Posted by Cochise on April 08, 2008 at 10:27:57:
In Reply to: Re: MASS APPRAISAL MYTH MESS! Richard Dick Hoffman MAI posted by Cochise on April 07, 2008 at 15:35:12:
OHIO BOARD OF TAX APPEALS
Robert Baker, ))
Appellant, ))
vs. ))
Erie County Board of Revision and )
Erie County Auditor, ))
Appellees. )
APPEARANCES:
Entered October 21, 2005
The Board of Tax Appeals considers this matter pursuant to a notice of
appeal filed by Robert Baker. Mr. Baker appeals from a decision of the Erie County
Board of Revision, in which the BOR determined the true value of certain real
property to be $489,020 for tax year 2003. Mr. Baker claims that the correct true
value of the property should be $350,000.
The county appellees also appeared at this board’s hearing, offering the
testimony and appraisal report of Richard H. Hoffman, MAI, a state-certified
appraiser. Mr. Hoffman offered an opinion of value using both the cost and sales
comparison approaches to value. Under the cost approach, value is derived by
estimating the current cost of replacing or reproducing the improvements, deducting
from that cost the estimated physical depreciation and all forms of obsolescence, if
any, and then adding the market value for land. Ohio Adm. Code 5703-25-05(D); The
Appraisal of Real Estate (12th Ed. 2001), at 50.
Mr. Hoffman’s cost approach began with an estimation of land value.
Mr. Hoffman reviewed the sales of four parcels. Mr. Hoffman calculated an average
3 Richard H. Hoffman, MAI
price of $1,718,441 per acre from the sales. Applying this to the subject’s .172 acres,
Mr. Hoffman determined a land value of $295,942 for the subject.
Mr. Hoffman next determined a replacement cost of $271,915 for the
subject’s improvements by utilizing construction costs from the Marshall & Swift
Valuation Manual. Mr. Hoffman then subtracted $19,415 in physical depreciation
from the total replacement cost, resulting in a depreciated value for the improvements
of approximately $252,500. To this, he added the land value of $295,566 and $15,000
in site improvements to derive an opinion of value under the cost approach of
$563,066.
The sales comparison approach, often referred to as the market data
approach, derives an estimate of value by comparing the subject property to the sale
prices of similar properties. The sale prices of properties considered to be most
comparable generally establish a range in which the value of the subject will fall. The
Appraisal of Real Estate, at 417. Mr. Hoffman analyzed sales of five properties
located in the general area of the subject property. The sales occurred between June
2000 and December 2002 and ranged in price from a low of $475,000 to a high of
$620,000. Taking into account the dates of the sales, age, size, condition and
differences in the improvements, Mr. Hoffman found a value range for the subject of
between $512,920 and $618,740. From this, he determined a total value under the
sales comparison approach of $561,700.
In reconciling his two approaches to value, Mr. Hoffman placed greatest
weight upon the sales comparison approach. While he did find the cost approach to
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“support the indicated value,” Mr. Hoffman believed the sales comparison approach to
be a better indicator of value. Appellees’ Ex. 1 at 5. Thus, Mr. Hoffman opined a final
true value for the subject property of $561,700 for tax year 2003.
In offering his opinion of value, Mr. Hoffman testified that the
subdivision in which the subject is located is an extremely desirable area that has seen
a drastic increase in property values over a short period. H.R. at 30. Referring to one
of Mr. Baker’s comparable sales, that for $475,000, Mr. Hoffman noted that the same
property sold in 1993 for $196,000, in 1995 for $270,000 and in 2002 for the $475,000
price. H.R. at 29. See, also, Appellant’s Ex. H.
we turn next to the appraisal evidence offered by the county appellees.
Upon review, we do not find the appraiser’s cost approach to be reliable.
In determining land value, the appraiser relied upon four sales, the highest of which
sold for an adjusted price of $2,417,059 per acre and the lowest at $1,095,357 per acre.
Then, the appraiser applied the average of the four prices. We do not find this method
to be persuasive. The price among the four parcels varies significantly. This
difference raises questions regarding the comparability of the sales to the subject
property, and, without more support, we are reluctant to rely upon them. We also find
the simple averaging of the four sales to be suspect. An appraiser is to adjust his sale
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comparables to account for differences in size, locat1on, and other factors to bring the
sales in line with what would be expected for the subject. Other than an adjustment
for time, no such analysis appears to have taken place here. Finally, we note that one
of the properties used to develop a land value was improved at the time of the sale.
This sale is not comparable to the other, vacant properties and would ultimately lead to
bias in the determination of value.
Next, we do not find the appraiser’s market data approach to be
reflective of the subject’s true value. Initially, we note that many of the comparable
properties have improvements that vary drastically in size from the subject’s. We are
unable to find them comparable for purposes of this matter. Second, some of the
properties differ greatly in age. Even if we were to find the sales comparable to the
subject, no adjustments appear to have been made to account for these age differences.
Next, we find the adjustments made to the sales to be unsupported by the record. As an
example, the appraisal indicates that each of the comparable sales was sold at well
over $100 per square foot. The appraiser also indicates that the cost, new, for the
subject’s improvements would be nearly $100 per square foot; yet, the appraiser
adjusts the sale price for differences in size at $10 per square foot for homes that are
well over 1,000 square feet larger than the subject’s improvements. We do not find the
adjustments to be adequate given the evidence offered by the record. Finally, the
appraiser makes no adjustments for differences in the amount of land. While some of
the sales are similar to the subject, others contain nearly twice as much land area.
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Upon review, we find that the appraisal evidence offered by the county
is not sufficiently reliable to be probative of value. In reaching this determination, we
note that it is within our discretion to accept all, part, or none of an expert’s testimony.
Witt Co. v. Hamilton Cty. Bd. of Revision (1991), 61 Ohio St.3d 155.
As we are compelled to find that the parties have not met their burden of
persuasion, Columbus, supra, Cleveland Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision
(1994), 68 Ohio St.3d 336; Crow v. Cuyahoga Cty. Bd. of Revision (1990), 50 Ohio
St.3d 55
we turn to the remaining evidence of value contained in the statutory
transcr1pt. This includes the property record card and the BOR’s meeting minutes.
The BOR’s minutes note that it had before it much information about properties
surrounding the subject, including sales and listings for sales. After hearing, the BOR
voted to decrease the subject’s true value by $56,060. We find that the statutory
transcr1pt provides sufficient information to explain the action taken by the BOR.
Upon review of the evidence as a whole, we also conclude that the value of the subject
property is $489,020. Columbus, supra.
http://www.bta.ohio.gov/04T745.pdf
Richard H. Hoffman, MAI