Godzilla Investment LLC v. Multnomah County Assessor

• Court: Oregon Tax Court
• Decided: August 13, 2012
• Docket: TC-MD 120199D
• Status: Unpublished

Opinion

IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax

GODZILLA INVESTMENT LLC, ) ) Plaintiff, ) TC-MD 120199D ) v. ) ) MULTNOMAH COUNTY ASSESSOR, ) ) Defendant. ) DECISION

Plaintiff appeals the 2011-12 real market value of property identified as Account

R256130 (subject property). Steven Anderson (Anderson), Oregon licensed real estate broker,

appeared on behalf of Plaintiff. Jeff Brown, Oregon registered appraiser, appeared on behalf of

Defendant. Stephanie McQuown (McQuown), Oregon registered appraiser, testified on behalf of

Defendant.

Plaintiff’s Exhibits 1 through 7 and Defendant’s Exhibit A were admitted without

objection. Defendant objected to Plaintiff’s Rebuttal Exhibits A-8 and A-9, pages 1 through 3,

but the court admitted them.

I. STATEMENT OF FACTS

Anderson testified that the subject property is a 3 bedroom, 2 bathroom, 1,305 square

foot condominium with a one-car garage located in northeast Portland, Oregon in the Rivercliff

Estates Condominium development. (Ptf’s Ex 1; Def’s Ex A at 4.) Both parties discussed the

subject property’s listing history, stating that the subject property was “listed for $176,990 back

in May of 2008” and the “price was lowered in August of 2010 to $135,000” when the “bank”

took ownership of the subject property. (Ptf’s Ex 2; Def’s Ex A at 4.) McQuown stated in her

appraisal report that:

DECISION TC-MD 120199D 1 “At the time of the January 1, 2011 valuation date, the asking price was $135,000. It was then re-listed in February of 2011 for $114,900, but then immediately reduced again in March of 2011 to $94,900. The subject was then put up for auction and sold for $60,000 in May of 2011.”

(Def’s Ex A at 4-5.) (Emphasis in original.) Anderson cited prior court decisions discussing the

sale of bank owned properties and how those sales can be used to determine real market value.

(Ptf’s Ex 6 and 7.)

Anderson testified that there were 122 sales of “condos and single family homes” ranging

in price between $50,000 and $100,000 that sold during calendar year 2011. (Ptf’s Ex 3 at 1-4.)

Of those 122 sales, Anderson testified that “79 were bank owned properties.” (Ptf’s Ex 4.) The

average selling price per square foot was $71 for the 122 sales and $72 for the bank owned

properties. (Ptf’s Ex 3 at 4; Ptf’s Ex 4 at 3.) Defendant questioned why Anderson testified that

the 122 sales were only sales of “condos and single family homes” when “attached (7),”

“floating homes (4)” and “manufactured homes (2)” were included in the listing. (Id.)

McQuown testified that in preparing her appraisal report she inspected the subject

property. She testified that she verified that each sale of the properties she selected as

comparable to the subject property was a “non-distress, arm’s length transaction.” Defendant’s

three comparable properties were adjusted for time, quality, size, second garage and fireplaces.

(Def’s Ex A at 9-10.) The adjusted sale prices ranged from $99,605 to $118,300. (Id.)

Anderson asked McQuown why she did not include the sale of a property (14830 NE

Rose Parkway) located in the same development as the subject property that was 1,299 square

feet, listed for 436 days and sold on February 11, 2011, for $71,000. (Ptf’s Ex 5.) McQuown

responded, stating that she did not remember why she did not include that property among her

three comparable properties. Anderson questioned her further asking why she would include a

property that was “not a lease hold estate” (comparable #4) when the 1,299 square foot property

DECISION TC-MD 120199D 2 is “a lease hold estate” condominium located in the same development as the subject property.

The parties agreed that the subject property is built on land that is leased, having a lease

expiration date of 2067. McQuown testified that it was “not necessary to have or know the rent

for land” in making her appraisal and “the market does not appear to have any significant

reaction to this difference [lease hold estate].” (Def’s Ex A at 6.)

