23-000691-R Crane Valuation FOJ - signed by JMW.pdf
Lauren C Crane, Petitioner V Township Of Putnam, Respondent · 24-004188-TT
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STATE OF MICHIGAN GRETCHEN WHITMER GOVERNOR DEPARTMENT OF LICENSING AND REGULATORY AFFAIRS LANSING MARLON I. BROWN, DPA DIRECTOR MICHIGAN TAX TRIBUNAL · 611 W. OTTAWA ST., LANSING, MI 48933 · 517-335-9760 PO BOX 30232, LANSING, MI 48909 · Other Carriers: 2407 N. GRAND RIVER AVE., LANSING, MI 48906 Lauren C Crane, MICHIGAN TAX TRIBUNAL Petitioner, SMALL CLAIMS DIVISION MTT Docket No. 23-000691-R v Case Type: Valuation Township of Putnam, Presiding Judge Respondent. Joshua M. Wease ORDER SEVERING 2024 TAX YEAR AND ASSIGNING IT DOCKET NUMBER 24-004188 FINAL OPINION AND JUDGMENT Location of Hearing: Telephonic Hearing Held on: May 7, 2024 Appearances on Behalf of Petitioner: Lauren Crane Appearances on Behalf of Respondent: Amy Pashby SUMMARY OF JUDGMENT The subject property’s true cash value (TCV), state equalized value (SEV), and taxable value (TV), for the tax year at issue, shall be as follows: Parcel Number: 4714-22-405-008 Year TCV SEV TV 2023 $351,031 $175,515 $175,515 The 2024 tax year shall be severed and assigned a new docket number. PROCEDURAL HISTORY Petitioner was required to protest the subject property’s assessment to the Board of Review (BOR). Petitioner protested the subject property’s assessment to the 2023 March BOR. Petitioner filed a Petition with the Tribunal on April 13, 2023, and Respondent filed an Answer on May 10, 2023.
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MTT Docket No. 23-000691-R Page 2 of 10 The amount of SEV or TV in dispute, as set forth in the pleadings, for all tax years at issue is within the jurisdictional limits of the Small Claims Division.1 Further, the property’s assessment for subsequent tax years is included in this proceeding.2 ISSUES AND APPLICABLE LAW The issues in this matter are: 1. Whether the subject property is assessed in excess of 50% of its TCV. The assessment of real property in Michigan shall not exceed 50% of its TCV.3 “True cash value” means “the usual selling price . . . .”4 “True cash value” means “fair market value.”5 “The petitioner has the burden of proof in establishing the true cash value of the property.”6 The Tribunal is required to make an independent determination of TCV.7 “[T]he tribunal is not bound to accept either of the parties’ theories of valuation. It may accept one theory and reject the other, it may reject both theories, or it may utilize a combination of both in arriving at its determination.”8 The Tribunal is required to select the valuation methodology that is accurate and bears a reasonable relationship to the property’s TCV.9 2. Whether the TV exceeds the amount provided by MCL 211.27a. MCL 211.27a provides that a property’s TV is the lesser of the property’s SEV or capped TV, and a property’s capped TV is, absent a transfer of ownership, determined mathematically by taking into consideration the prior tax year’s TV, statutory losses, the lesser of the rate of inflation or 5%, and statutory additions, including omitted property (i.e., property not previously assessed).10 1 See MCL 205.762(1). 2 See MCL 205.737(5)(b). 3 Michigan Const 1963, art IX, sec 3. 4 MCL 211.27(1). 5 CAF Investment Co v State Tax Comm, 392 Mich 442, 450; 221 NW2d 588 (1974). 6 MCL 205.737(3); see also Kern v Pontiac Twp, 93 Mich App 612, 620; 287 NW2d 603 (1979). 7 See Jones & Laughlin Steel Corp v City of Warren, 193 Mich App 348; 483 NW2d 416 (1992). 8 Id. at 356. 9 See Safran Printing Co v Detroit, 88 Mich App 376; 276 NW2d 602 (1979). 10 See MCL 211.34d.
