Opinion
Docket No. 015046-2013
12-26-2014
Re: Applebaum et al. v. Township of Edison Block 415, Lot 4.A, Unit CC037 (37 Giggleswick Way)
NOT FOR PUBLICATION WITHOUT APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS
BY ELECTRONIC MAIL
Stephen N. Severud, Esq.
Valley Professional Center
59 East Mill Road
Long Valley, New Jersey 07853
Albert J. Alvarez, Esq.
Hoagland Longo Moran Dunst & Doukas, L.L.P.
40 Paterson Street
New Brunswick, New Jersey 08901
Dear Counsel:
This letter constitutes the court's decision following trial. Plaintiffs, as owners of the above referenced property ("Subject"), contested the following assessment:
| Land: | $ 115,000 |
| Improvements: | $ 151,600 |
| Total: | $ 266,600 |
The Middlesex County Board of Taxation ("County Board") reduced the assessment as follows:
| Land: | $ 115,000 |
| Improvements: | $ 82,895 |
| Total: | $ 197,895 |
The average (Chapter 123) ratio for 2013 was 50.10% with an upper limit of 57.62% and a lower limit of 42.58%. The Subject's implied true value is thus $532,136.
Plaintiffs appealed the County Board's judgment. The Township filed a counterclaim. A bench trial was held. Plaintiffs' expert (accepted as such by the court without objection from the Borough) opined the Subject's value as $360,000 based on a comparable sales approach, using six comparable sales of single-family townhomes. Three were located within the same development as the Subject and the rest were in neighboring developments in the defendant ("Township"). The expert's report was entered into evidence without objection. The Township produced no witnesses or documentary evidence.
The matter was tried to conclusion alongside 12 other appeals of properties all of which were located in the same development as the Subject called "Giggleswick Way." Each property owner had filed an appeal with the County Board. Although their original assessments differed, all 12 properties obtained the same reduced judgment of $197,895. The expert proffered in this matter was also the expert in the 12 appeals, and prepared reports in those cases. His testimony contained information that applied to all 13 homes. He used the same comparable sales for all cases, but also provided particularized information as to each case as warranted. Thus, while the 13 matters were consolidated for trial purposes, and the single issue in dispute was the same in each case, the court will issue 13 separate opinions for each appeal.
At the end of plaintiffs' case-in-chief, the Township moved to dismiss the complaint under R. 4:37-2(b) on grounds plaintiffs failed to overcome the presumptive correctness of the assessment. The court reserved decision.
The sole issue in this case is whether plaintiffs' expert's adjustment to the comparables' sale prices for interior condition was credible. The expert testified that the basis for his adjustment amount was a combination of several factors including his personal inspection and familiarity with almost 90% of the homes in the Subject's development; his several years' of experience as a real estate appraiser; his knowledge of costs in the market; and federal Fannie Mae or VA loan guidelines. The Township maintained that plaintiffs' expert's adjustments for interior condition should be rejected as unsupported and purely subjective.
For the reasons explained below, the court finds persuasive plaintiffs' expert's testimony and finds credible his conditions adjustments. The court therefore accepts the expert's value conclusion for the Subject as $360,000. FACTS
The Subject is townhome located in the Giggleswick Way, a 33-year old development, which borders the Township of Plainfield and is in close proximity to a private golf course. The development's home owners are not provided or assured membership in the golf course due to the proximity of their homes to the course.
The development contains 37 homes with some end units. All homes have two stories with a full basement and a detached one-car garage. The interior units have slight variations as to room count. The access to the homes in the Subject is by private roads. The homes are spaced well, show well from the outside, and have good market appeal. All have equal access to the common amenities within the development with no one home or model having any superior location in this regard.
The Subject is a model "B" end-unit home with two floors and a full but unfinished basement. The first floor includes a living room, dining room, den, kitchen, master bedroom, one full and one half-bathroom. The second floor includes two bedrooms and a full bath. The gross living area ("GLA") is 2,048 square feet ("SF"). It has a fireplace and two decks.
Plaintiffs' expert testified that his measurement was in accord with the assessor's records, thus, there was no dispute as to size of the Subject or of any of the other 16 homes he had appraised for their respective appeals.
