R&R Ranches LLC v. Deschutes County Assessor

• Court: Oregon Tax Court
• Decided: July 10, 2013
• Docket: TC-MD 130085N
• Status: Unpublished

Opinion

IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax

R & R RANCHES, LLC, ) ) Plaintiff, ) TC-MD 130085N ) v. ) ) DESCHUTES COUNTY ASSESSOR, ) ) Defendant. ) DECISION

Plaintiff appeals the real market value of property identified as Account 132747 (subject

property) for the 2012-13 tax year. A trial was held in the Oregon Tax Courtroom in Salem,

Oregon on May 13, 2013. Mark Rubbert (Rubbert) appeared and testified on behalf of Plaintiff.

Sean H. McKenney (McKenney) appeared and testified on behalf of Defendant. Plaintiff’s

Exhibits 1 through 17 and Defendant’s Exhibits A and B were received without objection.

Defendant’s Rebuttal Exhibit A1 was received over Plaintiff’s objection that the exhibit was not

exchanged within the time allowed under Tax Court Rule-Magistrate Division 10 C. At the

conclusion of trial, Plaintiff requested an award of the $240 filing fee.

I. STATEMENT OF FACTS

The subject property is a 3.6-acre lot located in the Whispering Pines subdivision

between the cities of Bend and Redmond, Oregon. (Def’s Ex A at 2.) Rubbert testified that the

subject property’s lot is rocky and covered with sagebrush and juniper. The parties agreed that

the subject property’s lot is sloping. As of January 1, 2012, the subject property was improved

with a 1,753-square foot manufactured home built in 1999; a 924-square foot manufactured

home built in 1975; and two storage sheds. (Id.) McKenney reported that the 924-square foot

manufactured home was removed after January 1, 2012, and before Plaintiff’s purchase of the

DECISION TC-MD 130085N 1 subject property in May 2012. (Id.) Rubbert testified that the 924-square foot manufactured

home was required to be removed under the “county code.” He testified that the typical removal

cost for a manufactured home is $5,000. McKenney testified that he assigned a “salvage value”

of $1,500 to the 924-square foot manufactured home as of January 1, 2012, because it had some

value for storage purposes. However, he testified that he agreed with Rubbert that no buyer

would pay more for the subject property because of the 924-square foot manufactured home.

On May 4, 2012, the subject property “sold from a lender for $52,000.” (Def’s Ex A at

2.) “Three days later [May 7, 2012] a deed was recorded for the sale of the [subject] property to

[P]laintiff for $70,000.” (Id.) McKenney does not consider either of those sales to have been

“typical market transaction[s].” (Id.) Rubbert testified that he is in the business of buying

“problem homes” and fixing them up for resale. He testified that he purchased the subject

property from someone in the same line of work who had previously purchased the subject

property, but did not have time to work on it. Rubbert testified that the cost of removing the

924-square foot structure should be subtracted from his May 2012 purchase price to reflect the

fact that the structure was still located on the subject property as of January 1, 2012. Rubbert

requests that the 2012-13 real market value of the subject property be reduced to $65,000.

Rubbert testified that, at the time of Plaintiff’s purchase, the subject property suffered

from significant damage, including pet damage to the floors and carpet; mold on the walls; water

damage to the ceiling; and peeling paint. He testified that, additionally, the subject property’s

septic system was not functioning, the subject property lacked electrical power, and the skirting

needed repair. McKenney testified, and Rubbert agreed, that the subject property electrical

power may have been connected as of January 1, 2012, and disconnected prior to Plaintiff’s

purchase. Rubbert provided 14 photographs from May 2012 documenting the poor condition of

DECISION TC-MD 130085N 2 the subject property at that time. (Ptf’s Exs 1-14.) Rubbert testified that, before beginning work

on a property, he cannot tell how much work will be required to fix the property. He testified

that, with respect to the subject property, he considered there to be a “50-50 chance” that he

would have to tear down the structure. McKenney testified that he did not observe the subject

property’s condition as of January 1, 2012, so he could not give an opinion on the cost to cure as

of January 1, 2012. He testified that he agreed with Rubbert that there was probably no way to

know the cost to repair the subject property as of January 1, 2012.

Rubbert offered no evidence of the cost to repair the subject property. However, the

parties agreed that Rubbert spent $20,000 on repairs. Rubbert testified that he considers the

amount he spent to be irrelevant to the real market value of the subject property because, given

his business connections, he is able to purchase materials for “wholesale prices” and receive

discounts on labor. Rubbert testified that, when he is considering the purchase of a property to

repair, he will try to determine the maximum cost of repairs and will not pay more than the likely

sale price after repairs less the estimated maximum cost of repairs. He testified that his opinion

at the time he purchased the subject property was that it would sell for $120,000 to $130,000

when the repairs were completed.