Anderson submitted a listing for another property (15123 NE Rose Parkway) located in

the subject property’s same development. (Ptf’s Rebuttal Ex A-9 at 2.) He testified that the

1,305 square foot condominium was first listed for sale in December 2008, for $174,000 and the

price was reduced a month later to $155,000 and the next month another reduction followed to

$140,000. (Id. at 1.) Anderson testified that subsequent price reductions have occurred and the

property is still listed for sale at $71,000. In response to a question, Anderson testified that he

verified the listing with the agent. Anderson testified that the “subject property’s value is

falling” and there is “no financing available” for this type of property.

II. ANALYSIS

At issue in this case is the subject property’s real market value for the 2011-12 tax year.

Real market value is defined in ORS 308.205(1)1 as:

“[T]he 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.”

The assessment date for the 2011-12 tax year was January 1, 2011. 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

1 References to the Oregon Revised Statutes (ORS) are to the 2011 edition.

DECISION TC-MD 120199D 3 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 not applicable. Defendant considered the cost

approach, concluding that “[t]he cost approach was not used due to the subject property being a

condominium which due to comment (sic) elements causes value influencing facts that cannot be

developed in a cost approach due to the type of ownership.” (Def’s Ex A at 8.)

A. Comparable Sales Approach

In a case such as this, the comparable sales approach may be used to value improved

properties. 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: “In 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 utilized in the sales comparison

approach must be verified to ensure they reflect arms-length market transactions.”

Anderson submitted listing information for two properties he identified as comparable to

the subject property. (Ptf’s Ex 5; Ptf’s Rebuttal Ex A-9 at 2.) Both properties are located in the

subject property’s development. One property is slightly smaller but newer than the subject

property that sold close to the assessment date for $71,000. (Ptf’s Ex 5.) The second property is

the same size but newer than the subject property; it was first listed for sale in late 2008 and is

still for sale with an offering price of $74,950. (Ptf’s Rebuttal Ex A-9 at 2.) Plaintiff made no

adjustments for size, time or amenities such as fireplace. In contrast, McQuown selected two

properties located in the same development as the subject property. One property that was sold

DECISION TC-MD 120199D 4 close to the assessment date was substantially larger than the subject property with a fireplace

and two-car garage. (Def’s Ex A at 9.) The second property was the same size as the first

property with a fireplace and two-car garage but sold more than five months after the assessment

date. (Id.) McQuown adjusted the sale price of each property for time, size, condition and

amenities. (Id.) McQuown’s other two properties were not located within the subject property’s

development and one property was sold as fee simple. The court finds neither of those properties

as comparable to the subject property as properties located in the same subject property’s

development.

Looking at the two properties that sold the closest to the assessment date, the range of

value is $107,705 to $71,000. (Ptf’s Ex 5; Def’s Ex A at 9.) The subject property’s real market

tax roll value of $82,900 fits within that range. Given the subject property’s one-car garage and

lack of a fireplace, it is reasonable that the subject property’s real market value is at the low end

of the range.

B. Burden of Proof

As the party seeking affirmative relief, Plaintiff bears the burden of proving that the

subject property’s real market value is incorrect on the tax roll. ORS 305.427. Plaintiff must

establish his 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 (July 12, 2001) (citing Feves v.

Dept. of Revenue, 4 OTR 302 (1971)).

Plaintiff must present the greater weight of evidence to support his requested real market

value reduction. This court has stated that “it is not enough for a taxpayer to criticize a county’s

position. Taxpayers must provide competent evidence of the [real market value] of their

property.” Poddar v. Dept. of Rev., 18 OTR 324, 332 (2005) (quoting Woods v. Dept. of Rev., 16

DECISION TC-MD 120199D 5 OTR 56, 59 (2002) (citation omitted)). 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 licensed brokers.”

Danielson v. Multnomah County Assessor, TC-MD No 110300D at 7 (Mar 13, 2012). Evidence

that is inconclusive or unpersuasive is insufficient to sustain the burden of proof. Reed v. Dept.

of Rev., 310 Or 260, 265, 798 P2d 235 (1990).

“In evaluating the competing evidence, the court looks to the comparability of the

different sales and the application of all necessary adjustments for differences. Adjustments are a

key component in evaluating properties.” Voronaeff v. Crook County Assessor, TC-MD No

110361C at 6 (Apr 25, 2012). According to The Appraisal of Real Estate:

“Ideally, if all comparable properties are identical to the subject property, no adjustments will be required. However, this is rarely the case * * *. After researching and verifying transactional data and selecting the appropriate unit of comparison, the appraiser adjusts for any differences.”