In his report discussing "physical depreciation and functional or external obsolescence," the expert noted that the Subject was "adequately maintained and in average overall condition with no known need for repairs" and that it was "generally dated with no recent updating no[t]ed." In the report's portion describing the "style, quality, condition, size, and value of improvements," the expert noted that the Subject's "condition is average and typical of homes in the neighborhood" and "value of the improvements" was "typical of homes within the market." Based on his personal exterior and interior inspection of the Subject, the expert testified that there were no updates or remodeling to the interior features. VALUATION
Plaintiffs' expert relied upon the sales comparison or market approach. He examined thirteen sales which had sale prices ranging from a low of $294,000 to a high of $429,000 with sale prices of the five useable sales ranging from $346,000 to $429,000. He used six comparable sales, three of which were in the same development as the Subject (23 Giggleswick which sold 08/15/2012 for $395,000; 14 Giggleswick which sold 08/06/12 for $346,100; and 63 Giggleswick which sold 01/20/2013 for $385,000). The other three were townhomes in the neighboring developments (3101 Cricket Circle which sold 10/18/2012 for $398,500; 182 Hidden Hollow Court which sold 05/21/2012 for $380,000; and 4506 Stonebridge Road which sold 08/20/12 for $412,000), all less than two miles from the Subject's development.
Each comparable's sale price was lower than its listed price.
The expert made adjustments for GLA difference; condition ($25,000 for "average+" and $50,000 for "good"); bathroom count; basement existence ($10,000); level of finished area ($5,000); and bathroom therein ($2,500 for half-bath); differences in amenities (garage $10,000, deck/patio $2,500); and unit location of end versus interior ($5,000). His adjusted sale prices were $360,000; $341,100; $371,000; $377,500; $364,000; and $360,000. He placed most importance on the adjusted sale price of 14 Giggleswick because that unit was most similar to the Subject in terms of condition (the Subject and the comparable having no updates or renovations), and lesser but equal weight to the remaining comparables to arrive at the Subject's fair market value at $360,000.
The expert testified that he personally inspected the interiors of two comparables in the Subject's development (23 Giggleswick and 14 Giggleswick). He stated that he was personally familiar with the homes in the Subject's development having inspected 34 of them, and having appraised many of them when they were about seven years old. He testified that he was similarly familiar with the developments within which the other three comparables were located as he had inspected and appraised units within those developments. Because of this familiarity, he was able to ascertain whether the materials or condition of the interiors of the comparables were original to the time when the units were built or were subsequently improved. He testified that since he was knew and was familiar with the original building materials and style, he would "immediately" know if they were changed or replaced.
The expert explained that, when built, homes in a developer-built development enjoy or possess exterior and interior uniformity as to features and condition (except for homes choosing additional or other options offered by the developer). He stated that as the development gets older (as here, 30-33 years older), the exterior conditions of all homes tend to stay uniform since responsibility for the external upkeep of every home within the development is upon the developer. However, the individual home owner is responsible for the home's interior conditions such as maintenance, renovations, or updates in areas such as floorings, kitchens and bathrooms. Thus, per the expert, the interior conditions of the units would not necessarily be the same as they were when built, especially if the development (as here) was about 30 years old, and that these conditions were an important factor in driving the market price for townhomes within the development. For instance, he stated, a townhome with a remodeled kitchen and bathroom could command a significantly higher price than a similar townhome with the original kitchen and bathroom installed thirty years ago. Therefore, he opined, it is not unusual for each home within the development, which may look the same on the outside as any other unit, to command a different market value. He maintained that consequently adjustments for interior conditions play a significant role in appraising the market value for units within the same development.
The expert testified in detail about the various data sources, which included information from the Multiple Listing Services ("MLS"); the assessor's records; peer discussion; verification from listing agents; review and verification of items listed on the disclosure sheet in listing agreements; knowledge of market costs for renovations, replacements, updates, and/or redecorations; and his 27+ years of experience in the area of real estate appraisal. He testified that he was also instructed by the guidelines required by the federal government for financing purposes (such as Fannie Mae, FHA or VA loans). He conceded that a value conclusion under a financing appraisal is not necessarily controlling for local property tax purposes. He maintained that the guidelines in making adjustments for the former appraisal purpose would nonetheless persuasively apply for the latter appraisal purpose. This is because the federal guidelines were conservative in approach and while they did not fix any particular percentage or dollar amount for a conditions adjustment, they required the same be "reasonable." An unreasonable or unjustified conditions adjustment in an appraisal for conventional financing could not only invalidate the appraisal, but if used, could even jeopardize the loan. Thus, his provision for a conditions adjustment for valuation purposes was conservative (and lower than the actual costs incurred for the updates in one of the comparables). FINDINGS
(A) Standard of Review
"Original assessments and judgments of county boards of taxation are entitled to a presumption of validity." MSGW Real Estate Fund, L.L.C. v. Borough of Mountain Lakes, 18 N.J. Tax 364, 373 (Tax 1998). This presumption "attaches to the quantum of the tax assessment. Based on this presumption, the appealing taxpayer has the burden of proving that the assessment is erroneous." Pantasote Co. v. City of Passaic, 100 N.J. 408, 413 (1985). "The presumption of correctness . . . stands, until sufficient competent evidence to the contrary is adduced." Township of Little Egg Harbor v. Bonsangue, 316 N.J. Super. 271, 285-86 (App. Div. 1998).