Rubbert testified that he identified three comparable sales, all located in the same

subdivision as the subject property, that support his requested real market value. Rubbert

testified that his sale 1 was a bank sale on May 11, 2012, for $64,000. (See Ptf’s Ex 15.) He

testified that sale 1 was a 2.47-acre, flat, usable lot with a 2,536-square foot manufactured home

built in 1999. (See id.) Rubbert testified that, before purchasing the subject property, he

considered purchasing sale 1. He testified that, in his view, the condition of sale 1 was very

similar to that of the subject property. Rubbert testified that sale 2 was a 2.5-acre lot with a

DECISION TC-MD 130085N 3 1,024-square foot improvement built in 1984 that sold for $95,500 on September 10, 2012. (See

Ptf’s Ex 16.) Rubbert testified that sale 2 was a flat lot situated on top of a hill with great views.

(See id.) He testified that the sale 2 structure was in good condition and included all appliances

and a large garage with enough room for a boat.

Rubbert testified that sale 3 was a 3.2-acre lot with a 1,440-square foot manufactured

structure built in 1973 that sold for $47,500 on June 14, 2012. (See Ptf’s Ex 17.) Sale 3 was on

the market for 296 days. (Id.) Rubbert testified that sale 3 included a cistern, but it appeared that

the property could be connected to city water. He testified that the sale 3 lot is flat with similar

views as the subject property. Rubbert testified that sale 3 also included a small A-frame

structure. McKenney provided an “Agent Detail Report” for Rubbert’s sale 3, noting that the

“Agent-Only [Remarks]” stated “Cistern and septic systems are damaged.” (See Def’s Rebuttal

Ex A1.) Rubbert noted that the “Agent-Only [Remarks]” also state “Value is for land only.”

(See id.)

McKenney testified that as of early 2012, there were very few sales in the subject

property subdivision, so it was difficult to identify comparable sales or determine market-based

adjustments. (See Def’s Ex A at 13.) He identified three sales that he considered comparable to

the subject property if repairs were made and the subject property was brought to “average

condition and livable.” (Id. at 15.) McKenney testified that he drove by his comparable sales,

but he did not view the interiors of the sales. He testified that his paired sales analysis yielded

confusing results (i.e. a superior view decreased price), so he was unable to make market-based

adjustments. (See id. at 16.) Instead, McKenney’s “adjustments were made based on the

appraiser’s judgment.” (Id.)

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DECISION TC-MD 130085N 4 McKenney’s three sales sold for $152,000 on July 20, 2012; $151,000 on March 23,

2013; and $174,600 on July 12, 2012. (Id. at 15.) He made net downward adjustments to each

of his sales for adjusted prices of $145,400; $138,400; and $153,200, respectively. (Id.) Based

on those sales, McKenney determined an indicated value of $146,000 for the subject property.

(Id.) He subtracted “approximately $20,000” based on the actual cost of repairs reported by

Plaintiff and concluded a 2012-13 real market value of $120,000 for the subject property. (Id.)

Rubbert testified that, unlike the subject property, McKenney’s sale 1 was a horse

property. He testified that horse properties can sell for up to $50,000 more than other properties,

simply by virtue of being a “horse property.” Rubbert testified that McKenney’s sale 2 has a

layout similar tothe subject property, but very nice paving and landscaping. He testified that

McKenney’s sale 2 has superior views to the subject property and he thinks it has a heat pump,

which is an upgrade. Rubbert testified that McKenney’s sale 3 has great landscaping and great

views. He testified that McKenney’s sales 2 and 3 are somewhat superior to the subject

property. Rubbert testified that McKenney’s sales sold in bank sales immediately prior to the

sales described in McKenney’s report.

The 2012-13 tax roll real market value of the subject property was $140,210. (Ptf’s

Compl at 3.) The board of property tax appeals (BOPTA) reduced the 2012-13 real market value

to $110,000. (Id.) The 2012-13 maximum assessed value of the subject property was $154,820.

(Id.) Rubbert verbally amended Plaintiff’s Complaint at trial to request a 2012-13 real market

value of $65,000 for the subject property. Defendant requests the 2012-13 real market value of

the subject property be increased to $120,000. (Def’s Ex A at 2.)

