The opinion
IN THE OREGON TAX COURT
MAGISTRATE DIVISION
Property Tax
STEVEN A. METZLER )
and DONNA L. METZLER, )
)
Plaintiffs, ) TC-MD 110253N
)
v. )
)
YAMHILL COUNTY ASSESSOR, )
)
)
Defendant. ) DECISION
Plaintiffs appeals the real market value of property identified as Account 7931 (subject
property) for the 2010-11 tax year. A trial was held on September 1, 2011, in the Tax
Courtroom, Salem, Oregon. Steven A. Metzler (Metzler) appeared and testified on behalf of
Plaintiffs. Ron Woodard (Woodard), licensed appraiser, testified on behalf of Plaintiffs. Chris
Lanegan (Lanegan), Registered Appraiser Analyst I, appeared and testified on behalf of
Defendant. Brad Erland (Erland), registered appraiser, also testified on behalf of Defendant.
Plaintiffs‟ Exhibits B 1A, B 2A, B 3A, B 4A, B 5A, and B 6A were offered and received without
objection. Defendant‟s Exhibits A, B, and C were offered and received without objection.
I. STATEMENT OF FACTS
The subject property is located in Gaston, Oregon and includes a single-family dwelling
and a shop with a living area. (Def‟s Ex A at 3-4, 6.) The dwelling “was built in 1992 and is a
two-story single family residence with a finished daylight basement.” (Def‟s Ex A at 6.)
Defendant‟s appraisers found the subject property condition to be “below average for its age[,]”
noting that at the time of appraisal, it “was 18 years old and regular maintenance had not been
performed.” (Id.) The “detached shop was built in 2002 [and is] of similar quality as the main
DECISION TC-MD 110253N 1
house.” (Def‟s Ex A at 6.) The shop is two stories, consisting of a “1[,]152 square foot shop,
800 square foot RV garage, 728 square feet of storage, and a half bath[]” on the first floor and “a
finished living area, complete with a full bath, dining room, living room, and a kitchenette[]” on
the second level. (Id.) Woodard testified that the subject property has a “territorial view,” not a
mountain view.
A. Valuation History and Deferred Maintenance
Metzler testified that Defendant originally determined a 2010-11 real market value of
approximately $1.3 million for the subject property. He testified that he requested review of the
subject property‟s real market value and, on November 17, 2010, Defendant reduced the real
market value to $898,500. (Ptfs‟ Ex B 1A at 1.) Metzler testified that he requested a re-review
and, on December 28, 2010, Defendant reduced the real market value to $598,900. (Id. at 2.) He
testified that, at the Board of Property Tax Appeals (BOPTA) hearing in March 2011, Defendant
recommended a real market value of $550,000. (Ptfs‟ Ex B 3A at 1.) Metzler testified that
Defendant‟s recommendation to BOPTA included cost to cure estimates totaling $18,532.10, but
did not account for mold or the poor condition of the deck. (Id. at 7.)
Erland testified that he completed a “desk review” or “desk appraisal” of the subject
property without a site inspection in November 2010. Lanegan testified that Plaintiffs did not
provide information concerning deferred maintenance at the time of their review request in
November 2010. Lanegan testified that Defendant reduced the value of the subject property in
December 2010, following receipt of the appraisal by Mandy McLaughlin (McLaughlin). (See
Def‟s Ex B.) He testified that he and Erland completed a full inspection of the subject property
on February 4, 2011; at that time, Plaintiffs had not provided any cost estimates for the deferred
maintenance. Lanegan testified that, prior to the February 2011 site inspection, all of
DECISION TC-MD 110253N 2
Defendant‟s information concerning the subject property was based on a prior exterior
inspection. Following the February 2011 inspection, Defendant‟s appraiser made the following
changes, “The class was lowered from a class 5 to a class 4, the total square footage was
increased by 159 square feet, the value placed on the view was lowered, and the % good was
lowered to reflect the deferred maintenance.” (Def‟s Ex A at 7.)
Plaintiffs estimate that it will cost $96,817.78 “to bring house up to standards,” not
including $4,500 to $5,000 for “painting of siding and trim, doors, [and] drywall repairs.” (Ptfs‟
Ex B 5A at 2.) Metzler testified that necessary repairs include removal and replacement of
siding, replacement of the inadequate heating system, replacement of 28 windows, repair of
drywall in bedrooms, removal and replacement of deck, repair of porch and steps, and
replacement of doors. (Ptfs‟ Ex B 4A at 1, 3-8.) Metzler testified that, as of the trial date, none
of the repairs had been completed or even started because they are too expensive. Lanegan
testified that “deferred maintenance need[s] to be addressed,” but questioned whether all of the
“repairs” identified by Plaintiffs are in fact repairs rather than “upgrades.” (See Def‟s Ex A at 6.)
