Mary Kent Living Trust v. Benton County Assessor

IN THE OREGON TAX COURT
MAGISTRATE DIVISION
Property Tax
MARY KENT LIVING TRUST, )
)
Plaintiff, ) TC-MD 110729D
)
v. )
)
BENTON COUNTY ASSESSOR, )
)
Defendant. ) DECISION
Plaintiff appeals the 2010-11 real market value of property identified as Account 416978
(subject property). A trial was held in the Oregon Tax Court Mediation Center, Salem, Oregon,
on October 24, 2011. Mary Kent (Kent) appeared on behalf of Plaintiff. Doug Hillpot (Hillpot),
Benton County Assessor and Caleb Nelson (Nelson), Sale Data Analyst and Oregon registered
appraiser, Benton County Assessment and Taxation, appeared on behalf of Defendant.
Plaintiff’s Exhibits 1 through 9 and Defendant’s Exhibits A through C were received
without objection.
I. STATEMENT OF FACTS
Kent testified that she purchased the subject property in 2005, paying $327,000.
According to Nelson’s appraisal report, the subject property is a four bedroom, three and one-
half bathroom two story residence with a three car garage located on an .l9 acre lot in Albany,
Oregon. (Def’s Ex A at 7.) The parties agreed that the subject property was built in 2003 and
placed on the tax roll in 2004. Kent testified that, when the subject property’s real market value
was “put on the rolls,” it was “initially higher than the original owner’s purchase price.” She
testified that she “probably should have appealed” when she purchased the property in 2005.
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DECISION TC-MD 110729D 1
Plaintiff relies on the sale of a neighboring property (referred to as the Greene’s home) to
support its requested real market value of $295,000. (Ptf’s Ex 2 at 1.) Kent testified that the
Greene’s home is “most like the subject property with similar features and amenities, closest in
proximity to the subject property, and has a similar property tax base like the subject property.”
Kent testified that she believes that purchasers look at the assessed value and total property tax
obligation when deciding to purchase a residence. The parties discussed whether property taxes
are reflected in the sale or purchase price, with differing opinions. Kent testified that the
Greene’s home was listed for sale in March 2008 for $450,000 and sold in May 2009 for
$295,000. (Id.) Hillpot testified that, in February 2009, the Greene’s home was transferred from
“one lending institution” (Flagstar Bank) to a “federal mortgage company” (Federal National
Mortgage Association). (See Def’s Ex C.) Hillpot testified that the sale of the Greene’s home
was not an “arm’s length transaction,” but rather a “distressed” or “foreclosure” sale. He
reminded the court “that one sale does not make a market.” Nelson testified that the county did
not consider the Greene’s home as a comparable property because it was not “a typical sale”; it
was a foreclosure sale. Hillpot testified that the Greenes offered their home for sale by owner in
August 2011 asking $365,000. (Def’s “Picture Taken in 8/2011”.) Kent testified that the
Greenes, who were “balancing” two mortgages after being unable to sell another home, are no
longer trying to sell that home.
Kent testified that Plaintiff’s requested real market value is supported by vacant land
sales, ranging from $23,000 to $113,000, and averaging $60,000. (See Ptf’s Ex 8.) Nelson
testified that he reached a different conclusion than Plaintiff after selecting three comparable
land sales, ranging in size from .20 acre to .24 acre and having been sold in June 2009, October
2009, and July 2010. (See Def’s Ex A at 9.) Nelson testified that “residential site development
DECISION TC-MD 110729D 2
cost[s]” ($15,000) and “yard improvement” costs ($16,800) must be added to the vacant lot sale
price to arrive at a total land real market value. (See id.) Nelson testified that he determined
“Indicated Value of Total Land on 1/1/2010” as “$112,800[.]” (See id.) Kent testified that using
an estimate of 2009 building costs and adding the average of the land sale prices ($60,000), the
subject property could be “built new” for $295,000. (Id.) Using Plaintiff’s building cost of
$235,000 and Defendant’s “Indicated Value of Total Land on 1/1/2010” of “112,800,” Nelson
testified that the total subject property’s real market value would be $347,800. (See id.)
