The opinion
IN THE OREGON TAX COURT
MAGISTRATE DIVISION
Property Tax
KARL T. & DOROTHY J. JENNINGS )
FAMILY TRUST, )
)
Plaintiff, ) TC-MD 120129
)
v. )
)
LANE COUNTY ASSESSOR , )
)
Defendant. ) DECISION
Plaintiff appeals the real market value of residential property identified as Account
0798973 (subject property) for the 2011-12 tax year. A trial was held on August 1, 2012, via
telephone at the Oregon Tax Court, Salem, Oregon. David E. Carmichael, Attorney at Law,
represented Plaintiff. Tony Wells (Wells), general manager at Prudential Pacific Properties,
testified on behalf of Plaintiff. Karl Jennings (Jennings), trustee, testified on behalf of Plaintiff.
Defendant‟s representative, Bryce Krehbiel (Krehbiel), testified on behalf of Plaintiff. Krehbiel,
Residential Appraiser, Lane County Assessment and Taxation, appeared on Defendant‟s behalf.
Plaintiff‟s Exhibit 1, Plaintiff‟s Rebuttal Exhibit 1, and Defendant‟s Exhibits A through L
were received without objection.
I. STATEMENT OF FACTS
The subject property is a two-story, 1,762 square foot home located on 0.14 acres in
Florence, Lane County, Oregon. (Ptf‟s Ex 1 at 4.) The subject property‟s improvement is a
house built in 1979 that has a main level of 1,090 square feet and an upper level of 672 square
feet. (Id. at 4-5.) The house has three bedrooms, two bathrooms, and an attached two-car
garage. (Id. at 5.) The house has a heat pump heating system. (Id.) When the subject property
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DECISION TC-MD 120129 1
was listed for sale in 2011, the listing stated that the “[p]roperty will be trashed out by Seller,”
and “[p]roperty sold „as is‟ without repair.” (Id.)
Plaintiff purchased the subject property from Deutsche Bank National Trust Company
(Bank) on July 6, 2011, paying $129,699. (Ptf‟s Ex 1 at 1-2; Def‟s Ex A.) Wells testified that
even though residential property in Florence, Oregon typically spends 120 to 150 days on the
market before sold, the subject property was on the market for 17 days before Plaintiff purchased
it. (Ptf‟s Ex 1 at 7.) Wells testified that the subject property was originally listed for $135,000.
Jennings testified that he gave the Bank one offer of $129,699 for the subject property. Jennings
testified that he had been buying properties his entire life and owned several rental properties in
the Florence area. Wells testified that if Jennings thought the subject property was worth more
than $129,699, he would have offered to purchase the subject property for a higher price.
Wells testified that the foreclosure market in Florence, Oregon from January to October
2011 constituted about ten percent of total listings. Wells testified that he does not believe bank
owned sales are discounted, because banks are just another seller in the market. Wells testified
that he believes Plaintiff‟s purchase of the subject property from the Bank was representative of
an arms-length transaction between two informed parties.
Wells testified that the subject property could not have sold for $180,000 in January
2011. Wells testified that due to the declining real estate market in Florence, market values
decreased around three percent from January 2011 to July 2011. Wells testified that two-story
homes, such as the subject property, do not sell for prices as high as single-story homes, because
Florence is a retirement community. Wells based his opinion on his twenty years of experience
as a real estate broker.
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DECISION TC-MD 120129 2
Wells testified that at the time of purchase, the subject property suffered from deferred
maintenance. Jennings testified that the subject property had been “ruined” by the previous
owner‟s pets. (Ptf‟s Ex 1at 3.) Wells and Jennings testified that the subject property smelled
like pet odor. Jennings testified that the carpet and carpet pads needed to be replaced, the
interior and exterior walls repainted, and the heater replaced. Jennings testified that the door
frames and doors were outdated. Jennings testified that the sewer lines needed to be unplugged
and the plumbing in the kitchen and the upstairs level replaced. Jennings testified that the
subject property‟s grounds were overgrown. Jennings testified that he had to remove a wax
myrtle bush that hung over the street and a tree that hung over the subject property‟s roof.
Jennings testified that it took nines trips with a truck and trailer to clear the brush from the
subject property‟s grounds. Jennings testified that he put in 400 hours of labor and spent $6,000
on supplies and additional labor to restore the house. (Ptf‟s Rebut Ex 1 at 1-4.)