Lanegan testified that the cost of upgrades are not taken into account as deferred maintenance
and that the cost of a repair does not necessarily equate to value.
B. Plaintiffs’ Appraisal
Woodard inspected the subject property and determined the real market value as of
January 1, 2010, to be $430,000, rounded.1 (Ptfs‟ Ex B 6A at 2.) Woodard testified that he used
the market approach, found five comparables sales from the subject property‟s “marketing area,”
and made adjustments for differences. (Id. at 4.) Woodard testified that the subject property‟s
1
Woodard testified that his certification as a licensed appraiser does not allow him to appraise homes over
$1 million in value and limits his ability to appraise “complex properties.” Defendant suggested that the subject
property is a “complex property” and that Woodard does not, therefore, have the necessary credentials to appraise it.
Woodard testified that he disagrees that the subject property is a “complex” property.
DECISION TC-MD 110253N 3
market area includes Newberg, but that Newberg is nicer and more desirable than Gaston. He
testified that the properties located on Bald Peak Road (sales 3 and 4) are also in a nicer area
than the subject property. (Id. at 4-5.) Woodard made location adjustments ranging from,
approximately, -$25,000 to -$41,000 to sales 2, 3, and 4.2 (See id. at 4-5.) He testified that he
had to consider sales in better market areas due to the limited number of sales available.
Woodard testified that the subject property is typical of the area, but its condition is not.
Woodard determined all of his sales to be “superior” in condition to the subject property,
requiring downward adjustments ranging from -$15,000 to -$57,000. (Ptfs‟ Ex B 6A at 4-5.) He
testified that, in 2009 and 2010, the prices of rural properties were not falling as fast as “in-town”
properties; for that reason, he did not make time adjustments. Woodard testified that the actual
age of the subject property is 18 years, but he determined the effective age to be 20 years. (Id. at
4.) He testified that the subject property is two-stories with a daylight basement, but he did not
include the daylight basement as above-grade square footage based on the Fannie Mae standard.
Woodard determined the adjusted prices of comparable sales 1 through 5 to be $429,180,
$461,410, $392,705,$350,0003 and $433,400, respectively. (Ptfs‟ Ex B 6A at 4-5.) He testified
that he assigned a “weighted value” to each of his comparable sales (“wv3” is better than “wv1”)
and multiplied the adjusted sales prices by the weighed values. (Id. at 4.) He then averaged
those values to determine a value for the subject property. Woodard testified that sales 1 and 5
2
Woodard‟s report does not state the location adjustment for comparable sale 4. (Ptfs‟ Ex B 6A at 5.)
However, Woodard testified at trial that sale 4 is located across the street from sale 3 and should have been adjusted
similarly for location, estimating a downward adjustment of $26,000 or $27,000.
3
During trial, Woodard corrected his location and effective age adjustments to sale 4 and revised his
adjusted sale prices to approximately $350,000. Woodard testified that sales 3 and 4 are located across the street
from each other and both feature views superior to that of the subject property. He testified that sale 4 offers views
of Mt. Hood and other mountains to the east, and the house is set up to take advantage of those views; he made an
adjustment of -$40,000. Woodard testified that sale 3 has some views of the coastal range; he made an adjustment
of -$15,000. Woodard testified that he verified sale 4 with the title company and was told that it was not a short
sale. Lanegan testified that he disagrees; the Regional Multiple Listing Service reported sale 4 as a short sale.
DECISION TC-MD 110253N 4
are the best comparable sales for the subject property; his adjusted sale prices were $429,180 and
$433,400, respectively. He testified that he verified sale 1 with the buyers, the sellers, and
through county records. Woodard testified that the sale 1 lot is over four acres, but the usable
real acreage is less. The $15,000 lot adjustment was based on both the net usable acreage and the
site.
C. Defendant’s Appraisal
Lanegan testified that, following their February 2011 inspection, he and Erland
completed a summary appraisal of the subject property as of January 1, 2010. (See Def‟s Ex A.)
He testified that they assumed the February 2011 condition of the subject property was also the
condition in January 1, 2010. Defendant‟s appraisers used the sales comparison and cost
approaches.
Lanegan testified that, for the sales comparison approach, he identified four comparable
sales and one comparable listing, each of which Lanegan confirmed through Defendant‟s data
analyst, or through Washington County‟s data analysis for sales in Washington County.
(See Def‟s Ex A at 13-14.) Lanegan testified that due to the lack of sales near the subject
property, he looked for sales in a wider area. He testified that he made time adjustments as well
as an adjustment for “listing price to selling price ratio” for listing 5.4 (Def‟s Ex A at 14.)