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MTT Docket No. 23-000691-R Page 3 of 10 SUMMARY OF EVIDENCE A. Petitioner’s Evidence Petitioner’s contentions of TCV, SEV, and TV: Parcel Number: 4714-22-405-008 Year TCV SEV TV 2023 $351,031 $175,515 $175,515 Petitioner offered the following exhibits: 1. Evidence, filed on April 13, 2023, with the Petition a. 2023 Notice of Assessment, Taxable Valuation, and Property Classification b. Petition to Board of Review and Decision c. Warranty Deed d. Home Appraisal, dated November 18, 2022 e. Letter from Kristin E Mills f. MLS Listings – 444 Fairwood Rd, Pinckney 2. Evidence filed on April 9, 2024 a. Exhibit A – Duplicate MLS Listings – 444 Fairwood Rd, Pinckney b. Exhibit B – Duplicate Warranty Deed c. Exhibit C – Property Transfer Affidavit d. Exhibit D – Principal Residence Exemption Affidavit e. Exhibit E – Duplicate Letter from Kristin E Mills f. Exhibit F – Duplicate November 18, 2022, Home Appraisal g. Exhibit G – Duplicate 2023 Notice of Assessment, Taxable Valuation, and Property Classification h. Exhibit H – Duplicate Copy of Petition to Board of Review and Decision No exhibits were excluded from evidence. Petitioner contends the following based on the pleadings, admitted exhibits, and sworn testimony. Petitioner stated that she purchased the subject property on December 8, 2022, for $351,000. It was a seller’s market at the time. The subject had multiple bidders and was an arms-length transaction. Petitioner considered comparable sales and had an appraisal that found a value of $352,000. The BOR lowered the TV to $191,587, but Petitioner argues that it still does not account for the subject’s condition. The subject’s basement features drywall, dropped ceiling, and 30-year-old carpeting. Petitioner argues that the property should be valued at purchase price.
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MTT Docket No. 23-000691-R Page 4 of 10 B. Respondent’s Evidence The property’s TCV, SEV and TV, as confirmed by the BOR, for the tax year at issue: Parcel Number: 4714-22-405-008 Year TCV SEV TV 2023 $383,174 $191,587 $191,587 Respondent offered the following exhibits: 1. Evidence, filed on May 10, 2023, with the answer a. 2023 Petition to Board of Review and Decision b. 2023 Property Record Card dated April 9, 2024, for 444 Fairwood 2. Evidence, filed on April 9, 2024 a. Select pages from Petitioner’s appraisal b. 2024 Property Record Card dated April 9, 2024, for 449 Fairwood c. 2024 Property Record Card dated April 9, 2024, for 441 Fairwood d. Duplicate 2023 Petition to Board of Review and Decision e. Duplicate 2023 Property Record Card dated April 9, 2024, for 444 Fairwood No exhibits were excluded from evidence. Respondent contends the following based on the pleadings, admitted exhibits, and sworn testimony. Respondent contends that the subject property is properly assessed. Respondent challenges Petitioner’s offered appraisal on three grounds. First, it is a financing appraisal that Petitioner’s bank used to approve the loan that Petitioner used to finance the purchase. Second, the Petitioner’s comparable sale 1, 9730 Fairfax Dr, is not in Putnam Township. Respondent argues that instead, the sale of 441 Fairwood, which sold on June 30, 2021, for $371,000 should be considered. The sale has 1,584 square feet (SF) and an adjusted sale price of $380,000. Third, Petitioner’s comparable sale 2, 489 Fairwood Road, was not adjusted for the square footage of finished basement and should have had an adjusted value of $357,500. Respondent further argues that Petitioner’s sale would not have been considered because it was not within the sales study for 2023. FINDINGS OF FACT The Tribunal's factual findings are to be supported by competent, material, and substantial evidence.11 The following facts were proven by a preponderance of the evidence: 1. The subject property is located at 444 Fairwood Road in Livingston County. 2. The subject property is classified as residential. 11 See Antisdale v City of Galesburg, 420 Mich 265, 277; 362 NW2d 632 (1984); Dow Chemical Co v Dep’t of Treasury, 185 Mich App 458, 462-463; 462 NW2d 765 (1990).