Jennings testified that the main level of the subject property includes a 240 square foot
sunroom. Jennings testified that the sunroom was once a porch that a previous owner enclosed
to form a room. Jennings testified that the sunroom is not supported by the subject property‟s
foundation. Jennings testified that the sunroom is connected to the main house by an alcove that
is adjacent to a bathroom. Jennings testified that odors from the bathroom escape to the
sunroom. Jennings testified that a person has to travel through the sunroom to get to the
backyard. Jennings testified that the sunroom has high windows and gets very hot.
Jennings testified that because 240 square feet of the subject property constitutes a
sunroom that is not supported by the foundation, the subject property‟s square footage is
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DECISION TC-MD 120129 3
misrepresented as 1,762 square feet. Jennings testified that he believes the true square footage of
the subject property is 1,522 square feet.1
The subject property‟s real market value on the tax roll as of the January 1, 2011,
assessment date was $204,226. (Ptf‟s Compl at 2.) Plaintiff filed a petition to appeal the subject
property‟s real market value to the Board of Property Tax Appeals (BOPTA), which on February
6, 2011, reduced the market value to $179,724. (Id.)
At trial, Plaintiff requested a 2011-12 real market value between $129,699 and $135,000.
Plaintiff provided the sale price of a comparable property (Comparable # 1) as evidence of the
subject property‟s real market value. (Ptf‟s Ex 1 at 8-10.) Comparable # 1 is a single-story,
1,680 square foot home that sits on 0.19 acres down the street from the subject property. (Id. at
8.) The home has three bedrooms, one and a half bathrooms, wall heating units, and an attached
two-car garage. (Id. at 8-9.) Jennings testified that Comparable # 1 was “beautifully
landscaped.” Krehbiel testified that Plaintiff‟s Comparable # 1 was a bank sale and
acknowledged that Plaintiff‟s Comparable # 1 was also Defendant‟s Comparable # 4.
After being on the market for 96 days, Comparable # 1 sold for $126,458. (Ptf‟s Ex 1 at
10.) Wells testified that Comparable # 1 was originally listed for $149,900. Wells testified that
because Comparable # 1 was listed for $149,900 and sold for $126,458, Plaintiff‟s purchase of
the subject property for $129,699 was reasonable.
At trial, Defendant requested that the court sustain the BOPTA ordered real market value
of $179,724. Krehbiel testified that the subject property was bank-owned at the time Plaintiff
purchased it and as a result, Plaintiff‟s transaction was not indicative of an “arm‟s-length sale.”
Krehbiel testified that properties purchased from banks are typically purchased at a discount
1
Jennings calculated what he believes to be the subject property‟s square footage by subtracting 240 square
feet from 1,762 square feet.
DECISION TC-MD 120129 4
from real market value. Krehbiel provided a report from RealtyTrac showing that foreclosures in
Oregon typically have sale prices averaging 26.05 percent less than real market value, and that
8.21 percent of Oregon home purchases are foreclosed properties as of the fourth quarter and
year-end 2011. (Def‟s Ex L at 4.)
Krehbiel submitted five comparable properties based on sale date, classification, square
feet, year built, and proximity to the subject property. (Def‟s Ex D-I.) Krehbiel testified that the
comparable properties indicate that the subject property‟s real market value was between
$168,610 and $199,000. Comparable # 1 was a 1,419 square foot, three-bedroom, two-bathroom
home on a 0.24 acre lot. (Def‟s Ex D.) Comparable # 1 had a heat pump heating system. (Id.)
Comparable # 1 was built in 1979 and sold for $255,000 on October 19, 2010. (Id.) Krehbiel
testified that Comparable # 1 spent 131 days on the market before sold. Wells and Jennings
testified that Comparable # 1 was located in a much more established neighborhood than the
subject property. Wells testified that Comparable # 1 was landscaped, remodeled, contained
wood floors, and sold for a higher price than it should have.
Comparable # 2 was a 1,540 square foot, three-bedroom, two-bathroom home on a 0.24
acre lot. (Def‟s Ex E.) Comparable # 2 had a forced hot air heating system. (Id.) Comparable #
2 was built in 1983 and sold for $160,000 on April 26, 2011. (Id.) Krehbiel testified that
Comparable # 2 spent 6 days on the market before sold.
Comparable # 3 was a 1,596 square foot, three-bedroom, two-bathroom home on a 0.11
acre lot. (Def‟s Ex F.) Comparable # 3 had a radiant-ceiling heating system. (Id.) Comparable
# 3 was built in 1972 and sold for $155,000 on November 28, 2011. (Id.) Krehbiel testified that
Comparable # 3 spent 191 days on the market before sold. Wells testified that Comparable # 3
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DECISION TC-MD 120129 5
was located in a commercial zone and only a block and a half away from the highway. Krehbiel
acknowledged that Comparable # 3 was residential property in a commercial zone.
