IN THE OREGON TAX COURT MAGISTRATE DIVISION Property Tax
HARRY SCHMIDT ) and COLLEEN SCHMIDT, ) ) Plaintiffs, ) TC-MD 140134C ) v. ) ) CLACKAMAS COUNTY ASSESSOR, ) ) Defendant. ) FINAL DECISION
This Final Decision incorporates without change the court’s Decision, entered
February 4, 2015. The court did not receive a statement of costs and disbursements within 14
days after its Decision was entered. See TCR-MD 16 C(1).
Plaintiffs appeal the real market value of property identified as Account 00131075
(subject property) for the 2011-12, 2012-13, and 2013-14 tax years. (Ptfs’ Compl at 1; Ptfs’ Am
Compl at 1.)
A trial was held in the Oregon Tax Courtroom on October 8, 2014, in Salem, Oregon.
W. Scott Phinney (Phinney), an Oregon Registered Appraiser, represented Plaintiffs. Phinney
also testified for Plaintiffs at trial. Todd Cooper (Cooper), a Registered Appraiser with the
Clackamas County Assessor’s office, appeared and testified on behalf of Defendant. Plaintiffs’
Exhibit 1 was received without objection. Defendant’s Exhibits A through J and M were
received without objection.
I. STATEMENT OF FACTS
A. The Subject Property
The parties agree generally on the basic physical characteristics of the property under
appeal (size, quality and condition). (see e.g., Ptfs’ Ex 1 at 13-15; Def’s Ex A at 4.) The subject
FINAL DECISION TC-MD 140134C 1 property is a 5,702 square foot, good quality home on 5.76 acres in Damascus, Oregon. (Ptfs’
Ex 1 at 6; Def’s Ex A at 3.) The home was built in 1997, with at least one remodel or addition in
2001. (Ptfs’ Ex 1 at 6; Def’s Ex A at 3, 5.) The zoning in the area of the subject property is
RRFF5 (rural residential, farm/forest, with a minimum five acre requirement to build).
(Ptfs’ Ex 1 at 4, 7-8.)
The home has a total of 5,702 square feet of finished living space; 3,167 square feet is
above grade, or on the main floor, and 2,535 square feet is finished basement living area. (Ptfs’
Ex 1 at 6; Def’s Ex A at 3, 5.) The home has four bedrooms, three full baths and two half baths.
(Id.) The home has an attached garage. In their comparative sales analyses, Plaintiffs describe
the garage simply as a three-car garage, while Defendant indicates that the garage is 866 square
feet in size and “has room for 3-4 cars.” (Ptfs’ Ex 1 at 13-15; Def’s Ex A at 3-4.)
Additional amenities directly associated with the home include a 50-year composition
roof, stucco siding, wood decks, multiple concrete patios and ornamental copper downspouts.
(Ptfs’ Ex 1 at 6; Def’s Ex A at 3.) The parties further agree that the home’s additional interior
features include granite tile kitchen counters, marble and hardwood floors, good or high quality
kitchen appliances, two gas fireplaces, and a free-standing gas stove. (Ptfs’ Ex 1 at 6; Def’s
Ex A at 3.)
The subject property also has an in-ground pool, a pool house, a large shop, a barn with
an attached lean-to, and a tennis court. (Ptfs’ Ex 1 at 6; Def’s Ex A at 3, 8.) Defendant’s
appraisal report indicates that the pool includes a “pool house and full bath, multiple
outbuildings, a fenced tennis court and full landscaping.” (Def’s Ex A at 3.) Plaintiffs did not
challenge that description, and their written opinion of value includes some of that information.
(Ptfs’ Ex 1 at 6.) According to Defendant, “The tennis court is 24 x 70 [feet] with asphalt
FINAL DECISION TC-MD 140134C 2 paving, full chain link perimeter fencing and a built-in net assembly.” (See Def’s Ex A at 3.)
Plaintiffs did not challenge that description of the tennis court, and the court accepts it as fact.
Defendant’s report further stated that “[t]he outbuildings consist of a 60 x 68 [foot] steel frame
shop with concrete floor, full electrical, 144 square foot finished office, full bath and a
30 x 12 [foot] outbuilding. (Id.) The barn structure is 20 x 40 [feet] with an attached 20 x 20
[foot] machine shed and a 50 x 10 [foot] lean to.” (Id.)
Defendant submitted photographs of the subject property depicting the pool, pool house,
barn, shop, tennis court, and photos of the home’s interior amply depicting the quality and
condition of the home, including the living room, dining room, kitchen, family room, master
bedroom and master bath, den, recreation room, wet bar, wine room, and guest bathroom.
(Def’s Ex A at 15-22.) Those photographs show the marble, tile, and granite, as well as dark
wood accents and specialty lighting. (Id. at 16-19.)
Phinney testified that the property’s location as “out in the middle of nowhere, about
three miles off Highway 212.” In his report, Cooper describes the neighborhood as “comprised
mainly of single family homes built from 1960 to 1996 with average to good overall quality.
Small commercial, light industrial and multi-family uses are present in the subject neighborhood,
but make up less than 10% of the total land use.” (Def’s Ex A at 3.) Cooper stated in his report
that “[e]mployment opportunities, public transportation, shopping and additional public
amenities are located in close proximity to the subject.” (Id.)