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MTT Docket No. 23-000691-R Page 5 of 10 3. Petitioner purchased subject for $351,031 on December 8, 2022. 4. The subject property was listed on the market for eight days prior to contract and there were multiple bids on the property. 5. Petitioner submitted a valuation disclosure based on the sales comparison approach that concluded to a value of $352,000. a. 9730 Fairfax Dr, sold on October 2022 for $345,000. Petitioner’s appraiser calculated an adjusted sales price of $358,500. b. 489 Fairwood Road, sold in February 2022 for $340,000. Petitioner’s appraiser calculated an adjusted sales price of $347,500. c. 449 Fairwood Road, sold in December 2021 for $380,000. Petitioner’s appraiser calculated an adjusted sales price of $352,500. d. 414 Fairwood Road, sold in December 2021 for $319,900 Petitioner’s appraiser calculated an adjusted sales price of $345,900. e. 406 Fairwood Road, was listed for sale in November 2022 for $325,000. 6. Respondent submitted a valuation disclosure based on the mass appraisal cost approach that concludes to a value of $383,174 for 2023. a. Respondent submitted the sale of 441 Fairwood, which sold on June 30, 2021, for $371,000. The property has 1,584 SF and Respondent concluded to an adjusted sale price of $380,000. CONCLUSIONS OF LAW A proceeding before the Tax Tribunal is original, independent, and de novo.12 Further, “[i]t is the duty of the [T]ax [T]ribunal to select the approach which provides the most accurate valuation under the circumstances of the individual case.”13 In doing so, the Tribunal shall consider the three most common approaches to valuation - the capitalization of income approach, the sales comparison or market approach, and the cost-less-depreciation approach.14 This case involves a property that was purchased approximately 23 days before tax day. Petitioner argues that the purchase price is the strongest indicator of value. Respondent argues that the mass appraisal cost approach is the strongest indicator of value. Mass Appraisal Cost Approach A property’s TCV is generally determined using one of three widely accepted appraisal methods: cost, income, and market.15 Respondent calculated the subject property’s assessment using the mass appraisal, cost-less-depreciation approach to value. This approach includes market adjustments using a county multiplier and an economic condition factor (ECF). While this approach is lawful and generally mandated 12 MCL 205.735a(2). 13 Antisdale at 277; citing Pantlind Hotel Co v State Tax Comm, 3 Mich App 170; 141 NW2d 699 (1966). 14 See Meadowlanes Ltd Dividend Housing Ass’n v City of Holland, 437 Mich 473, 484-485; 473 NW2d 636 (1991); Pantlind Hotel Co, 3 Mich App 170. 15 Meadowlanes Ltd Dividend Housing Ass'n v City of Holland, 437 Mich 473, 485; 473 NW2d 636 (1991).
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MTT Docket No. 23-000691-R Page 6 of 10 for assessment purposes,16 it is most applicable to newly constructed properties.17 It “can sometimes be applied to older properties given adequate data to measure depreciation,” but “investors or purchasers of older buildings . . . may be more concerned about expenditures that they will need to make after the purchase to make the property suitable to their needs than they are by the calculation of replacement or reproduction cost and depreciation.”18 Further, “when improvements are considerably older or do not represent the highest and best use of the land as though vacant, the physical deterioration, functional obsolescence, and external obsolescence may be more difficult to estimate.” 19 The cost approach also requires a well-supported land value, however, Respondent did not provide the land sale studies used in its valuation of the subject property.20 The Tribunal concludes that the cost approach is not appropriate given the subject’s age. Instead, the more appropriate approach is the sales comparison approach. Sales Comparison Approach Petitioner’s appraisal relies solely on the sales comparison approach. Such reports are not conclusive evidence of value and must be evaluated on an individual basis to determine both reliability and relevance to the tax years at issue. This is particularly true when the appraisal is not prepared specifically for the purpose of an appeal before the Tribunal, though preparation for another purpose does not preclude consideration of the appraisal or the sales utilized therein. “The sales comparison approach is most useful when a number of similar properties have recently been sold or are currently for sale in the subject property’s market.”21 Petitioner’s appraisal suggests that their purchase price is representative of TCV or “usual selling price” within the meaning of MCL 211.27. The appraisal relied on four sales and one listing. The comparable (Comp) sales that took place in 2021 (Comp Sale 3 and Comp Sale 4) are too far removed from tax day to provide meaningful value information. Further, Comp Sale 5 is a sales listing and is not relevant since it is not a sale that can be relied on. The leaves two sales. First, the property located at 9730 Fairfax Dr, sold on October 2022 for $345,000 (Comp Sale 1). Petitioner’s appraiser calculated an adjusted sales price of $358,500. Second, the property located at 489 Fairwood Road, sold in February 2022 for $340,000 (Comp Sale 2). Petitioner’s appraiser calculated an adjusted sales price of $347,500. 