Comparable # 4 was a 1,680 square foot, three-bedroom, and one-and-a-half-bathroom
home on a 0.19 acre lot. (Def‟s Ex G.) Comparable # 4 had a wall unit heating system. (Id.)
Comparable # 4 was built in 1976 and sold for $126,458 on October 26, 2011. (Id.) Krehbiel
testified that Comparable # 4 spent 96 days on the market before sold. Krehbiel acknowledged
that Comparable # 4 was the same property as Plaintiff‟s Comparable # 1.
Comparable # 5 was a 1,773 square foot, three-bedroom, two-bathroom home on a 0.25
acre lot. (Def‟s Ex H.) Comparable # 5 had a baseboard heating system. (Id.) Comparable # 5
was built in 1977 and sold for $220,000 on August 18, 2010. (Id.) Krehbiel testified that
Comparable # 5 spent 463 days on the market before sold.
Krehbiel testified that each comparable property was a “Class 4” property like the subject
property. (Def‟s Ex I.) Krehbiel testified that all of the comparables were arm‟s-length
transactions except for Comparable # 4, which was previously bank-owned at the time of sale
like the subject property. (Id.)
Krehbiel adjusted the comparable properties‟ sale prices for time trending. (Def‟s Ex I.)
Krehbiel calculated the time trended values of Comparables # 1, # 2, # 3, # 4, and # 5 as
$225,000, $173,440, $163,556, $132,275, and $202,952 respectively. (Id.) Krehbiel calculated
the median and average dollars per square foot of the comparable properties to both be $113 per
square foot. (Id.) Krehbiel testified that when he calculated the median dollars per square foot
of the five comparables, he did not include Comparable # 1 and Comparable # 4 in the
calculation. Krehbiel testified he did not include those two comparables because Comparable #
1 was recently remodeled and Comparable # 4 was bank-owned at the time of sale.
DECISION TC-MD 120129 6
Krehbiel testified that he did not make any adjustments to the sale prices of the
comparable properties. Krehbiel also testified that he did not inspect the subject property or any
of the comparable properties.
II. ANALYSIS
At issue in this case is the subject property‟s real market value for the 2011-12 tax year.
ORS 308.205(1)2 defines real market value as:
“[T]he amount in cash that could reasonably be expected to be paid by an
informed buyer to an informed seller, each acting without compulsion in an
arm‟s-length transaction occurring as of the assessment date for the tax year.”
The assessment date for the 2011-12 tax year was January 1, 2011. ORS 308.007(2).
A. Purchase price
When determining real market value, a voluntary, arm‟s-length sale of a property
between a willing and knowledgeable buyer and seller is “very persuasive” of real market value.
Kem v. Dept. of Rev. (Kem), 267 Or 111, 114, 514 P2d 1335 (1973); see also Sabin v. Dept. of
Rev., 270 Or 422, 426-27, 528 P2d 69 (1974); Equity Land Res. v. Dept. of Rev., 268 Or 410,
414-15, 521 P2d 324 (1974). The two important considerations are whether or not the sale was
“recent” and whether it was “arm‟s-length.” Kem, 267 Or at 114-15.
Plaintiff‟s purchase, which was negotiated in June 2011, and closed on July 6, 2011, was
not close to the January 1, 2011, assessment date. Plaintiff‟s purchase of the subject property
was not “recent.” Wells testified that market prices in Florence declined at a three percent rate
between January 2011 and July 2011.
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2
All references to the Oregon Revised Statutes (ORS) and Oregon Administrative Rules (OAR) are to
2009.
DECISION TC-MD 120129 7
The next question is whether the sale was an “arm‟s-length” transaction. At the time of
Plaintiff‟s purchase, the subject property was a bank-owned property. This court has addressed
the issue of bank-owned property previously, observing that:
“A property purchased through foreclosure may well involve an element of
compulsion on the part of the seller. There are many practical reasons why the
sale of a property following foreclosure by the lender might involve an atypical
market condition rendering the transaction of little or no value as an indication of
market value. For example, the lender may have a policy of selling such property
only for the amount of the underlying debt, regardless of what the property may
actually be worth, particularly if it would take a few months more to find a buyer
willing to pay a higher price. If so, the sale, at best, likely represents the low end
of the real market value range, and may have been well below the actual market
value of the property.”
Kryl v. Lane County Assessor (Kryl), TC-MD No 100192B, WL 1197444 at *2 (March 30,
2011).
In Kryl, this court gave little weight to a bank-owned property sale which occurred within
a few months after the bank acquired it and after a short listing period. This court has also
observed that, “a sale of bank-owned property conducted with such rapidity suggests duress or
compulsion on the part of the seller, leading the court to conclude such sales as not indicative of
an arm‟s-length transaction.” Brashnyk v. Lane County Assessor, TC-MD No 110308, WL
6182028 at *5.