B. Tax Roll Values and the Parties’ Value Requests
The real market value on the assessment and tax rolls for the years at issue is $699,791
for the 2011-12 tax year, $648,517 for the 2012-13 tax year, and $704,868 for the 2013-14 tax
year. (Ptfs’ tax statements, filed Apr 23, 2014; Ptfs’ Compl at 2.)
FINAL DECISION TC-MD 140134C 3 Plaintiffs originally requested a real market value of $525,000 for each of the three tax
years under appeal. (Ptfs’ Compl at 1.) Plaintiffs filed an Amended Complaint requesting real
market values of $470,000, $500,000, and $525,000, respectively, for tax years 2011-12,
2012-13, and 2013-14. (Ptfs’ Am Compl at 1.) Plaintiffs again revised their request at trial,
based on a written opinion of value, to $460,000, $520,000, and $490,000, respectively, for the
three tax years at issue. (Ptfs’ Ex 1 at 12.)
Defendant requested at trial that the court sustain the values on the roll for tax years
2011-12 and 2013-14, and that the court dismiss Plaintiffs’ appeal for the 2012-13 tax year
because it does not meet the 20 percent statutory threshold requirement under ORS 305.288. A
dismissal of the 2012-13 tax year would have the effect of sustaining the values currently on the
roll for that tax year.
C. Plaintiffs’ Evidence and Appraisal
1. General Overview and the Approaches to Value Considered and Used
Plaintiffs submitted a summary format appraisal “with support coming from work files
not included in the report.” (Ptfs’ Ex 1 at 8.) Phinney states in his report that he considered the
three standard approaches to value (cost, income, and comparable sales), but that, due to the “age
and type of * * * property” being appraised, the cost approach was deemed unreliable and
therefore not used because there was a “distressed market for residential properties during the
time period at issue,” and “significant subjective adjustment[s] for economic obsolescence”
would need to be made. His report also indicates that “typical buyers for this type of property do
not rely on the cost approach.” (Id. at 8-9.) Phinney also rejected the income approach because
the subject property “is not income producing.” (Id. at 9.) Phinney therefore relied solely on the
comparable sales approach. (Id.)
FINAL DECISION TC-MD 140134C 4 2. The Subject Property, Factors Influencing Selection of Comparables, and Market Conditions
During his testimony, Phinney described the subject property as a very good quality,
large home, in the middle of nowhere, about three miles off Highway 212.” Phinney further
testified that the “big issue” in this case is the size of the subject property - a home in excess of
5,600 square feet. Phinney testified that it was important to select comparable sales that were
similar in size, located in the same market area, which he determined to be Multiple Listing
Service (MLS) area 145, and that sold within the window six months before to six months after
the applicable assessment date for each tax year (thus bracketing the assessment date).
According to Plaintiffs’ evidence, MLS area 145 encompasses Milwaukie and Clackamas. (Ptfs’
Ex 1 at 28-31.) Phinney explained during his presentation of Plaintiffs’ case in chief that during
calendar year 2013, MLS areas 143, 144, and 145 had sales price percentage changes of 18.1
percent (MLS area 143), 14.4 percent (MLS area 144), and 13.2 percent (MLS area 145).
Phinney then testified that that data, which represents market conditions in 2013, explains why
he chose only comparables for market area 145. (Id. at 28.) However, all of Phinney’s
comparable sales are of properties in the town of Damascus, which is where the subject property
is located. (Ptfs’ Ex 1 at 13-15.)
Phinney further testified that the location of the subject property made the home
“unique.” Phinney testified that he considered the size of the lot to be another important factor in
this case in terms of the selection of comparable sales.
Phinney further testified that, in his professional opinion, the real estate market “crash” in
2007 continued into 2012, and is possibly still going on “today.” That market phenomenon,
Phinney testified, diminished the market and made it hard to find comparable sales. Phinney
testified that adjustments had to be made through “market extraction” and “cost factors,” but not
FINAL DECISION TC-MD 140134C 5 costs from the Department of Revenue manual. He further testified that paired sales were not
possible. For each assessment year, Phinney selected the four best sales from his comparable
sales search criteria discussed above.
3. Comparables Selected and Types of Adjustments Made
Phinney used four comparable sales for each of the three tax years at issue. (Ptfs’ Ex 1
at 13-15.) The court will focus its analysis on tax years 2011-12 and the 2013-14 because
Phinney acknowledged that his value estimate for the 2012-13 tax year did not result in an
alleged error of at least 20 percent, which is a statutory requirement for both the 2011-12 and
2012-13 tax years, as explained below.1
Phinney testified that all of his comparable sales are in the town of Damascus and are
within five miles of the subject property. His appraisal report substantiates that fact. (Id.)
Phinney considered a host of factors for the adjustments he made to his comparable sales.