DECISION TC-MD 130085N 5 II. ANALYSIS

The issue before the court is the real market value of the subject property for the 2012-13

tax year. “Real market value is the standard used throughout the ad valorem statutes except for

special assessments.” Richardson v. Clackamas County Assessor (Richardson), TC-MD No

020869D, WL 21263620 at *2 (Mar 26, 2003) (citing Gangle v. Dept. of Rev., 13 OTR 343, 345

(1995)). Real market value is defined in ORS 308.205(1), which states:

“Real market value of all property, real and personal, means 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 2012-13 tax year was January 1, 2012. ORS 308.007; ORS 308.210.

“Real market value in all cases shall be determined by methods and procedures in

accordance with rules adopted by the Department of Revenue.” ORS 308.205(2). There are

three approaches of valuation that must be considered, although all three approaches may not be

applicable: the cost approach, the sales comparison approach, and the income approach.

OAR 150-308.205-(A)(2)(a); Allen v. Dept. of Rev. (Allen), 17 OTR 248, 252 (2003). The real

market value of property is ultimately a question of fact. Chart Development Corp. v. Dept. of

Rev., 16 OTR 9, 11 (2001) (citation omitted).

Plaintiff has the burden of proof and must establish its case by a preponderance of the

evidence. ORS 305.427. A “[p]reponderance of the evidence means the greater weight of

evidence, the more convincing evidence.” Feves v. Dept. of Revenue, 4 OTR 302, 312 (1971). If

the evidence is inconclusive or unpersuasive, Plaintiff will have failed to meet its burden of

proof. See Reed v. Dept. of Rev., 310 Or 260, 265, 798 P2d 235 (1990). “[T]he court has

1 All references to the Oregon Revised Statutes (ORS) and to the Oregon Administrative Rules (OAR) are to 2011.

DECISION TC-MD 130085N 6 jurisdiction to determine the real market value or correct valuation on the basis of the evidence

before the court, without regard to the values pleaded by the parties.” ORS 305.412.

A. Plaintiff’s purchase of the subject property

Plaintiff requests that the 2012-13 real market value of the subject property be reduced to

$65,000, based on Plaintiff’s May 2012 purchase price of $70,000 less the estimated cost of

removing the 924-square foot manufactured home. “A recent sale of the property in question is

important in determining its market value. If the sale is a recent, voluntary, arm’s length

transaction between a buyer and seller, both of whom are knowledgeable and willing, then the

sales price, while certainly not conclusive, is very persuasive of the market value.” Kem v. Dept.

of Rev. (Kem), 267 Or 111, 114, 514 P2d 1335 (1973) (citations omitted). “In the absence of

data indicating that ‘the price paid was out of line with other market data material, we believe [a

recent sale] to be one of the best and most satisfactory standards for the estimation of actual

value although, admittedly, it is not conclusive.’ ” Ernst Bros. Corp. v. Dept. of Rev., 320 Or

294, 300, 882 P2d 591 (1994) (citations omitted).

Under Kem, a sale of the subject property must be recent. 267 Or at 114. “Whether a

transaction is so recent as to be persuasive of present value will depend upon the similarity of

conditions affecting value at the time of the transaction and conditions affecting value at the time

of the assessment.” Sabin v. Dept. of Rev., 270 Or 422, 426-27, 528 P2d 69 (1974). The court

finds that the sale of the subject property in May 2012 was recent as of the January 1, 2012,

assessment date. McKenney testified that there were very few sales in the Whispering Pine

subdivision and market-based adjustments could not be determined. Both parties relied on sales

that occurred seven and eight months after the assessment date. The court finds that market

conditions as of May 2012 were similar to those as of January 1, 2012.

DECISION TC-MD 130085N 7 Under Kem, the sale must also be an “arm’s length transaction.” 267 Or at 114. Here,

there is a question whether Plaintiff’s purchase was “arm’s length.” Rubbert testified that he

purchased the subject property from another person in the same line of work who did not have

time to repair the subject property. There is no evidence that the subject property was listed or

marketed prior to Plaintiff’s purchase. Because Plaintiff’s purchase of the subject property may

not have been “arm’s length,” the court finds the purchase price to be inconclusive and considers

other evidence of real market value provided by the parties.