The Oregon Supreme Court, in Ward v. Dept. of Revenue, recognized that property
purchased through foreclosure may be considered “a voluntary bona fide arm‟s-length
transaction between a knowledgeable and willing buyer and a willing seller.” 293 Or 506, 508,
650 P2d 923 (1982). This court has also held that “[t]here are narrow exceptions determined on
a case-by-case basis to the holding that bank-owned property sales are not typically
representative of real market value.” Brashnyk, WL 6182028 at *5. Such an exception may be
recognized by the court “where the majority of sales are distress, [for] it would seem that that
DECISION TC-MD 120129 8
kind of sale would provide a more accurate reflection of the market.” Morrow Co. Grain
Growers v. Dept. of Rev., 10 OTR 146, 148 (1985). Bank-owned property sales may be
considered as comparable sales for the purpose of establishing real market value “when those
bank-owned property sales have been exposed to the open market and meet the nominal
standards for an acceptable comparable sale.” Brashnyk, WL 6182028 at *6 (internal quotation
marks omitted).
Before Plaintiff purchased the subject property, the subject property was exposed to the
market for 17 days. (Ptf‟s Ex 1 at 7.) Wells testified that in Florence the average property spent
120 to 150 days on the market before sold. The Bank accepted Plaintiff‟s single offer of
$129,699, even though the subject property was listed for $135,000. The quick sale by the bank
supports the conclusion that the sale “suggests duress or compulsion on the part of the seller,
leading the court to conclude such sales as not indicative of an arm‟s-length transaction.”
Brashnyk, WL 6182028 at *5. Plaintiff‟s purchase price of $129,699 is not singularly persuasive
evidence in establishing the subject property‟s real market value.
B. Comparable sales approach
Real market value is determined by the particular methods and procedures 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 or comparable sales
approach, and 3) the income approach. Allen v. Dept. of Rev., 17 OTR 248, 252 (2003). See
also OAR 150-308.205-(A)(2)(a) (stating that all three approaches must be considered although
all three approaches may not be applicable to the valuation of the subject property). Because the
subject property is a residence and not an income producing property, the income approach is
inapplicable. Neither party considered the cost approach.
DECISION TC-MD 120129 9
In a case such as this, the comparable sales approach may be used to value improved
properties. Appraisal Institute, The Appraisal of Real Estate 300 (13th ed 2008). The legislature
requires real market value to be determined in all cases by “methods and procedures in
accordance with rules adopted by the Department of Revenue.” ORS 308.205(2).
The Department of Revenue adopted OAR 150-308.205(A)(2)(c), stating that: “In
utilizing the sales comparison approach only actual market transactions of property comparable
to the subject, or adjusted to be comparable, will be used. All transactions utilized in the sales
comparison approach must be verified to ensure they reflect arms-length market transactions.”
As the party seeking affirmative relief, Plaintiff bears the burden of proving that the
subject property‟s real market value is incorrect on the tax roll. ORS 305.427. Plaintiff must
establish his claim “by a preponderance of the evidence, or the more convincing or greater
weight of evidence.” Schaefer v. Dept. of Rev., TC No 4530, WL 914208 at *2 (July 12, 2001)
(citing Feves v. Dept. of Rev., 4 OTR 302 (1971)); ORS 305.427. Plaintiff must present the
greater weight of evidence to support its requested real market value reduction. This court has
stated that “it is not enough for a taxpayer to criticize a county‟s position. Taxpayers must
provide competent evidence of the [real market value] of their property.” Poddar v. Dept. of
Rev., 18 OTR 324, 332 (2005) (quoting Woods v. Dept. of Rev., 16 OTR 56, 59 (2002) (internal
quotation marks omitted). “Competent evidence includes appraisal reports and sales adjusted for
time, location, size, quality, and other distinguishing differences, and testimony from licensed
professionals such as appraisers, real estate agents, and licensed brokers.” Danielson v.
Multnomah County Assessor, TC-MD No 110300D, WL 879285 (March 13, 2012). Evidence
that is inconclusive or unpersuasive is insufficient to sustain the burden of proof. Reed v. Dept.
of Rev. (Reed), 310 Or 260, 265, 798 P2d 235 (1990).