Phinney adjusted for date of sale, sale type (short sales and the bank-owned properties, of which
there were three), lot size, location, year built, quality, condition, and above grade versus below
grade finished and unfinished living space, number of spaces in the garage, number of bathrooms
and bedrooms, HVAC (heating, ventilation, air conditioning), fireplaces, view, and “outdoor
features[.]” (Ptfs’ Ex 1 at 10-11.) Plaintiffs’ most significant adjustments, in terms of dollars,
were for sale type, lot size, “area,” which boiled down to whether the comparable was located in
a gated community or not (Phinney giving a negative $50,000 adjustment for homes in a gated
community), size of the homes, year built and view. (Id. at 13, 15.)
///
1 Although Phinney’s appraisal includes valuation evidence for the 2012-13 tax year, the court finds it unnecessary to discuss Plaintiffs’ evidence for that tax year because Plaintiffs have failed to meet the 20 percent statutory threshold for prior year appeals required by ORS 305.288(1)(b), and addressed in the Analysis section of the court’s Decision.
FINAL DECISION TC-MD 140134C 6 4. Tax Year 2011-12
Phinney’s unadjusted sale prices for his four comparables used for the 2011-12 tax year
were $550,000, $525,000, $447,500, and of $335,000. (Ptfs’ Ex 1 at 13.) Those sales are
comparables 1 through 4, respectively. (Id.) Phinney’s net adjustments for those four
comparables were $11,480, negative $68,213, $12,073, and $109,020, respectively. (Id.) His
adjusted values for the 2011-12 tax year were $561,480, $456,788, $459,573, and $444,020.
(Id.) Phinney testified that his comparable sales one and three had small net adjustments (unlike
comparable sales 2 and 4), but that comparable 1 had a second home, therefore, comparable 3
was the “best” comparable for 2011. Phinney’s appraisal aligns with his testimony, indicating
that comparable sale number 3 “is the best indication of value” as of January 1, 2011 (2011-12
tax year). (Id. at 11.) That property sold for $447,500, is located three miles from the subject,
sits on a 0.69 acre lot (compared to the subject’s 5.76 acre lot), is 760 square feet smaller than
the subject, and was a bank sale that was on the market for 45 days, leading the appraiser to
apply a positive adjustment of $22,375 to account for the bank influence. (Id. at 13, 18.)
Phinney’s comparable 1, the other sale he used that had small overall (net) adjustments, sold for
$550,000, and with net adjustments of $11,480, had an adjusted sale price of $561,480. (Id. at
13.) Based on the conclusion that sale 3 was his best comparable, Phinney estimated the value of
the subject property for tax year 2011-12 to be $460,000 ($427 more than the adjusted sale price
of Phinney’s comparable sale 3). (Id. at 11, 12.)
5. Tax Year 2013-14
For the 2013-14 tax year, Phinney’s four comparables sold for $572,000, $459,900,
$509,000, and a $540,000, respectively. (Ptfs’ Ex 1 at 15.) Phinney’s net adjustments were a
negative $83,761, negative $102, $45,830, and negative $5,505, respectively, for comparables 1
FINAL DECISION TC-MD 140134C 7 through 4. (Id.) His adjusted values for his comparables 1 through 4 are $488,239, $459,798,
$554,830, and $534,495. (Id.) One of the four comparable sales (comparable 1) was a bank
sale. Three of the four properties are on acreages relatively similar to the subject property’s 5.76
acres (4.76 acres, 4.6 acres, and 5.95 acres, respectively, for sales 1, 2, and 4). (Id.) Two of the
four sales (comparables 2 and 4) are located within a half mile or less from the subject property.
(Id.) Phinney indicates in his appraisal that his comparables 2 and 4 are his “best indications of
value.” (Id. at 12.) Phinney acknowledges in his report that those comparables “create[] a wide
range of value,” with adjusted sale prices of $459,798 and $534,495. (Id. at 12, 15.) Phinney
gave comparable 2 “slightly more weight,” concluding that the subject property’s “value as of
January 1, 2013 is $490,000.” (Id. at 12.) Comparable 2 sold on March 4, 2013, several months
after the applicable assessment date. (Id. at 15.) The home is located on a 4.6 acre lot, was built
in 2003, and has a total square footage very similar to the subject property (5,550 square feet for
comparable 2 and 5,702 square feet for the subject property). (Id.) The subject property’s total
above grade finished living space is 3,167 square feet and Plaintiffs’ comparable 2 has 3,250
square feet of above grade finished living space; the subject property has 2,535 square feet of
below grade (or basement) finished space and comparable 2 has 2,300 square feet of finished
below grade living space. (Id.)
D. Defendant’s Evidence and Appraisal
1. General Overview and the Approaches to Value Considered and Used
Cooper considered all three approaches to value in his “summary appraisal report,” but
utilized only the sales comparison and cost approaches, finding the income approach
inappropriate because the subject property is not the type of property that generates income.
(Def’s Exs A at 9, D at 9, G at 9.) Cooper testified that, although he included a valuation using
FINAL DECISION TC-MD 140134C 8 the cost approach, he gave that approach little weight. According to both Cooper’s testimony
and his appraisal report, Defendant relied primarily on the sales comparison approach, which,
according to his report, “was given the most consideration as it[] best represents the actions of
buyers and sellers of similar properties in the current marketplace.” (Def’s Ex A at 14.)