If the court decides that the presumption of correctness is overcome, it must determine the value "based on a fair preponderance of the evidence." MSGW, supra, 18 N.J. Tax at 377. This is so even if there is a counterclaim. Ibid. The court's "independent assessment" depends "on the evidence before it and the data that are properly at its disposal." F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 430 (1985). The complainant continues to bears the burden of persuading the court that the "judgment under review" is erroneous. Ford Motor Co. v. Township of Edison, 127 N.J. 290, 314-15 (1992), aff'g, 10 N.J Tax 153 (Tax 1988).
(B) Credibility of Valuation Conclusion
The sales comparable method is generally appropriate for valuation of a residential single-family property where "sufficient recent, reliable transactions" exist to provide a "supportable indication of market value" through "value patterns or trends in the market." See Appraisal Institute, The Appraisal of Real Estate 297 (13th ed. 2008). Plaintiffs' expert's use of comparable sales as a method of valuing the Subject is therefore credible.
An expert's opinion must be based on "facts, data, or another expert's opinion, either perceived by or made known to the expert, at or before trial." Evid. R. 703. Thus, generally, "[a]n expert's opinion is only as good as the data upon which the expert relied." Greenblatt v. City of Englewood, 26 N.J. Tax 41, 54-55 (Tax 2010). If an opinion is based solely upon an expert's several years of experience in the real estate appraisal field, it is unpesuasive. See Genola Ventures-Shrewsbury v. Borough of Shrewsbury, 2 N.J. Tax 541, 554-55, n.5 (Tax 1981) (while "experience . . . may lead to sound judgment" valuation of real estate cannot be based solely on the same) (quotation omitted). Cf. Coastal Eagle Point Oil Co. v. Township of W. Deptford, 13 N.J. Tax 242, 299-300 (Tax 1993) ("the evidential value and weight to be given to the testimony of . . . experts . . . depends upon their candor, intelligence, knowledge, experience and especially upon the facts and reasoning which are offered as the foundation of their respective opinions"), aff'd, 15 N.J. Tax 190 (App. Div.), certif. denied, 143 N.J. 320 (1995).
The author of the quote observed that he would "find it difficult to accept the notion that dependable valuation of real estate is nothing more than experience and judgment" and that he "would not give a red cent for an appraisal by the 'expert' who beats his breast and shouts: 'I don't have to give reasons. I've had 40 years experience in this business. And, this property is worth so much because I say so.'" Genola Ventures, supra, 2 N.J. Tax at 555, n.5.
The only dispute here is the credibility of plaintiffs' expert's adjustment for interior conditions. There were no issues regarding the usability of the sales for valuation purposes. The Township did not question the appropriateness as to the provision or amount of adjustments for any other physical characteristics. The Township's sole basis for its motion to dismiss the complaint at the end of plaintiffs' case-in-chief was that the expert's negative adjustments for condition were not only excessive but were unsupported by any objective data.
One of the 17 appeals herein included that of 14 Giggleswick. In that property's appraisal report, the expert stated that on the sale date, the owner and trustee of the home had transferred the ownership of the property "out of a trustee and into typical ownership" for one dollar. The current owners then purchased the property for $346,100. The Township, which had filed a counterclaim, did not challenge the use of the latter sale. The website information maintained by the Monmouth County Board of Taxation (www.njactb.org) lists the $1.00 sale as non-usable (Category 25), however, no such non-useable category is listed for the $346,100 sale.