16 See MCL 211.10e and State Tax Commission, Michigan Assessors Manual, Vol. I-III. 17 “Because cost and market value are usually more closely related when improvements are new, the cost approach is more important in estimating the market value of new or relatively new construction.” Appraisal Institute, The Appraisal of Real Estate (Chicago: Appraisal Institute, 15th ed. 2020) p. 530. The Supreme Court has also recognized that “while actual and reproduction cost are some evidence of value, the constitutional and statutory standard is market-based.” First Fed Sav & Loan Ass'n of Flint v City of Flint, 415 Mich 702, 705; 329 NW2d 755, 757 (1982). Further, “the market approach is the only valuation method that directly reflects the balance of supply and demand for property in marketplace trading.” Jones & Laughlin, 193 Mich App at 353-354. 18 Id. 19 Appraisal Institute, The Appraisal of Real Estate (Chicago: Appraisal Institute, 15th ed. 2020) p. 531. 20 Id. 21 The Appraisal of Real Estate at 36.
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MTT Docket No. 23-000691-R Page 7 of 10 Respondent challenged Petitioner’s Comp Sale 1 and Comp Sale 2. First, Respondent argues that Comp Sale 1 should be excluded because it is not in Putnam Township. However, Respondent has not provided any evidence that a buyer in the market would not consider a property that is as close as 3.3 miles to the subject. Also, just because the township would not consider that sale under the mass appraisal cost approach does not discount it as a comparable sale under the sales comparison approach. Therefore, Respondent’s argument on this point is not persuasive. Respondent objects to Petitioner’s Comp Sale 2 because it was not adjusted for the square footage of finished basement and should have had an adjusted $10,000 to a value of $357,500. Here, Respondent makes a fair point. The adjustments for the basement and finish between the subject and the comparable sales are inconsistent. The subject has 1,736 SF of basement area. Comp Sale 1 has an area of 1,592 SF (approximately 8% small) and the sale price was adjusted by $10,000. Comp Sale 2 has a significantly smaller basement area of 697 SF (a difference of 60%) but is not adjusted at all. The appraiser provides no explanation for this inconsistent treatment. The Tribunal concludes that the adjustments made to Petitioner’s Comp Sale 1 and Comp Sale 2 are inconsistent and not well explained or supported by data. These comparables are like the subject in terms of age, functional utility, gross living area, and amenities. However, without better support for how the appraiser adjusted for property differences, these comps cannot be relied on to determine the TCV of the subject. At best, the base sale prices of $345,000 and $340,000 represent the bottom end of the range of sale prices for comparable homes for the tax year at issue. The Tribunal concludes that the appraisal is not a strong indicator of value and gives the appraisal little weight. Next, Respondent argues that the sale of 441 Fairwood, which sold on June 30, 2021, for $371,000 should be considered. However, like the other sales from 2021, this sale is too far removed from tax day to be relevant. Further, Respondent’s assessor provided few details about this sale beyond sale date, price, gross living area and number of baths. This data is too limited to make a fair comparison to the subject. Therefore, this sale is given no weight. Petitioner’s Purchase Price By law, “the purchase price paid in a transfer of real property is not the presumptive true cash value.”22 “A great many factors enter into the determination of a sale price, such as need or ability to utilize the property, potential income, actual income, age and physical condition, tax considerations, and financing costs.”23 Actual selling price is relevant in determining the "usual selling price,” however, and “must be considered by the Tribunal in the absence of an auction or forced sale.”24 22 MCL 211.27(6). 23 First City Corp v City of Lansing, 153 Mich App 106, 115; 395 NW2d 26, 30 (1986). 24 Samonek v Norvell Twp, 208 Mich App 80, 85; 527 NW2d 24, 27 (1994). See also Jones & Laughlin Steel Corp v City of Warren, 193 Mich App 348; 483 NW2d 416 (1992).