2. Factors Influencing Selection of Comparables, and Market Conditions
Cooper testified during his case in chief that he searched for larger homes on rural
acreage properties in the towns of Boring, Damascus, and outer Sandy. Cooper testified that,
over his 20-plus years of residential appraiser experience as a licensed and certified appraiser in
Oregon and Washington, he has appraised “hundreds of properties in that area[,]” and that he
owned a home one quarter mile away from the subject property.2 Cooper testified that buyers do
not ask to see homes that are in MLS area 145, or the town of Damascus, as Phinney contended.
Rather, as stated above, prospective buyers of homes similar to the subject property are looking
for rural acreage properties with larger homes in and around Damascus. Cooper testified on
cross-examination that important factors to be considered in selecting comparable sales are the
market area, which he described as the “primary factor,” the size of the home based on above
grade square footage, and the size of the property, testifying that it was important that the
comparables selected were on “acreage[.]”
Cooper testified that the parties disagree on what the market was doing. Cooper states in
his report that, for the 2011-12 tax year, “[t]he subject market (as of the effective date of
appraisal) was slow with a decline in property values over the twelve months prior. * * * The
decline was a result of an oversupply of inventory, decreased demand and increased difficulty in
2 Cooper’s appraiser qualifications appear in Defendant’s Exhibit A at 25. Cooper began as a registered assistant appraiser in Oregon in 1992, was licensed in Oregon and Washington in 1994, and certified in both states in 2006.
FINAL DECISION TC-MD 140134C 9 obtaining buyer financing.” (Def’s Ex A at 3.) Cooper determined that property values “were
generally stable” for the 12 months prior to tax years 2012-13 and 2013-14. (Def’s Exs D at 3,
G at 3.)
Cooper relied on a total of 18 sales he deemed comparable to the subject property in his
comparable sales approach, six for each tax year. (Def’s Ex A at 4, D at 4, G at 4.) Cooper
testified that, of the 18 sales, one was a “short sale,” and another a “bank sale.” (see also Def’s
Ex D at 9). Cooper testified that he made a $53,600 upward adjustment (9 percent) to his bank
sale, which is his comparable 4 for the 2012-13 tax year. (Def’s Ex D at 4, 9.) Cooper
acknowledged on cross-examination that he made no adjustment to his comparable 2 (also for
the 2012-13 tax year), because it was, in Cooper’s opinion, not a “typical” short sale. However,
because the 2012-13 tax year is being dismissed for lack of jurisdiction (see Analysis below), the
court will limit any discussion of Defendant’s value evidence for that year to minimal relevant
references.
Cooper also made adjustments for differences between the subject property and his
comparable sales that were “derived from the market using paired sales analysis and extraction
techniques [which] are supported by the local RMLS statistics, local cost guides, personal data
banks and conversations with professionals deemed a knowledgeable in this area.” (Def’s Exs
A at 7, G at 7.) Those adjustments included date of sale, lot size, neighborhood, quality, year
built (age), condition, square footage of the home (above and below grade), differences in the
garage area, number of bathrooms, and exterior amenities (e.g., swimming pool, pool house,
shops, barns, tennis courts). (Def’s Exs A at 4, 7-8; G at 4, 7-8.)
FINAL DECISION TC-MD 140134C 10 4. Cost Approach
For his cost approach, Cooper determined a land value based on “land valuation studies
of the subject area by the [assessor’s] office[,]” and construction costs “from the Oregon
Department of Revenue Cost Factor Book adjusted for location and time.” (Def’s Exs A at 9,
G at 8-9.) Cooper notes in his report that “[t]he cost approach was the basis for the original
valuation of the subject property for this assessment year [2011-12] and has been included in its
report.” (Def’s Exs A at 14, G at 14.) Cooper goes on to note that “the recent inspection of the
subject property resulted in a correction of the building sketch and outbuilding inventory changes
[and that] [d]ue to the recent changes, the cost approach * * * is not felt to be the best indicator
of market value and was given less consideration in the development of the market value
estimate.” (Id.) Cooper’s value estimates under the cost approach for the three years at issue are
$699,791 as of January 1, 2011, and $704,868 as of January 1, 2013. (Id.) Cooper’s trial
testimony focused almost entirely on the sales comparison approach, discussed immediately
below.
5. Comparable Sales Approach
a. Tax Year 2011-12
Cooper used six comparable sales for each of the three tax years at issue. (Def’s Exs A
at 4, D at 4, G at 4.) Cooper’s unadjusted sale prices for the 2011-12 tax year range from a low
of $439,850 to a high of $950,000. (Def’s Ex A at 4.) His sales for that year occurred between
August 2010 (comparable 3) and June 2011 (comparable 6). (Id.) Cooper made adjustments for
differences in acreage, year built, total above grade square footage, total basement square
footage, square footage of the garage, number of bathrooms and fireplaces, and exterior
amenities. (Id.) His net adjustments for the 2011-12 tax year were $125,000, $95,400,
FINAL DECISION TC-MD 140134C 11 $130,500, $58,100, $192,200, and negative $97,400, respectively, for comparables 1 through 6.