The court finds that the expert's basis and explanation for the conditions adjustment was well articulated. It was undisputed that he personally inspected the interiors of the comparable upon which he placed most reliance upon (14 Giggleswick), as well as of the comparable which had renovations or upgrades (23 Giggleswick) for purposes of this trial. It is undisputed that he personally inspected (interior and exterior) and had appraised several units in the Subject's development, as well of those in the comparables' developments. Personal inspection adds significantly to the persuasiveness of a conditions adjustment. See e.g. WCI-Westinghouse, Inc. v. Township of Edison, 7 N.J. Tax, 610, 623 (Tax 1985 (absent "an onsite inspection, there is no way for this court (or the expert for that matter) to determine whether the interior of the allegedly comparable property required an adjustment for interior finish or physical amenities" thus weakening the comparable's probative value), aff'd, 9 N.J. Tax 86 (App. Div. 1986); Ford Motor Co., supra, 10 N.J. Tax at 174-175 (rejecting an expert's explanation that since all industrial buildings were alike, personal inspections were unnecessary, and ruling that "[i]n any appraisal analysis the task of an appraiser is to examine a property through the eyes of an informed, prudent purchaser" which buyer would not make a purchase without an inspection, and while "appraisers do need some latitude with regard to the practicalities of the use of a market data approach" they should not sacrifice their "experienced appraisal judgment" by sitting "at [their] desk using only information supplied by others either in the mail or over the telephone without personal verification").
The expert failed to include photographs which he had taken of the interiors of 23 Giggleswick, or of any of the other comparables he had not personally inspected but for which he had relied upon the pictures from the MLS. He testified that he did not include them in his report since he was going to supplement his summary report with his testimony. Although the court prefers inclusion of detailed color photographs in an expert report especially where the sole issue is an adjustment for interior condition, the omission here is not fatal because the court finds the expert's testimony of his personal familiarity with the Subject and of the comparables to be credible, persuasive, and undisputed, and further because the Township as a counter-claimant could have, but did not introduce its own evidence contradicting the expert's testimony as to the condition of the Subject or the comparables.
In addition, the expert's testimony as to the various sources he relied upon for the adjustment was persuasive, lending to the conclusion that the adjustment amount was credible. This is further endorsed when the difference in the sale prices of 14 Giggleswick and 23 Giggleswick, both of which sold August 2012, is examined. Both units were almost identical except that the latter had an extra half-bath and lacked a patio, adjustments for which (+$2,500 and -$2,500) were not significant. Condition-wise, the latter was in a better condition than the former. The difference of about $50,000 in their sale prices could thus reasonably be attributed to the interior condition. Thus, the expert's -$25,000 for the average+ condition of 23 Giggleswick (a unit he personally inspected) is persuasive, as are the similar adjustment amounts for other comparables with an average+ condition, as well as his -$50,000 for "good" condition.
The Township claimed that since the expert did not know whether the comparables which were in better condition than the Subject had permits for the work done, his condition adjustments were not objectively supported. The court is not persuaded. Plaintiffs' expert credibly explained that the cost information on the permits is not only estimated and unreliable, but is also irrelevant for valuation purposes especially since absence of permits does not mean absence of updates or renovations and further since costs do not always convert to value in older homes. He also credibly explained that foremost in a valuation analysis is the existence and quality of the improvements as of the relevant assessment date. In contrast, the Township which had filed a counterclaim, did not provide any documentary or other evidence as to the reliability of permit information, or as to the interior condition of either the Subject or the comparables to credibly contradict plaintiffs' expert's conclusion.
Plaintiffs' expert's other adjustments were reasonable, except for discrepancies in bathroom in 23 Giggleswick which should have been -$2,500 not -$7,500. Nonetheless this difference which increases this comparable's adjusted sale price to $365,000 does not render the expert's overall value conclusion invalid given his heaviest reliance upon the sale of 14 Giggleswick ($341,100, the unit most like the Subject, thus, with no adjustment for interior condition), and lesser but equal weight to the remaining comparables.
At $2,500 for a half-bath, thus $5,000 for a full bath, the expert's provision of -$7,500 for the comparables three full baths as compared to the Subject's two full and one-half baths, is mathematically incorrect.
In sum, the court finds that plaintiffs have overcome the presumptive correctness of the County Board's judgment. They further provided persuasive evidence that the Subject's value should be lower than that reflected in the County Board judgment. The Township did not provide persuasive evidence that the original assessment should be restored or should be higher than what was imposed. Therefore, its counterclaim fails. The court accepts the plaintiffs' expert's value conclusion of $360,000. Since this value falls outside the 15% corridor, the assessment will be reduced due to application of the average ratio. CONCLUSION
The assessed-to-true value ratio is 74% ($266,600/$360,000). Application of the average ratio of 50.1% to $360,000 provides an assessment of $180,360.
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A judgment will be entered reducing the assessment as follows:
| Land: | $ 115,000 |
| Improvements: | $ 65,360 |
| Total: | $ 180,360 |
Very truly yours
/s/
Mala Sundar, J.T.C.