Lanegan testified that sale 1 is newer and in better condition than the subject property, so he
adjusted the sale price downward. Lanegan testified that he did not make location adjustments
because there were no vacant land sales to provide a basis for the adjustment. Defendant‟s
appraisers placed the most weight on sales 1 and 3 because they are “located closest in proximity
to the subject” property; the adjusted sale prices of sales 1 and 3 were $515,600 and $492,400,
4
Defendant’s comparable listing 5 sold on May 23, 2011, for $500,000. (Def’s Ex C at 34-35.) The initial
list price for listing 5 was $725,000. (Def’s Ex A at 14.)
DECISION TC-MD 110253N 5
respectively. (Id.) Under the sales comparison approach, Defendant‟s appraisers concluded the
property held a value of $515,000. (Id.)
Woodard questioned Lanegan‟s adjustment of $25,000 to sale 1 based on its “inferior”
view; he stated that both sale 1 and the subject property have “territorial” views, so no
adjustment is required. According to the Regional Multiple Listing Service (RMLS),
Defendant‟s sale 2 has mountain views and a “[d]aylight basement [that] was used as [a] shop.”
(Def‟s Ex C at 16.) Lanegan testified on cross-examination that comparable sale 2 should be
adjusted downward -$31,000 for the basement and -$25,000 for the view, for a revised adjusted
sale price of $517,000.5 According to the RMLS information provided by Defendant, sale 3
features “breathtaking [mountain] & valley views” and a “[v]iew from nearly every [room].”
(Id. at 12.) Defendant‟s appraisers did not make an adjustment for the superior view of sale 3,
but stated in their report that a -$25,000 adjustment is appropriate for a superior view; this
information suggests an adjusted sale price of $467,400 for sale 3. (Def‟s Ex A at 13, 21.)
Lanegan determined a value of $570,061 under the cost approach. ( Def‟s Ex A at 20.)
Lanegan testified that his land value conclusion was based on the value set by BOPTA and is
supported by McLaughlin‟s appraisal. He testified that his cost estimates are based on the
Department of Revenue‟s cost factor book. Lanegan testified that he gave the most value to the
sales comparison approach and determined a reconciled value of $515,000 for the subject
property. (Id.)
D. McLaughlin Appraisal
Defendant provided a copy of an appraisal of the subject property completed by
McLaughlin. (Def‟s Ex B.) Lanegan testified that McLaughlin is a certified appraiser and that
5
Defendant‟s appraisers originally concluded an adjusted sale price of $575,200 for sale 2. (Def‟s Ex A at
13.)
DECISION TC-MD 110253N 6
she determined a value under both the sales comparison and cost approaches. He testified that
McLaughlin‟s values under the sales comparison approach ranged from $482,500 to $536,100;
she concluded a value of $515,000. (Id. at 4-5.) McLaughlin was not available to testify at trial.
Woodard‟s sale 3 is the same as McLaughlin‟s sale 5. (Ptfs‟ Ex B 6A at 4; Def‟s Ex B at
5.) Woodard concluded an adjusted sale price of $392,705 whereas McLaughlin‟s adjusted sale
price is stated as $508,600.6 (Id.) Defendant‟s sale 1 is also McLaughlin‟s sale 6. (Def‟s Ex A
at 13; Ex B at 5.) Defendant‟s appraiser determined an adjusted sale price of $515,600, whereas
McLauglin‟s adjusted sale price is stated as $495,900. (Id.) Defendant‟s appraiser made an
upward adjustment of $40,000 for “outbuildings” and an upward adjustment of $25,000 for
“view” whereas McLaughlin did not make any adjustment for outbuildings or view. (Id.) The
RMLS states that the property includes a “2+ stall horse barn” and a “252 [square foot]
unfin[ished] „[t]heatre‟ room not included in total [square feet].” (Def‟s Ex C at 10.)
E. Requested Values
The 2010-11 real market value and assessed value of the subject property is $530,000, as
set by BOPTA. Plaintiffs request a 2010-11 real market value of $479,000. Defendant
determined a 2010-11 real market value of $515,000 for the subject property and requests a
reduction of the real market value to $515,000.
II. ANALYSIS
The issue before the court is the real market value of the subject property for the 2010-11
tax year. “Real market value is the standard used throughout the ad valorem statutes except for
special assessments.” Richardson v. Clackamas County Assessor, TC-MD No 020869D, WL
21263620 at *2 (Mar 26, 2003) (citing Gangle v. Dept. of Rev., 13 OTR 343, 345 (1995)). Real
6
McLaughin‟s made an adjustment of $60,000 for “outbuildings.” (Def‟s Ex B at 5.) Woodard testified
that he did not make an adjustment to comparable sale 3 for an outbuilding because there is no outbuilding.