(Id.) Cooper’s adjusted sale prices for his six comparables were $685,000, $595,400, $715,500,
$578,100, $632,050, and $852,600, respectively. (Id.) Cooper testified that his comparable 1 is
located on the same street as the subject property, is of similar quality, condition, has more above
grade square footage but no basement, and was an arm’s-length sale. However, although the
subject property has a total of 5,702 square feet of finished living space, with 3,167 square feet
of above grade living space and 2,535 square feet of finished basement area, Cooper’s
comparable 1 has 3,279 square feet of total finished living space, all of which is above grade.
(Id. at 3-4.) Cooper made a net adjustment to his comparable 1 for the difference in size of
$43,400.3
b. Tax Year 2013-14
For the 2013-14 tax year, Cooper’s unadjusted sale prices ranged from a low of $507,000
to a high of $730,000. (Def’s Ex G at 4.) Cooper’s sales occurred between June 2012
(comparable 5) and May 2013 (comparables 2 and 6). (Id.) Cooper made the same adjustments
to his 2013-14 comparables that he did for his comparables for the two prior tax years. (Id.) His
net adjustments were $142,500, $82,900, $32,100, $168,600, negative $22,325, and $75,185,
respectively, for comparables 1 through 6. (Id.) Cooper’s final adjusted sale prices were
$692,000, $669,900, $647,000, $675,600, $707,675, and $700,185, respectively. (Id.) Cooper
briefly testified to the adjusted value range of $647,000 to $707,675 and advised the court that
his value estimate was $683,000 for the 2013-14 tax year. Cooper’s appraisal report indicates
that comparables 2, 3, 5 and 6 were “felt to be the best indicators of market value” because of
3 Cooper made a negative $7,300 adjustment for the larger amount of above grade living space, and a positive adjustment of $50,700 for the 2,535 square feet enjoyed by the subject, but lacking in his comparable number one. (Def’s Ex A at 4.)
FINAL DECISION TC-MD 140134C 12 their lower overall net adjustments. (Id. at 8.) Those four properties had adjusted sale prices of
$669,900, $647,000, $707,675, and $700,185. Those properties are located between
approximately two and one half miles and five miles from the subject property. (Id. at 4.) None
of those properties had below grade, or basement, living space, and total square footages are
3,074 square feet, 3,925 square feet, 4,872 square feet, and 4,038 square feet, respectively, for
comparables 2, 3, 5 and 6. (Id.)
II. ANALYSIS
The issue before the court is the real market value of the subject property for tax years
2011-12, 2012-13, and 2013-14.
A. Jurisdiction
The court has jurisdiction to hear property tax valuation appeals for the “current tax year”
under ORS 305.275(1) 4 provided the party is aggrieved and, under subsection (3), has appealed
“from an order of the board [of property tax appeals] as a result of the appeal filed under
ORS 309.100.”
Plaintiffs’ appeal for the 2013-14 tax year was timely filed from an order of the county
board of property tax appeals. The court therefore has jurisdiction to consider that tax year.
Plaintiffs’ appeal for the 2011-12 and 2012-13 tax years was filed under ORS 305.288(1).
The relevant provision in that statute requires that the taxpayer asserts, and the court determines,
“that the difference between the real market value of the property for the tax year and the real
market value on the assessment and tax roll for the tax year is equal to or greater than 20
percent.”
4 Unless otherwise noted, the court’s references to the Oregon Revised Statutes (ORS) are to 2011.
FINAL DECISION TC-MD 140134C 13 Plaintiffs have alleged an error in the real market value of their property in excess of 20
percent for the 2011-12 tax year; they have not alleged an error of at least 20 percent for the
2012-13 tax year. The real market value on the rolls for the 2012-13 tax year is $648,517, and
Plaintiffs have requested a real market value of $520,000. That allegation amounts to an alleged
error of 19.8 percent. Although that number is close to the 20 percent statutory threshold, it must
be at least 20 percent. Phinney acknowledged that during closing argument, adding that the
statute would be satisfied if the court were to find that the evidence supported a slightly lower
value than the $520,000 request. The evidence does not support such a finding, and more
importantly, the statute makes the allegation of an error in value of at least 20 percent necessary
for the court to order a change or reduction in value. ORS 305.288(1)(b). The pertinent
language in the statute provides that “[t]he change or correction requested is a change in value
* * * and it is asserted in the request and determined by the tax court that the difference between
the real market value [of the property versus the] real market value on the assessment and tax roll
* * * is equal to or greater than 20 percent.” Id. (emphasis added).
B. Real Market Value and the Burden of Proof
ORS 308.205(1) defines RMV in part as:
“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.”
The assessment dates for the three years at issue are January 1, 2011, January 1, 2012,
and January 1, 2013. ORS 308.007; ORS 308.210. Plaintiff has the burden of proof and must
establish its case by a preponderance of the evidence. ORS 305.427. This court has previously
ruled that “[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) (citation omitted).