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MTT Docket No. 23-000691-R Page 8 of 10 Here, there is persuasive evidence that the subject's TCV is the purchase price. The sale occurred only 23 days before tax day for the year at issue. Petitioner’s appraisal indicates that the property was only listed for eight days prior to contract. However, Petitioner credibly testified that there were multiple bids on the property. Respondent challenges the date of Petitioner’s purchase because the sale was outside the period for the 2023 sales study. Respondent’s sales all sold more than one year prior to the tax day relevant to this appeal, and though assessors are required by way of MCL 211.10e and State Tax Commission guidelines to use a one to two-year study period in the development of assessments under the mass appraisal cost approach, this period is not applicable to a sales comparison analysis. In the sales comparison approach to value, the date of the sale is an element of comparison, which ideally should require little or no adjustment. The goal is to determine the true cash or fair market value of the subject in a hypothetical sale on the relevant tax day. Therefore, when choosing comparable sales, neither party is limited to the one to two- year study period referred to above but should consider relevant sales that occurred closest in time to the tax day in question. Absent adjustments for changes in market conditions or evidence establishing that no adjustments are needed, the Tribunal cannot conclude that Respondent’s sales are reliable indicators of value. Further, this argument is not persuasive since the purchase was only 23 days before tax day. Respondent has not provided persuasive evidence that challenges the validity of the sale as an arm’s length transaction or that the sale price does not reflect market value. The Tribunal concludes that the sale was an arm’s-length transaction, and the sale price strongly supports the property’s TCV for the year at issue. Petitioner’s testimony is credible and sufficient to conclude that she bought the subject under normal market conditions and pressures to provide a reliable indication of value. The Tribunal is satisfied that the property had reasonable market exposure – subject to normal market conditions and pressures – to provide a reliable indication of value. The Tribunal concludes, given the available evidence, that Petitioner’s purchase price provides the best evidence of TCV within the meaning of MCL 211.27. Reconciliation of Value Petitioner has met their burden of proof that the TCV for 2023 is the purchase price based on credible and persuasive evidence. However, neither party provided evidence of the subject’s TCV for tax year 2024. Therefore, the 2024 tax year is severed and will be assigned a new docket number and will allow the parties to submit evidence and have a separate proceeding. JUDGMENT IT IS ORDERED that the 2024 tax year shall be SEVERED and assigned Docket No. 24-004188.