B. Sales comparison approach

The sales comparison approach “may be used to value improved properties, vacant land,

or land being considered as though vacant.” Chambers Management Corp v. Lane County

Assessor, TC-MD No 060354D, WL 1068455 at *3 (Apr 3, 2007) (citations omitted). The

“court looks for arm’s length sale transactions of property similar in size, quality, age and

location” to the subject property. Richardson, TC-MD No 020869D, WL 21263620 at *3. OAR

150-308.205-(A)(2)(c) states:

“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. When non-typical market conditions of sale are involved in a transaction (duress, death, foreclosures, interrelated corporations or persons, etc.) the transaction will not be used in the sales comparison approach unless market-based adjustments can be made for the non-typical market condition.”

Rubbert presented evidence of three sales that he considered comparable to the subject

property, but made no adjustments to any of his sales. Under OAR 150-308.205-(A)(2)(c),

adjustments must be made for differences. Plaintiff’s comparable sales evidence does not meet

the requirements of OAR 150-308.205-(A)(2)(c). Plaintiff failed to prove by a preponderance of

DECISION TC-MD 130085N 8 the evidence that the real market value of the subject property was $65,000 as of January 1,

2012.

McKenney presented evidence of three sales that he determined would be comparable to

the subject property upon completion of repairs to the subject property. His sales were not,

therefore, comparable to the subject property as of January 1, 2012. McKenney testified that he

could not determine market-based adjustments, but he nevertheless made adjustments based on

his judgment. He provided no evidence in support of his adjustments. McKenney’s sales do not

bracket the subject property. His net adjustment for each sale was downward, indicating that his

sales are all superior to the subject property. “The responsibility of an appraiser is to review and

evaluate market data, and base conclusions on such data. Personal conclusions with no basis in

actual market data are entitled to little or no weight.” McKee v. Dept. of Rev., 18 OTR 58, 64

(2004). Defendant has the burden of proof with respect to its request that the subject property’s

real market value be increased to $120,000. Defendant failed to prove by a preponderance of the

evidence that the real market value of the subject property was $120,000 as of January 1, 2012.

This 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 values pleaded by the parties.”

ORS 305.412. Rubbert testified that, at the time he purchased the subject property, he

anticipated that he would be able to sell it for $120,000 to $130,000 after repairs. However, he

provided no evidence in support of that estimate. There is no evidence that the subject

property’s anticipated sale price, reduced by estimated repair costs, should be the real market

value as of January 1, 2012. Both Rubbert and McKenney agreed that, as of January 1, 2012, it

was not possible to know the cost to repair the subject property. The parties agreed that

Rubbert’s actual cost to repair the subject property was $20,000. Rubbert testified persuasively

DECISION TC-MD 130085N 9 that the actual repair cost of $20,000 was low because he was able to secure deals and discounts.

Unfortunately, Rubbert failed to provide any evidence of the cost to repair the subject property

and the court cannot speculate as to the cost. The evidence presented does not support a change

to the 2012-13 real market value of the subject property determined by BOPTA.

C. Plaintiff’s request for an award of the $240 filing fee

Rubbert verbally requested at trial that the court award Plaintiff the $240 filing fee. He

did not cite any authority in support of his request. ORS 305.490(1)(a) states that “[p]laintiffs or

petitioners filing a complaint or petition in the tax court shall pay the filing fee established under

ORS 21.135 at the time of filing for each complaint or petition.” Taxpayers may file a

Declaration and Application for Waiver of Fee at the time of filing a complaint. There is no

provision in the statutes or court rules for a refund of that fee. This court has previously

determined that “there is no statutory authority for an award of costs and disbursements in the

Magistrate Division of the Oregon Tax Court.” Wihtol v. Multnomah County Assessor, TC-MD

No 120762N, WL 412542 (Jan 30, 2013.) Plaintiff’s request for the $240 filing fee is denied.

III. CONCLUSION

After careful consideration, the court concludes that Plaintiff failed to prove by a

preponderance of the evidence that the real market value of the subject property was $65,000 as

of January 1, 2012. The court concludes that Defendant failed to prove by a preponderance of

the evidence that the real market value of the subject property was $120,000 as of January 1,

2012. The court finds that the evidence does not support a change to the 2012-13 real market

value of the subject property determined by BOPTA. Plaintiff’s request for the $240 filing fee is

denied. Now, therefore,

DECISION TC-MD 130085N 10 IT IS THE DECISION OF THIS COURT that, as determined by BOPTA, the real market

value of property identified as Account 132747 was $110,000 for the 2012-13 tax year.

IT IS FURTHER DECIDED that Plaintiff’s request for the $240 filing fee is denied.

Dated this day of July 2013.

ALLISON R. BOOMER 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.

DECISION TC-MD 130085N 11