his conclusion, Mr. Ingram lowered the “comparable” sales’ prices up to 55% despite the fact that the subject property was far larger, on substantially more land and with amenities comparable to the nicest properties identified in the Petitioner’s appraisal (who’s unadjusted sale prices ranged from $750,000 to $1,300,000). Given the significant issues in Mr. Ingram’s adjustments, the Board finds that the Petitioner’s appraisal lacks sufficient credibility and reliability to be probative of the Petitioner’s property’s value for the 2011 assessment year.