DECISION TC-MD 120129 10
“In evaluating the competing evidence, the court looks to the comparability of the
different sales and the application of all necessary adjustments for differences. Adjustments are
a key component in evaluating properties.” Voronaeff v. Crook County Assessor, TC-MD No
110361C, WL 1426847 at *3 (April 25, 2012). According to The Appraisal of Real Estate:
“Ideally, if all comparable properties are identical to the subject property, no
adjustments will be required. However, this is rarely the case * * *. After
researching and verifying transactional data and selecting the appropriate unit of
comparison, the appraiser adjusts for any differences.”
Appraisal Institute, The Appraisal of Real Estate 307 (13th ed 2008.)
In the case before the court, Plaintiff‟s comparable sales approach was incomplete
because the selected property was not “adjusted to be comparable” to the subject property. OAR
150-308.205(A)(2)(c). Plaintiff‟s selected comparable property was sold 11 months after the
subject property‟s assessment date, providing little evidence of the subject property‟s real market
value on the assessment date. In addition to failing to adjust for date of sale, Plaintiff made no
adjustment for size, quality, or other distinguishing property features.
Even though the burden has not shifted under ORS 305.427, the court has jurisdiction to
determine the “real market value or correct valuation on the basis of the evidence before the
court, without regard to the value pleaded by the parties.” ORS 305.412. Krehbiel presented a
comparable sales approach. Krehbiel only adjusted the selected comparables for time trending.
Like Plaintiff, Krehbiel made no other adjustments, and his evidence in support of his
determined real market value is inconclusive. However, Defendant does not have the burden of
proof.
Even though Plaintiff failed to carry his burden of proof and Defendant‟s evidence is
inconclusive, the court will look to the market in an effort to determine the real market value of
the subject property. The subject property was listed for sale for 17 days. Wells testified that the
DECISION TC-MD 120129 11
average market time for properties during 2011 was 120 to 150 days. The Bank‟s quick sale of
the subject property “suggests duress or compulsion on the part of the seller, leading the court to
conclude such sales as not indicative of an arm‟s-length transaction.” Brashnyk, WL 6182028 at
*5. Therefore, Plaintiff‟s purchase price is not singularly persuasive evidence in establishing the
subject property‟s real market value.
Plaintiff also offered the unadjusted sale price of Comparable # 1 as evidence in support of its
requested real market value as of January 1, 2011. Plaintiff‟s Comparable # 1, the same property
as Defendant‟s Comparable # 4, was bank-owned at the time of sale and located 0.1 mile down
the street from the subject property. (Ptf‟s Ex 1-8; Def‟s Ex G.) Jennings testified and
Defendant did not dispute that Comparable # 1 was landscaped and in better condition than the
subject property. Comparable # 1 was a single-story house unlike the subject property. Wells
testified that because of its landscaping and single level, Comparable # 1 was a more desirable
property than the subject property in the Florence market.
Comparable # 1 was originally listed for $149,900 and after spending 96 days on the
market, sold for $126,458. (Def‟s Ex G.) The time Comparable # 1 spent on the market leads
the court to conclude that the property‟s sale is indicative of an arm‟s-length transaction even
though the property was bank-owned at the time of sale. Krehbiel adjusted Comparable # 1‟s
sale price for time trending to be $132,275. (Def‟s Ex I.) Krehbiel made a similar adjustment to
the subject property‟s sale price, calculating a time trended value of $133,280. (Id.) Because the
subject property and Comparable # 1 are located on the same street in the same neighborhood
and the time trended sale prices are comparable, the court concludes that those sales are an
accurate reflection of the market for that neighborhood.
The subject property was listed for $135,000 in June 2011 and sold for $129,699 on July
6, 2011. Krehbiel calculated a time trended value for the subject property of $133,280 as of
DECISION TC-MD 120129 12
January 1, 2011. The sale of Comparable # 1 supports that value. Based on the evidence
presented, the court concludes that the subject property‟s real market value on the assessment
date, January 1, 2011, was $133,280.
III. CONCLUSION
After careful consideration of the testimony and evidence, the court concludes that the
best evidence of the subject property‟s real market value as of the assessment date was the time
trended sale price of a neighboring property identified as Comparable # 1 and Plaintiff‟s time-
trended purchase price. Now therefore,
IT IS THE DECISION OF THIS COURT that the 2011-12 real market value of property
identified as Account 0798973 was $133,280.
Dated this ____ day of October 2012.
JILL A. TANNER
PRESIDING MAGISTRATE
If you want to appeal this Decision, file a Complaint in the Regular Division of
the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563;
or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.
Your Complaint must be submitted within 60 days after the date of the Decision
or this Decision becomes final and cannot be changed.
This Decision was signed by Presiding Magistrate Jill A. Tanner on
October 4, 2012. The Court filed and entered this Decision on October 4, 2012.
DECISION TC-MD 120129 13