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MTT Docket No. 23-000691-R Page 9 of 10 IT IS FURTHER ORDERED that Petitioner shall file a petition pertaining to the 2024 tax year within 21 days of the entry of this Order.25 The petition shall note the docket number assigned by the Tribunal for the 2024 tax year and if filed utilizing the Tribunal’s e-filing system, must be filed on the assigned 2024 docket number as a “Severed Petition.” IT IS FURTHER ORDERED that the Tribunal shall issue a Notice of Docket after receipt of Petitioner’s petition. IT IS FURTHER ORDERED that the officer charged with maintaining the assessment rolls for the 2023 tax year shall correct or cause the assessment rolls to be corrected to reflect the property’s true cash and taxable values within 20 days of entry of this Final Opinion and Judgment, subject to the processes of equalization.26 To the extent that the final level of assessment for a given year has not yet been determined and published, the assessment rolls shall be corrected once the final level is published or becomes known. IT IS FURTHER ORDERED that the officer charged with collecting or refunding the affected taxes shall collect taxes and any applicable interest or issue a refund within 28 days of entry of this Final Opinion and Judgment. If a refund is warranted, it shall include a proportionate share of any property tax administration fees paid and penalty and interest paid on delinquent taxes. The refund shall also separately indicate the amount of the taxes, fees, penalties, and interest being refunded. A sum determined by the Tribunal to have been unlawfully paid shall bear interest from the date of payment to the date of judgment, and the judgment shall bear interest to the date of its payment. A sum determined by the Tribunal to have been underpaid shall not bear interest for any time period prior to 28 days after the issuance of this Final Opinion and Judgment. Pursuant to MCL 205.737, interest shall accrue (i) after December 31, 2013, through June 30, 2016, at the rate of 4.25%, (ii) after June 30, 2016, through December 31, 2016, at the rate of 4.40%, (iii) after December 31, 2016, through June 30, 2017, at the rate of 4.50%, (iv) after June 30, 2017, through December 31, 2017, at the rate of 4.70%, (v) after December 31, 2017, through June 30, 2018, at the rate of 5.15%, (vi) after June 30, 2018, through December 31, 2018, at the rate of 5.41%, (vii) after December 31, 2018 through June 30, 2019, at the rate of 5.9%, (viii) after June 30, 2019 through December 31, 2019, at the rate of 6.39%, (ix) after December 31, 2019, through June 30, 2020, at the rate of 6.40%, (x) after June 30 2020, through December 31, 2020, at the rate of 5.63%, (xi) after December 31, 2020, through June 30, 2022, at the rate of 4.25%, (xii) after June 30, 2022, through December 31, 2022, at the rate of 4.27%, (xiii) after December 31, 2022, through June 30, 2023, at the rate of 5.65%, (xiv) after June 30, 2023, through December 31, 2023, at the rate of 8.25%, (xv) after 25 Alternatively, the petition may be downloaded from the Tribunal’s website and mailed to the Tribunal via United States Postal Service at: Michigan Tax Tribunal, PO BOX 30232, Lansing, MI 48909. The petition may also be delivered to the Tribunal via overnight carrier (UPS, FedEx, or DHL) at: Michigan Tax Tribunal, 2nd Floor MTT, 2407 N. Grand River Avenue, Lansing, MI 48933. 26 See MCL 205.755.
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MTT Docket No. 23-000691-R Page 10 of 10 December 31, 2023, through June 30, 2024, at the rate of 9.30%, and (xvi) after June 30, 2024, through December 31, 2024, at the rate of 9.50%. This Final Opinion and Judgment resolves all pending claims in this matter and closes this case. APPEAL RIGHTS If you disagree with the final decision in this case, you may file a motion for reconsideration with the Tribunal or a claim of appeal with the Michigan Court of Appeals. A motion for reconsideration must be filed with the Tribunal with the required filing fee within 21 days from the date of entry of the final decision. Because the final decision closes the case, the motion cannot be filed through the Tribunal’s web-based e-filing system; it must be filed by mail or personal service. The fee for the filing of such motions is $50.00 in the Entire Tribunal and $25.00 in the Small Claims Division, unless the Small Claims decision relates to the valuation of property and the property had a principal residence exemption of at least 50% at the time the petition was filed or the decision relates to the grant or denial of a poverty or disabled veterans exemption and, if so, there is no filing fee. You are required to serve a copy of the motion on the opposing party by mail or personal service or by email if the opposing party agrees to electronic service, and proof demonstrating that service must be submitted with the motion. Responses to motions for reconsideration are prohibited and there are no oral arguments unless otherwise ordered by the Tribunal. Alternatively, you may file a claim of appeal with the Michigan Court of Appeals. If the claim is filed within 21 days of the entry of the final decision, it is an “appeal of right.” If the claim is filed more than 21 days after the entry of the final decision, it is an “appeal by leave.” A copy of the claim of appeal must be filed with the Tribunal to certify the record on appeal. There is no certification fee. By ______________________________ Date Entered by Tribunal: December 20, 2024 PROOF OF SERVICE I certify that a copy of the foregoing was sent on the entry date indicated above to the parties or their attorneys or authorized representatives, if any, utilizing either the mailing or email addresses on file, as provide by those parties, attorneys, or authorized representatives. By: Tribunal Clerk