The Petitioner bought the
property on August 25, 2009, for $51,250. His purchase was just six months
before the assessment and valuation date of March 1, 2010. The time is close
enough to be relevant. And we have recognized in many cases that the purchase
price of the property can be a good way to prove an accurate market value-in-use
for assessment purposes.
The Petitioner attempted to go
one step further. Using the trending factor of -2.4% that the Respondent
developed for the period March 1, 2009, through March 1, 2010, the Petitioner
reduced his purchase price to $50,630. This trending factor, however, represents
a market adjustment for an entire year, which is not relevant. See Ind. Code
§6-1.1-4-4.5. The Petitioner failed to establish a factor for the relevant six month
period from August 2009 to March 2010. The “trended” purchase price calculated
by the Petitioner does not help prove what a more accurate assessed value would
be for his property.
The Petitioner also presented an
appraisal that concluded the value of the subject property was $70,142 as of
August 13, 2009. Such an appraisal prepared in accordance with USPAP standards
is a widely recognized means of establishing the market value-in-use of a
property. Kooshtard Property VI, LLC v. White River Township Assessor, 836
N.E.2d 501, 506 n.6 (Ind. Tax Ct. 2005). The certified appraisal that the
Petitioner offered appears to meet those standards. The Respondent offered no
substantial evidence or argument that it does not. Therefore, this appraisal is
additional probative evidence that the current assessment is excessive.
Both the purchase of the subject
property and the appraisal are only approximately four months before the statutory
valuation date. With this proximity, they both are relevant, probative
evidence. Either one is sufficient to make a prima facie case.
Therefore, the burden of going
forward shifted to the Respondent. See American United Life Ins. Co. v.
Maley, 803 N.E.2d 276 (Ind. Tax Ct. 2004). The Respondent needed to offer
substantial, probative evidence that impeaches or rebuts the Petitioner’s
evidence. Id.; Meridian Towers, 805 N.E.2d at 479. Of course one way for
the Respondent to do so would be to present relevant, substantial, probative evidence
that the disputed assessment actually is an accurate market value-in-use for the
subject property. Rather than following that route, the Respondent primarily attempted
to attack purported weaknesses in the Petitioner’s evidence—the purchase price
and the appraisal. But after considering everything that was presented, those purported
weaknesses are not serious enough to totally destroy the probative value of either
the purchase price or the appraisal.
For a sale price to be a reliable
indicator of market value, the sale must have involved typically motivated and informed
parties, the property must have been exposed to the open market for a reasonable
time, the payment must have been made in terms of cash or comparable financial
arrangements, and the price must have been unaffected by special financing or
concessions. See MANUAL at 10 (defining “market value”). The Respondent claimed that the
Petitioner’s purchase price resulted from a distressed sale and does not
establish what this property would bring on the open market because the property was
bought by Wells Fargo Bank at a sheriff’s sale, subsequently sold to HUD, and
then sold to the Petitioner. But the Respondent offered no evidence that either
the Petitioner or HUD was not typically motivated in negotiating the sale or that the
subject property was not reasonably exposed to the market. (It was marketed for
seven months before it sold.) The Respondent identified no other specific
factors to show the purchase price is not a valid indicator of market value-in-use. The
Respondent’s unsubstantiated conclusory statements attempting to attack the
reliability of this particular sale do not constitute probative evidence. See Whitley Products, Inc. v. State Bd. of Tax Comm’rs, 704 N.E.2d
1113, 1119 (Ind. Tax Ct. 1998). And the
Respondent’s bald assertion that the original asking price is a more accurate
indication of value than the amount the Petitioner actually paid is even more
unpersuasive. Therefore, the Petitioner’s purchase price is substantial evidence supporting a
reduced assessment for the subject property.
Even though the Respondent
attempted to attack the appraisal from two angles, the Board reaches a similar
conclusion about it.