Appraisal Institute, The Appraisal of Real Estate 307 (13th ed 2008.)

In the case before the court, Plaintiff did not submit an appraisal report. Even though

Plaintiff did not submit an appraisal report, adjusted comparable sales may also be helpful in

determining real market value. Anderson submitted two properties he identified as comparable

to the subject property. (Ptf’s Exs 5; Ptf’s Rebuttal Ex A-9 at 2.) Anderson’s comparable sales

approach was incomplete because the selected properties were not “adjusted to be comparable”

to the subject property. OAR 150-308.205-(A)(2)(c). Anderson selected properties in the market

area, however, the only criteria used in comparing the properties to the subject property were the

year built, the neighborhood, and unadjusted sale price. Anderson failed to adjust the selected

comparable properties for size, condition or other distinguishing features.

///

DECISION TC-MD 120199D 6 Plaintiff’s evidence in support of his requested real market value reduction is

inconclusive. When the “evidence is inconclusive or unpersuasive, the taxpayer will have failed

to meet his burden of proof * * *.” Reed, 310 Or at 265. Unfortunately, Plaintiff has failed to

carry his burden of proof.

Even though the burden has not shifted under ORS 305.427, the court has jurisdiction to

determine the “real market value or correct valuation on the basis of the evidence before the

court, without regard to the value pleaded by the parties.” ORS 305.412. As previously stated,

the sale data for the comparable properties selected by the parties brackets the current real

market tax roll value. The court accepts Defendant’s determination that the subject property’s

real market value as of assessment date was $82,900.

C. 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, 415, 521 P.2d 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-

115.

Plaintiff’s purchase at auction closed in May of 2011, making it a fairly recent sale after

the assessment date.

In considering a sale, the next issue is whether the sale was an arm’s-length transaction.

At the time of Plaintiff’s purchase, the subject property was a bank owned property. In Brashnyk

v. Lane County Assessor, TC-MD No 110308 (Dec 12, 2011) this court has discussed the sale of

DECISION TC-MD 120199D 7 bank owned properties, stating that “[t]here are narrow exceptions determined on a case-by-case

basis to the holding that bank-owned property sales are not typically representative of real

market value.” Brashnyk, TC-MD No 110308 at 5. Such an exception may be recognized by the

court “where the majority of sales are distress, it would seem that that kind of sale would provide

a more accurate reflection of the market.” Morrow Co. Grain Growers v. Dept. of Rev., 10 OTR

146, 148 (1985). Bank owned property sales may be considered as comparable sales for the

purpose of establishing real market value, “when those bank-owned property sales have been

exposed to the open market and meet the ‘nominal standards for an acceptable comparable

sale.’” Brashnyk, TC-MD No 110308 at 9.

This court has made a distinction between the sale of bank owned properties using a

multiple listing service and an auction. In Schnabel v. Clatsop County Assessor, TC-MD No

100618D, the court stated that:

“An auction is defined as a ‘sale of property to the highest bidder.’ (Webster’s Third Int’l Dictionary 142 (unabridged ed 2002).) An auction eliminates the negotiation between the buyer and seller and requires buyers to negotiate with each other, generally leaving the seller out of the negotiation process.”

Schnabel, TC-MD No 100618D at 4. An auction sale is not necessarily indicative of real market

value and this court gives little consideration to an auction sale. The court concludes that

Plaintiff’s auction purchase more than five months after the assessment date is not persuasive

evidence of the subject property’s real market value as of the assessment date.

III. CONCLUSION

After careful consideration of the testimony and evidence, the court concludes that

Plaintiff failed to carry his burden of proof. The court accepts Defendant’s determination of the

subject property’s real market value. Now, therefore,

DECISION TC-MD 120199D 8 IT IS THE DECISION OF THIS COURT that the 2011-12 real market value of property

identified as Account R256130 is $82,900.

Dated this day of August 2012.

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 August 13, 2012. The Court filed and entered this document on August 13, 2012.

DECISION TC-MD 120199D 9