FINAL DECISION TC-MD 140134C 14 Burden of proof requires that the party seeking relief (Plaintiffs in this case) provide
evidence to support their position (value). The evidence that a plaintiff provides must be
competent evidence of the requested real market value of the property in order to sustain the
burden of proof. Woods v. Dept. of Rev., 16 OTR 56, 59 (2002). “Competent evidence includes
appraisal reports and sales adjusted for time, location, size, quality, and other distinguishing
[features or characteristics], and testimony from licensed professionals such as appraisers, real
estate agents and licensed brokers.” Betz Evans Associates v. Lane County Assessor, TC-MD
110329C, WL 4714961 at *3 (Oct 4, 2012); Toy Box Maxi-Storage LLC v. Jackson County
Assessor, TC-MD 110339C, WL 1958943 at *3 (May 31, 2012); see also Poddar v. Dept. of
Rev., 18 OTR 324, 332 (2005).
There are three standard methods of valuation for determining real market value, as
prescribed by statute and administrative rule. ORS 308.205(2) states that “[r]eal market value in
all cases shall be determined by methods and procedures in accordance with rules adopted by the
Department of Revenue * * *.” The department’s rule prescribes the following three methods of
valuation: (1) the cost approach, (2) the sales comparison approach, and (3) the income
approach. OAR 150-308.205-(A)(2)(a); see also Allen v. Dept. of Rev. (Allen), 17 OTR 248,
252 (2003). The administrative rule requires that consideration be given to the three approaches
to value (income, cost, and sales comparison), but they need not all be used. OAR 150-308.205-
(A)(2)(a); see also Allen, 17 OTR at 252; Gangle v. Dept. of Rev., 13 OTR 343, 345 (1995). The
valuation approach or approaches to be used is “a question of fact to be determined by the court
upon the record.” Pacific Power & Light Co. v. Dept. of Revenue, 286 Or 529, 533, 596 P2d 912
(1979).
FINAL DECISION TC-MD 140134C 15 Finally, “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 values pleaded by the
parties.” ORS 305.412.
C. The Court’s Analysis of the Evidence
Bearing in mind that Plaintiffs have the burden of proof to establish an error in the record
assessment, the court finds it unnecessary to go into extensive detail about the parties’ respective
appraisals and testimony. Both appraisers have problems with their valuation evidence.
1. Plaintiffs’ Evidence - Tax Year 2011-12
Looking first at Plaintiffs’ evidence for the 2011-12 tax year, the court notes that all four
properties were either short sales or bank (REO) sales. (Ptfs’ Ex 1 at 13.) Phinney adjusted
three of the four comparables by $26,250 (comparable 2), $22,375 (comparable 3), and $16,750
(comparable 4). (Id.) The court is also troubled by the magnitude of the adjustments that
Phinney applied to comparables 2 through 4. Comparable 2 has total negative adjustments of
$247,363, comparable 3 has positive adjustments totaling $161,775, and comparable 4 has
positive adjustments of $195,545. Those adjustments are significant when compared to the
unadjusted sale prices of $525,000, $447,500, and $335,000, respectively, for comparables 2
through 4. (Id.) They amount to adjustments of approximately 36 percent (comparable 3), 47
percent (comparable 2), and 59 percent (comparable 4). (See Agripac, Inc. v. Dept. of Rev., 11
OTR 371, 376 (1990) (Defendant made adjustments amounting to between 44 percent and 70
percent of the sale prices and the court found that “[s]uch large adjustments make any
comparisons unreliable.”). Plaintiffs’ adjustments in this case are close to that magnitude, and
are significant enough to be troubling to the court. Plaintiffs’ sales were, admittedly, offset by
correspondingly high adjustments on the other side of the ledger (comparable 2 having positive
FINAL DECISION TC-MD 140134C 16 adjustments totaling $179,150, comparable 3 having negative adjustments totaling $149,702, and
comparable 4 having negative adjustments totaling $86,525). Thus, although Plaintiffs’ overall
net adjustments are not too significant for three of the four comparable sales (comparable 4 being
the exception, with total net adjustments of $109,020 compared to a sale price of $335,000), the
magnitude of the adjustments leads the court to conclude that those sales are not truly
comparable. Both parties acknowledged the difficulty in finding “good” comparables, and their
evidence bears that out.
Looking more closely at the evidence, Phinney made a total of 13 individual adjustments
exceeding $40,000 to the four “comparable” sales, with two adjustments of negative $156,300
and negative $133,125 (to comparables 2 and 3). (Ptfs’ Ex 1 at 13.)
Phinney testified that, in his professional opinion, comparable 3 was his best comparable.
That property was a bank sale of a 4,942-square-foot home on 0.69 acre, which had a $50,700
adjustment for the difference in lot size, a $22,375 adjustment for the bank influence, a negative
adjustment of $133,125 for the difference in the size of the total above grade living space, a
$50,700 adjustment for the lack of any below grade living space (whereas the subject property
has 2,535 square feet of finished below grade living space), and a $35,000 adjustment for lesser
“outdoor features,” identified in the report as “pool/water fea.” (Id.) With total negative
adjustments of $149,702 and total positive adjustments of $161,775, applied to a property sold
by a bank for $447,500, the court rejects Phinney’s opinion that comparable 3 is the best
comparable. More accurately, the court finds that sale to not be truly comparable, as it does the
other three sales included in Plaintiffs’ appraisal as comparable sales. Additionally, Phinney’s
comparable 3 was sold “as is,” and was on the market for only 45 days before the bank sold it.