The appraisal states, “My
research did not reveal any prior sales or transfers of the subject property
for the three years prior to the effective date of this appraisal.” The evidence,
however, indicates there were two such transfers in August 2008, the first was
to Wells Fargo Bank and the second was to HUD. Therefore, we conclude the appraiser
made a mistake on this point. This mistake detracts from the credibility of the
appraiser and appraisal to some extent. It is an indication that the appraiser
was not as careful as he should have been. It does not, however, entirely
destroy the appraisal’s probative value.
The Respondent also attempted to
impeach the credibility of the appraisal by claiming it should have considered
seven additional sales of other properties in the same neighborhood. This part
of the attack on the appraisal also was ineffective. The Respondent
characterized the seven additional properties as comparables, but provided very
few details with little comparative analysis. Conclusory statements that a
property is “similar” or “comparable” to the subject property do not constitute
probative evidence. Long, 821 N.E.2d at 470. To use this kind of
evidence effectively, the Respondent was responsible for explaining the
characteristics of the subject property, how those characteristics compared to
those of the purportedly comparable properties, and how any differences affected
the relevant market value-in-use of the properties. Id. at 471. Here,
the sales prices of the seven neighborhood properties range from $111,500 to
$245,000. The construction dates of the homes occurred during a 58-year period
ranging from 1950 to 2008. The Respondent offered no discussion of the
amenities of the homes or analysis of how any differences affected value.
Although the Respondent presented a comparison grid that mimics a sales
comparison grid that might be contained in an actual appraisal, the evidence
does not establish who calculated these adjustments, what that person’s qualifications
might be, what criteria was used for the adjustments, or whether the work
conformed to USPAP standards or generally accepted appraisal principles. In other
words, the Respondent failed to offer any meaningful comparison of the properties.
The Respondent did virtually nothing to explain how the range of “adjusted”
sale prices for these purported comparables—from $96,876 to $239,456—helps
demonstrate what an accurate valuation of the subject property is. Therefore, these
sales have no probative value in attacking the appraisal or in demonstrating
that the existing assessed value on the subject property should be maintained.
The Respondent failed to convince
the Board that the appraisal was significantly flawed to the point where it
should be disregarded in determining the actual market value-in-use of the
subject property. In addition, the Respondent
failed to offer any substantial evidence or explanation supporting the
assessment of $157,400.
Therefore, the assessment will be
changed to either the value indicated by the Petitioner’s purchase price or the
value indicated by the appraisal. There is, however, no general or absolute
rule about which of those is more persuasive. In Hubler Realty Co. v.
Hendricks Co. Assessor, 938 N.E.2d 311, 315 (Ind. Tax Ct. 2010) the Board’s
determination assigning greater weight to a purchase price than to an appraisal
was affirmed by the Tax Court. But to repeat, the Board weighs the evidence and
ultimately decides what is most persuasive on a case by case basis. In this
case that determination is a close call (between the appraisal and the purchase
price) based on the totality of the evidence and how effectively the parties
made their cases.
Ultimately, the Board finds the
Petitioner’s purchase price to be the strongest evidence of the actual market
value-in-use. Although Wells Fargo Bank acquired the property through a sheriff’s
sale and then transferred it to HUD, there was no dispute about the fact that
subsequently this property was on the market for seven months before the
Petitioner bought it. During that time the listing price started at $150,000 and
then it was reduced several times before the Petitioner finally bought it for $51,250. The Respondent
presented no substantial evidence to support its conclusory claims that this
transaction was not an arm’s-length transaction or that it was a forced
distressed sale. Under these circumstances that transaction has considerable
weight. On the other hand, the appraiser’s unexplained failure to disclose the
2008 transfers is troubling. It indicates a lack of care in his work that detracts
somewhat from the credibility of the appraisal’s final conclusion about value. Therefore,
the Petitioner’s purchase price (rounded to $51,300) is determined to be the
best indication for an accurate valuation in this case.
http://www.in.gov/ibtr/files/Bohnenkemper_84-009-10-1-5-01824.pdf