In response to questions, Kent testified that she is not a certified appraiser or real estate
agent or broker. She testified that she is an “engineering manager” and “property owner, who
has done research” to support the requested real market value.
Nelson testified that he selected three comparable properties for his comparable sales
approach. (See Def’s Ex A at 7.) He testified that all properties are “similar class” (class 5) to
the subject property, located in subject property’s “immediate neighborhood,” “similar square
footage” to the subject property, and sales were “arm’s length transactions, no foreclosures.”
Nelson’s appraisal report stated that two of the three comparables “were built by the same
contractor as the subject” property. (See id.) Nelson testified that he adjusted the three selected
comparable properties, placing the most weight on Comparable Sale #4, “because of its minimal
overall adjustments, similar design, and closing date ten days from the effective date of value.”
(See id.) The adjusted sale prices ranged from $362,240 to $394,740, resulting in an “indicated
Value by: Sales Comparison Approach” of “$385,000.” (Id., emphasis in original.) Hillpot
testified that “most homes” in Plaintiff’s neighborhood have a real market value of “$400,000.”
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DECISION TC-MD 110729D 3
II. ANALYSIS
At issue in this case is the subject property’s real market value for tax year 2010-11. Real
market value is defined in ORS 308.205(1) as
“the amount in cash that could reasonably be expected to be paid by an informed
buyer to an informed seller, each acting without compulsion in an arm’s-length
transaction occurring as of the assessment date for the tax year.”1
The assessment date for the 2010-11 tax year was January 1, 2010. ORS 308.007(2).
There are three methods of valuation that are used to determine real market value: (1) the cost
approach, (2) the sales-comparison or comparable sales approach, and (3) the income approach.
Allen v. Dept. of Rev., 17 OTR 248, 252 (2003); see also OAR 150-308.205-(A)(2)(a) (stating
that all three approaches must be considered, although all three approaches may not be
applicable to the valuation of the subject property). Because the subject property is a residence
and not an income producing property, the income approach is inapplicable. Neither party
considered the cost approach.
A. Comparable sales approach
In a case such as this one before the court, the comparables sales approach may be used
to value improved properties. Chambers Management Corp v. Lane County Assessor, TC-MD
No 060354D at 6 (April 3, 2007) (citing Appraisal Institute, The Appraisal of Real Estate 335
(12th ed 2001)). The legislature requires real market value to be determined in all cases by
“methods and procedures in accordance with rules adopted by the Department of Revenue
* * *.” ORS 308.205(2). The Department of Revenue adopted OAR 150-308.205-(A)(2)(c),
stating that, “[i]n utilizing the sales comparison approach[,] only actual market transactions of
property comparable to the subject, or adjusted to be comparable, will be used. All transactions
1
All references to the Oregon Revised Statutes (ORS) are to 2009.
DECISION TC-MD 110729D 4
utilized in the sales comparison approach must be verified to ensure they reflect arms-length
market transactions.”
Plaintiff’s comparable sales approach was incomplete because Plaintiff selected one
property as comparable and that property was not “adjusted to be comparable * * *.” OAR
150-308.205-(A)(2)(c). Plaintiff’s selected comparable property was sold in May 2009, many
months before the subject property’s assessment date and provides little evidence of the subject
property’s real market value as of the date of assessment. From the information submitted by
Plaintiff, the comparable property is approximately 80 square feet larger than the subject
property, has one more bedroom than the subject property, and is located on a lot slightly larger
than the subject property. (Ptf’s Ex 3; Def’s Ex A at 7.) In addition to failing to adjust for date
of sale, Plaintiff made no adjustment, as required, for size, location, quality, and other
distinguishing property features, if any.
As the party seeking affirmative relief, Plaintiff bears the burden of proving that the
subject property’s land real market value is incorrect on the tax roll. ORS 305.427. Plaintiff
must establish its claim “by a preponderance of the evidence, or the more convincing or greater
weight of evidence.” Schaefer v. Dept. of Rev., TC No 4530 at 4-5 (July 12, 2001) (citing Feves
v. Dept. of Rev., 4 OTR 302 (1971)). Competent evidence includes appraisal reports and sales
adjusted for time, location, size, quality, and other distinguishing differences, and testimony
from licensed professionals such as appraisers, real estate agents and brokers.
