Mr. Kruse prepared what he certified was a USPAP-compliant appraisal using two generally accepted valuation approaches. He valued the property as of a date less than a year after the relevant March 1, 2010, valuation date using sales that bracketed that date. Indeed, he testified that his opinion would be no different if he had valued the property as of March 1, 2010. Mr. Kruse’s valuation opinion is therefore probative.
The Respondent attempted to impeach Mr. Kruse’s opinion by arguing that at least two of his comparable sales were the result of repossessions, and that several others involved homes in worse condition than, and of inferior quality to, the subject home.
While Mr. Kruse acknowledged that some of the properties were “REO,” presumably meaning that the sellers were financial institutions that had acquired the properties through foreclosures, the Respondent offered nothing to support the notion that generally accepted appraisal practices would require Mr. Kruse to automatically exclude those sales from his analysis. Indeed, Mr. Kruse’s appraisal report indicates that all of the properties were exposed to the market, and he made adjustments to several of the properties based on conditions of sale, albeit none that appear to expressly account for the fact that the seller had acquired the property through foreclosures.
As to the second point – the purportedly inferior condition of some of Mr. Kruse’s comparable properties – the Respondent pointed mainly to the condition ratings reflected on the properties’ record cards, without really explaining the basis for those ratings. Mr. Kruse, by contrast, based his evaluation of the subject home’s condition on his own inspection. He reached his conclusion largely because of the home’s interior, which the Respondent’s rating does not appear to reflect. And Mr. Buckner’s photographs of the home at least partially corroborate Mr. Kruse’s assessment of its condition. While Mr. Kruse did not inspect the interiors of the comparable homes, he relied on data of the type commonly used by his peers in the appraisal profession.
Mr. Kruse acknowledged the Respondent’s third point – that some of the comparable homes were of inferior quality to the subject home. But he explains that it is difficult to find comparable properties when valuing a home as old as the subject home and that similarity in condition is the most important factor. Notably, the Respondent did not point to any properties that Mr. Kruse should have used in the place of the ones that she argued were of inferior quality.
The Respondent also pointed to what she considered to be factual errors in Mr. Kruse’s appraisal. For example, the at 508 South Calvin Street is more than 2,000 square feet smaller than what was reflected in Mr. Kruse’s valuation opinion. As Mr. Kruse explained, he used eight comparable sales in his analysis, which limits the influence of any single sale on his ultimate valuation opinion. And any increase in 508 Calvin’s adjusted sale price would not change the median, which was what he gave the greatest weight to in reaching his opinion. Mr. Kruse also credibly explained that the property’s MLS listing reflected the larger size and that the property might have sold for less had the listing reflected the home’s actual size.
Mr. Kruse, however, did not address testimony that another of his comparable sales – 112 S. Orchard Street in Kendallville – was used as an office before the sale and that significant repairs were required to convert it to residential use. As already explained, Mr. Kruse used eight comparable sales in his analysis, which lessened the sale’s impact on his ultimate valuation opinion. Nonetheless, his failure to address the property’s pre-sale use as an office detracts at least somewhat from the reliability of his valuation opinion.
Finally, the Respondent pointed to discrepancies between the subject home’s listing, which says that the property has 17 rooms, an elevator and a sauna, and Mr. Kruse’s appraisal, which describes the home as having only nine rooms and does not mention the elevator or sauna. Those discrepancies do little to undermine the reliability of Mr. Kruse’s valuation opinion. As he credibly explained, the more than 100 year old elevator was unusable and the sauna would have little effect on the property’s market value. As for the discrepancy in the number of rooms, it is unclear how many rooms the home actually has. Indeed, the property record card appears to identify 13 rooms, which differs from both the listing and Mr. Kruse’s appraisal. In any case, the number of bedrooms and baths and the home’s overall size appear to have been far greater factors in Mr. Kruse’s analysis than was the total number of rooms.
In sum, the Respondent impeached Mr. Kruse’s valuation opinion to a degree, but the Board still finds it reliable and generally persuasive as to the subject property’s market value-in-use. The Board must therefore consider whether the Respondent offered any probative countervailing evidence of the property’s market value-in-use.
She did not. At most, she offered a spreadsheet containing what appears to be something approximating her own sales-comparison analysis and pointed to the Petitioner’s advertised asking prices. As to her spreadsheet, the Respondent did not explain how any of the properties compared to the subject property or how she arrived at her adjustments to the purportedly comparable properties’ sale prices. From what little the Board can glean, it appears that she simply made purely cost-based adjustments for a few features listed in the Department of Local Government Finance’s guidelines for mass-appraisal assessments. Without more, the Board will not assume that the Respondent’s analysis complies with generally accepted appraisal principles.
The Respondent’s reliance on the Petitioner’s asking prices is similarly unpersuasive. Mr. Buckner explained the discrepancy between the asking prices from the Petitioner’s listings and the requested assessment – he and the Petitioner were not necessarily looking to move when they listed the property but were instead trying to recoup some of his investment. And Mr. Buckner testified without dispute that the listings had not generated any offers, or even any interest, over the course of more than 10 years. At most, the listings might tend to show that the property was worth no more than $375,000. But they do not support any particular value below that level.
Because the Board is persuaded by Mr. Kruse’s valuation opinion, it finds that the subject property’s true tax value was $166,500. The 2010 assessment must be reduces accordingly.