FINAL DECISION TC-MD 140134C 17 (Ptfs’ Ex 1 at 10, 18.) Those factors collectively suggest that comparable 3 was a distressed sale
and not indicative of the market.
The court is mindful of the fact that Phinney testified that short sales and “REOs”
comprise up to 36 percent of sales, which he testified makes those sales “usable,” but the court
finds that not to be the case, given the fact that Defendant found 16 sales of homes that were
neither short sales nor bank sales (including the sales Defendant used for tax year 2012-13).
And, Phinney testified that both comparables 1 and 3 had small net adjustments, making them
both good indicators of value, but that comparable 1 had a second home, which according to
Cooper, was not actually the case. While Phinney relied on the MLS listing for that sale, which
refers to both a pool house and “2ND RES[,]” Cooper testified that he spoke with the listing
agent, and was told that the home had a pool house with a kitchen, but no second residence. That
calls into question Phinney’s negative $50,000 adjustment to comparable 1 because that home
included a pool and living quarter-style pool house that included a kitchen, which is superior to
the subject property’s pool house.5 Plaintiffs’ appraisal report states the “the subject property
enjoys about $50,000 in value from its outdoor structures,” and that “adjustments were made
based on the comparative value of the comparable sales outdoor structures[,] [which] can include
a pool, pool house, shed, barn, corral, shop, tennis court, detached garage, water feature, second
house, etc.” (Ptfs’ Ex 1 at 11.) It would seem that an adjustment of less than negative $50,000
would have been appropriate. That, of course, would have the effect of increasing the adjusted
sale price above Phinney’s $561,480 figure, and well above his $460,000 value conclusion for
the 2011-12 tax year. Given that Phinney appears to have relied on the adjusted sale price of his
5 Phinney’s appraisal report simply refers to that structure as a pool house; Cooper’s report states that there is a “pool house and full bath.” (Ptf’s Ex 1 at 6; Def’s Ex A at 3.) There is no mention of a kitchen and the subject property’s pool house and the bathroom look utilitarian; the quality being far less than the finish and condition of the subject’s main residence.
FINAL DECISION TC-MD 140134C 18 comparable 3 in arriving at his final value conclusion (which had an adjusted sale price of
$459,573), it appears to the court that a figure in excess of $561,480 (Phinney’s adjusted sale
price for his comparable 1) is supported by Plaintiffs’ data. But, the court has already chronicled
its concerns with Plaintiffs’ appraisal evidence for the 2011-12 tax year, which renders Plaintiffs’
value conclusion unpersuasive, even if adjusted by the court.
2. Plaintiffs’ Evidence - Tax Year 2013-14
Plaintiffs have similar problems with the 2013-14 tax year. Plaintiffs’ comparable 1 has
a single negative adjustment of $247,125 for its larger amount of above grade living space (6,462
square feet versus 3,167 square feet for the subject property), which amounts to 43 percent of the
unadjusted sale price of $572,000. (Ptfs’ Ex 1 at 15.) Plaintiffs’ comparables 1 through 3 have
numerous particularly large adjustments – eight in excess of $30,000. (Id.) Plaintiffs’ best
comparable (comparable 2) had practically offsetting adjustments of approximately 13 percent of
the sale price, and the other three comparables had substantially larger adjustments on a
percentage basis. Comparables 1 and 3 are particularly noteworthy in that comparable 1 had
total negative adjustments of $276,125 and total positive adjustments of $192,364, and
comparable 3 had total negative adjustments of $104,196 and total positive adjustments of
$150,025, compared to sale prices of $572,000 for comparable 1 and $509,000 for comparable 3.
(Id.) And, three of the four sales are considerably newer than the subject property, having been
built in 2004 (comparable 1), 2003 (comparable 2), and 2005 (comparable 3). (Id.)
Additionally, all four of Plaintiffs’ sale comparables for the 2013-14 tax year were on the
market for relatively short periods of time, especially given Phinney’s testimony about the poor
economy and “distressed” housing market. Those comparables were on the market for 16 days,
50 days, 7 days, and 51 days, respectively, for comparables 1 through 4. (Id. at 24-27.)
FINAL DECISION TC-MD 140134C 19 Considering Phinney’s testimony that typically homes sell between 30 and 180 days, the short
amount of time that those properties were on the market suggests to the court that those sales
were nontypical transactions, with buyers cashing in on deals made available by owners who
appear to have been somewhat desperate to sell. Those homes are all very high-end properties
and sold for between $83 per square foot (comparable 2) and $110 per square foot (comparable
4).6 (Id. at 15.) Phinney identified those two properties as his best comparables and, notably,
testified that comparable 2, which sold for $83 per square foot, the least amount of his four sales,
was the best comparable and most indicative of the value of the subject property after
adjustments. Phinney also acknowledged on cross-examination that he should have made a
larger adjustment for the condition of his comparable 1, which he already adjusted upwards
$57,200.