Plaintiff must present the greater weight of evidence to support its requested real market
value reduction. Plaintiff’s evidence in support of its requested real market value reduction is
inconclusive. Plaintiff did not submit an appraisal report, a complete comparable sales approach,
or any testimony from a certified appraiser or a licensed real estate agent or broker. When the
DECISION TC-MD 110729D 5
“evidence is inconclusive or unpersuasive, the taxpayer will have failed to meet his burden of
proof * * *.” Reed v. Dept. of Rev., 310 Or 260, 265, 798 P2d 235 (1990). Plaintiff has failed to
carry its burden of proof.
Even though the burden has not shifted, the court has jurisdiction to determine the “real
market value or correct valuation on the basis of the evidence pleaded by the parties.” ORS
305.412. Nelson presented a comparable sales approach, making adjustments to each sale to
make that property comparable to the subject property. Plaintiff presented no evidence showing
that Nelson’s comparable properties were not similar to the subject property. The court finds
Defendant’s evidence persuasive.
B. Purchase Price
When determining real market value, the sale price of a recent, voluntary, arm’s-length
sale of property between a willing and knowledgeable buyer and seller is also very persuasive of
real market value, albeit, not conclusive. Kem v. Dept. of Rev., 267 Or 111, 114, 514 P2d 1335(1973); see also Sabin v. Dept. of Rev., 270 Or 422, 426-27, 528 P2d 69 (1974); Equity Land
Res. v. Dept. of Rev., 268 Or 410, 414-15, 521 P2d 324 (1974). The two important
considerations are whether or not the sale was “recent” and whether it was “arm’s length.” Kem,
267 Or at 114-15.
Plaintiff requests that the court rely solely on the sale of a property she describes as
comparable to the subject property, even though it is not the subject property, to determine the
subject property’s real market value as of January 1, 2010. The sale of a property other than the
subject property is not persuasive of real market value unless it is adjusted to be comparable to
the subject property. Plaintiff did not make any adjustments and, therefore, the court cannot rely
solely on that unadjusted sale to support Plaintiff’s requested real market value.
DECISION TC-MD 110729D 6
Defendant raised the issue that the sale relied on by Plaintiff was not an arm’s length
transaction between a willing buyer and willing seller, but a distressed sale of a bank-owned
property. That property was transferred to Federal National Mortgage Association on
February 27, 2009, for a stated consideration of $359,900. (Ptf’s Ex 2.) The listing price of the
property was reduced $20,000 in 30 days and within 14 days a pending transaction was recorded
with a sale transaction closing 44 days later for $44,900 less than the listing price. (Id.) In
approximately 15 months, that property sold for more than $150,000 less than its prior sale price
on March 18, 2008. (Id.) Plaintiff submitted no evidence that that one sale was an arm’s length
market transaction. Plaintiff submitted no evidence that Defendant’s comparable properties
selling at substantially higher prices were other than arm’s length market transactions. Given the
substantial drop in value of one property over a relatively short period of time, the court
concludes that Plaintiff’s reliance on that one sale is misplaced.
III. CONCLUSION
After careful consideration of the testimony and evidence, the court concludes that
Plaintiff failed to carry its burden of proof. Defendant’s evidence supports the subject property’s
2010-11 real market value on the tax roll. Now, therefore,
IT IS THE DECISION OF THIS COURT that Plaintiff’s appeal is denied.
Dated this day of December 2011.
JILL A. TANNER
PRESIDING MAGISTRATE
If you want to appeal this Decision, file a Complaint in the Regular Division of the Oregon
Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563; or by hand delivery to:
Fourth Floor, 1241 State Street, Salem, OR.
Your Complaint must be submitted within 60 days after the date of the Decision or this
Decision becomes final and cannot be changed.
This document was signed by Presiding Magistrate Jill A. Tanner on
December 15, 2011. The Court filed and entered this document on December 15, 2011.
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