Friday, March 15, 2013

Board Finds Respondent's Appraisal More Probative of Property's Value than Taxpayer's Appraisal

Excerpts of the Board's Determination follow:

Here, the Respondent submitted a market value appraisal prepared by Jeffrey R. Vale and Michael L. Grant. Both appraisers are Indiana certified appraisers who attested that they prepared the Respondent’s appraisal in accordance with USPAP. Using the cost approach and sales comparison approach to value, the appraisers estimated the value of the property to be $250,000 as of January 1, 2006. An appraisal performed in conformance with generally recognized appraisal principles is often enough to establish a prima facie case that a property’s assessment is incorrect. See Meridian Towers, 805 N.E.2d at 479. Thus, the Board finds the Respondent raised a prima facie case that the property should be assessed at $250,000 for the March 1, 2007, assessment date.

The Respondent established a prima facie case that the Petitioner’s property’s value was $250,000 for 2007. Thus, the burden shifted to the Petitioner to prove any lower value. Here, the Petitioner submitted an appraisal prepared by Howard O. Cyrus, an Indiana certified appraiser, who also attested that he prepared his appraisal in accordance with USPAP. Mr. Cyrus estimated the value of the property to be $183,000 as of January 1, 2006, based on a sales comparison analysis. The Board therefore finds that the Petitioner presented sufficient evidence to rebut the Respondent’s prima facie case.

The Petitioner further contends that the property should have an influence factor applied to the property’s appraised value because the Petitioner’s land is contaminated. Generally, land values in a given neighborhood are developed by collecting and analyzing comparable sales data for the neighborhood and surrounding areas. See Talesnick v. State Board of Tax Commissioners, 693 N.E.2d 657, 659 fn. 5 (Ind. Tax Ct. 1998). However, properties often possess peculiar attributes that do not allow them to be grouped with each of the surrounding properties for purposes of valuation. The term “influence factor” refers to a multiplier “that is applied to the value of land to account for characteristics of a particular parcel of land that are peculiar to that parcel.” GUIDELINES, glossary at 10. However, the Petitioner bears the burden to produce “probative evidence that would support an application of a negative influence factor and quantification of that influence factor.” See Talesnick v. State Board of Tax Commissioners, 756 N.E.2d 1104, 1108 (Ind. Tax Ct. 2001). Here, while the Petitioner presented some evidence of petroleum contamination on the property, the Petitioner presented no probative evidence of the impact that the contamination has on the value of the property. Thus, the Petitioner failed to prove that the property should be granted a larger influence factor or that the property’s value should be reduced below its appraised value.

The Petitioner’s representative also contends that the subject property had a 20% influence factor applied to its property, while the other gas stations had a 35% or 40% influence factor applied. Pursuant to Indiana Code § 6-1.1-15-18(c), “To accurately determine market-value-in-use, a taxpayer or an assessing official may … introduce evidence of the assessments of comparable properties located in the same taxing district or within two (2) miles of a boundary of the taxing district…” Ind. Code § 6-1.1-15-18. The “determination of whether properties are comparable shall be made using generally accepted appraisal and assessment practices.” Id. Here, the Petitioner’s representative made no attempt to show how the nearby gas stations were similar to the subject property – other than to contend that the properties were all gas stations and convenience stores. As the Respondent’s witness observed, the influence factors could have been for location or problems with ingress or egress. Thus, the Petitioner again failed to prove that any further reduction should be made to the property’s appraised value.
 
Finally, the Petitioner contends its actual construction costs support a lower improvement value. And in support of this contention, the Petitioner submitted a proposal for an addition to the building at a cost of $85,600. But the proposal is dated October 9, 1998, which is approximately seven years before the valuation date. Moreover, the cost of constructing an addition to a building has little probative value to show the cost of constructing the building. Thus, the Petitioner’s cost data does not support any lower value for the subject property.

As the Board found above, both the Respondent’s appraisal and the Petitioner’s appraisal are sufficient to be probative evidence of the subject property’s value for the March 1, 2007, assessment date. The Board, therefore, must weigh the evidence presented by both parties and determine the most persuasive evidence of the property’s value.

Here, the Respondent’s appraisers estimated the property’s value to be $250,000 for the 2007 assessment using the sales comparison approach. The appraisers based this value on properties that sold in 2005 and in 2006. By contrast, the Petitioner’s appraiser valued the property at $183,000 using mostly sales from 2002, 2003 and 2004. Pursuant to 50 IAC 21-3-3(a), assessing officials use sales of properties occurring between January 1, 2005, and December 31, 2006, in performing sales ratio studies for the March 1, 2007, assessment date. Thus, the Respondent’s appraisers used sales that were more relevant to the time frame for the 2007 assessment. Only one of the Petitioner’s appraiser’s comparable sales occurred during the relevant time frame and that property, 7510 Broadway, resold in 2006 for a substantially higher value, as noted in the Respondent’s appraisal.

In addition, the Respondent’s appraisers made net adjustments to their comparable properties that ranged from 5 % to -25% and provided an explanation of the differences between each comparable property and the subject property to support their adjustments. The Petitioner’s appraiser’s analysis, however, addressed all of the comparable properties together and the explanation of his adjustments was largely conclusory: “All of the properties are in very superior locations and condition compared to the subject.” And the Petitioner’s appraiser adjustments were much larger than the Respondent’s appraisers adjustments – ranging from -45% to -65%. Thus, the Board can infer that the Respondent’s appraisers used properties that were more comparable to the subject property than the Petitioner’s appraiser’s properties.

The Respondent’s appraisal also estimated the value of the subject property using the cost approach; whereas the Petitioner’s appraiser chose not to prepare a cost approach analysis. Neither appraisal employed an income analysis in its valuation.

Finally, the Petitioner’s appraiser was a residential appraiser. And while one of the Respondent’s appraiser’s was also a residential appraiser, the Respondent’s other appraiser was an Indiana Certified General Appraiser with an MAI designation. The Board finds a commercial property appraised by a Certified General Appraiser with an MAI designation to be more credible and reliable than a commercial property appraised by a residential appraiser.

Here the Petitioner’s appraiser only developed a sales comparison analysis to value the Petitioner’s property and he used mostly sales that were remote from the relevant valuation date. In addition, he made large adjustments with little explanation for those adjustments. The Respondent’s appraisers, on the other hand, developed both a sales comparison and a cost approach analysis. They also used sales data from the relevant time period and provided a more thorough explanation for their adjustments. Moreover, one of the Respondent’s appraisers was a Certified General Appraiser; whereas the Petitioner hired a residential appraiser to value its commercial property. Thus, the Board concludes that the weight of the evidence supports the Respondent’s appraised value.