3. Additional Comments Regarding Plaintiffs’ Appraisal
Looking at Plaintiffs’ appraisal evidence for tax years 2011-12 and 2013-14, the court
notes that, although Phinney asserted during closing argument that acreage (size of the lot) was
not an important factor, he adjusted all of his comparable sales for differences in lot size, and
four of the eight by more than $40,000 (comparables 2, 3, and 4 for the 2011-12 tax year and
comparable 3 for the 2013-14 tax year). Plaintiffs have not presented properly adjusted
comparable sales. Richardson v. Clackamas County Assessor, TC-MD 020869D, WL 21263620
at *3 (Mar 26, 2003) (ruling that under the sales comparison approach, the court looks at arm’s
length sales transactions of similar property to determine a correct real market value). “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
6 The court calculated the per-square-foot prices based on total square footage and unadjusted sale price.
FINAL DECISION TC-MD 140134C 20 evaluating properties.” Voronaeff v. Crook County Assessor, TC-MD 110361C, WL 1426847
at *3 (Apr 25, 2012).
Additionally, during the evidentiary portion of the trial, Phinney testified that he
considered the size of the lot to be an important factor in terms of the selection of comparable
sales (along with location). However, during closing argument, Phinney stated that overall living
area was of primary importance, and that prospective buyers might or might not want a lot of
acreage, so acreage was “not as important.” Phinney added that buyers of homes like the subject
might want to be located in a gated community (the subject is not in such a community). Those
statements are conflicting and cause the court to question the reliability of Plaintiffs’ appraisal.
The court could discuss additional concerns it has with Plaintiffs’ appraisal, but finds the
above-mentioned problems sufficient to support its conclusion that Plaintiffs’ evidence does not
establish by a preponderance of the evidence that the values on the rolls for tax years 2011-12
and 2013-14 are more likely than not in error. And the court lacks jurisdiction to consider tax
year 2012-13.
4. Defendant’s Evidence
To begin with, Defendant has requested that the court sustain the current roll values of
$699,791 for the 2011-12 tax year and $704,868 for the 2013-14 tax year, and that the court
dismiss Plaintiffs’ appeal for tax year 2012-13 for failure to meet the statutorily required
allegation of a minimum 20 percent error in the value of the subject property as required by
ORS 305.288(1)(b).
Additionally, there are problems with Defendant’s appraisal. Defendant found it
necessary to make 15 individual adjustments to its six comparable sales for the 2011-12 tax year
in excess of $40,000 each. (Def’s Ex A at 4.) All of the comparable sales are considerably
FINAL DECISION TC-MD 140134C 21 smaller than the subject property, ranging in size from a low of 2,168 square feet (comparable 5)
to a high of 4,157 square feet (comparable 4), and three of the homes are under 3,000 square feet,
whereas the subject property is 5,702 square feet. Two of Defendant’s adjustments exceed
$70,000; one being for the difference in square footage between the subject property and
comparable 2, and the other for the difference in quality between the subject property and
comparable 6, with the latter being deemed superior and receiving a negative $76,000
adjustment. (Id.) Cooper testified on direct that it was difficult to find comparables. The
comparables chosen by the parties certainly seem to support that testimony.
As for the 2013-14 tax year, five of the six comparable sales are on considerably smaller
lots, ranging in size from a low of 1 acre to a high of 2.96 acres compared to the subject
property’s 5.76 acres. (Def’s Ex G at 4.) As with the 2011-12 tax year, Defendant found it
necessary to make sizable adjustments for a number of differences between the comparable sales
and the subject property. Cooper applied 11 adjustments in excess of $50,000 for sales of homes
of between $507,000 and $730,000. (Id.) And, Cooper made seven other adjustments that are
between $30,000 and $50,000. (Id.) Finally, four of the six comparable sales are post-
assessment date transactions. (Id.)
5. Reconciliation
Although the court, under ORS 305.412, “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,” the court finds the evidence in this case insufficient to determine
a value for the subject property for either tax year 2011-12 or 2013-14. In addition, as indicated
above, Plaintiffs have not alleged an error in value of at least 20 percent (nor alleged good and
FINAL DECISION TC-MD 140134C 22 sufficient cause) for the 2012-13 tax year, which leaves the court without court jurisdiction to
consider that tax year.
III. CONCLUSION
After careful consideration of the evidence before it, the court concludes that Plaintiffs’
appeal must be denied for the 2011-12 and 2013-14 tax years and dismissed for the 2012-13 tax
year. Plaintiffs failed to establish by a preponderance of the evidence that there was an error in
the real market value of the subject property, identified as Account 00131075, for tax years
2011-12 and 2013-14. Plaintiffs’ appeal for tax year 2012-13 is dismissed for lack of
jurisdiction, Plaintiffs having failed to allege an error in value of at least 20 percent, as required
by ORS 305.288(1)(b). Now, therefore,
IT IS THE DECISION OF THIS COURT that Plaintiffs’ appeal of property identified as
Account 00131075 is denied for the 2011-12 and 2013-14 tax years.
IT IS FURTHER DECIDED that Plaintiffs’ appeal is dismissed for the 2012-13 tax year.
Dated this day of February 2015.
DAN ROBINSON MAGISTRATE
If you want to appeal this Final 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 Final Decision or this Final Decision cannot be changed. TCR-MD 19 B.
This document was signed by Magistrate Dan Robinson on February 24, 2015. The court filed and entered this document on February 24, 2015.
FINAL DECISION TC-MD 140134C 23