DECISION TC-MD 110253N 7
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.”7
The assessment date for the 2010-11 tax year was January 1, 2010. ORS 308.007; ORS 308.210.
Plaintiffs have the burden of proof and must establish their 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).
“Taxpayers must provide competent evidence of the [real market value] of their property.”
Poddar v. Dept. of Rev., 18 OTR 324, 332 (2005) (citing Woods v. Dept. of Rev., 16 OTR 56, 59
(2002)). “[I]f the 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). “[T]he 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.
“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 methods of valuation that are used to determine real market value: 1) the cost approach, 2)
the sales comparison 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). The approach of valuation to be used is a question of fact to be determined on the
///
7
All references to the Oregon Revised Statutes (ORS) and to the Oregon Administrative Rules (OAR) are
to 2009.
DECISION TC-MD 110253N 8
record. Pacific Power and Light Co. v. Dept. of Rev., 286 Or 529, 533 (1979). Both parties
considered comparable sales and neither party considered the income approach.
Defendant determined a value under the cost approach, but gave little weight to that
approach. “The cost approach is „particularly useful in valuing new or nearly new
improvements.‟ ” Magno v. Dept. of Rev., 19 OTR 51, 55 (2006). “The [cost] approach is
especially persuasive when land value is well supported and the improvements are new or suffer
only minor depreciation and, therefore, approximate the ideal improvement that is the highest
and best use of the land as though vacant.” Appraisal Institute, The Appraisal of Real Estate at
382 (13th Ed 2008). The subject property was 18 years old as of the January 1, 2010, assessment
date with extensive deferred maintenance. The court finds that the cost approach does not
provide a reliable indication of the real market value of the subject property in this case.
In determining the real market value of the subject property, the court focuses on the
sales comparison approach. OAR 150-308.205-(A)(2)(c) states, in pertinent part,
“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.”
“The court looks for arm‟s-length sale transactions of property similar in size, quality, age and
location * * * in order to determine the [real market value]” of the subject property. Richardson
v. Clackamas County Assessor, TC-MD No 020869D, WL 21263620 at *3 (Mar 26, 2003).
The court has reviewed both parties‟ appraisal reports and has heard the appraisers‟
testimony concerning the comparable sales selected and the adjustments made. The court finds
that neither parties‟ sales comparison approach is entirely reliable, but each provides some
persuasive information as to the real market value of the subject property as of January 1, 2010.
Woodard made large downward adjustments (-$25,000 to -$41,000) for location to three of his
DECISION TC-MD 110253N 9
five comparable sales. He explained that the comparable sale properties were located in better
market areas than the subject property, but could not identify his basis for the adjustments.
Lanegan testified that he did not make location adjustments because he could not identify bare
land sales from which to determine an appropriate adjustment. All of Woodard‟s comparable
sales were “superior” in condition to the subject property, requiring downward adjustments;
Woodard provided no sales that were comparable to subject property with respect to condition.
Defendant‟s appraisers failed to make downward adjustments for the superior views of
comparable sales 2 and 3. Defendant‟s appraisers‟ $25,000 adjustment for the “inferior view” of
sale 1 is questionable given Woodard‟s testimony that the view is the same as the subject
property.8
The court accepts the appraisers‟ testimony concerning their “best” comparable sales.
Collectively, the parties‟ best comparable sales are Woodard‟s sales 1 and 5, with adjusted sale
prices of $429,180 and $433,400, respectively, and Defendant‟s appraisers‟ sales 1 and 3, with
adjusted sale prices of $515,600 and $492,400, respectively. Removing the $25,000 view
adjustment to Defendant‟s sale 1 yields an adjusted sale price of $490,600. Adding a downward
adjustment of -$25,000 to Defendant‟s sale 3 for its superior view yields an adjusted sale price of
$467,400. Plaintiffs‟ requested real market value of $479,000 is supported by the comparable
sales identified by the parties‟ appraisers. Accordingly, the court finds that the 2010-11 real
market value of the subject property was $479,000.
III. CONCLUSION
After carefully considering the testimony and evidence presented, the court finds that the
2010-11 real market value of the subject property was $479,000. Now, therefore,
8
Woodard‟s testimony is corroborated by McLaughlin‟s appraisal, which made no adjustment for the
“view” of Defendant‟s sale 1.
DECISION TC-MD 110253N 10
IT IS THE DECISION OF THIS COURT that Plaintiffs‟ appeal is granted. The 2010-11
real market value of property identified as Account 7931 was $479,000.
Dated this day of December 2011.
ALLISON R. BOOMER
MAGISTRATE PRO TEMPORE
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 Magistrate Pro Tempore Allison R. Boomer on
December 23, 2011. The Court filed and entered this document on December 23,
2011.
DECISION TC-MD 110253N 11