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HomeMy WebLinkAbout2006-6717 Civil MARTIN JACKSON and : IN THE COURT OF COMMON PLEAS MARIANNE JACKSON : CUMBERLAND COUNTY Appellants : PENNSYLVANIA : : v. : NO. 06-6717 CIVIL : : THE BOARD OF ASSESSMENT : CIVIL ACTION - LAW APPEALS OF CUMBERLAND : COUNTY, : REAL ESTATE TAX Appellee : ASSESSMENT APPEAL IN RE: REAL ESTATE TAX ASSESSMENT APPEAL ORDER OF COURT th AND NOW, this 27 day of August 2007, the market value assessment for 2006 of the subject property is $2,396,180. By the Court, M. L. Ebert, Jr., J. Michael J. Pykosh, Esquire Attorney for Appellants Stephen D. Tiley, Esquire Attorney for Appellee MARTIN JACKSON and : IN THE COURT OF COMMON PLEAS MARIANNE JACKSON : CUMBERLAND COUNTY Appellants : PENNSYLVANIA : : v. : NO. 06-6717 CIVIL : : THE BOARD OF ASSESSMENT : CIVIL ACTION - LAW APPEALS OF CUMBERLAND : COUNTY, : REAL ESTATE TAX Appellee : ASSESSMENT APPEAL IN RE: REAL ESTATE TAX ASSESSMENT APPEAL OPINION and ORDER OF COURT EBERT, J., August 27, 2007 - Petitioners, Martin and Marianne Jackson, filed this appeal from the assessment by Respondent, Board of Assessment Appeals of Cumberland County, of their property at 116 1 Ellesmere Lane, Mechanicsburg, PA 17055. The parties seek to establish the fair market value 2 of the property as of the date of the appeal on June 6, 2006. The parties have stipulated that the initial assessment of the property was $3,156,810. Additionally, both parties have stipulated that the given common level ratio as of June 2005 was 85.2%, that the common level ratio as of June 2006 was 87.8%, and that the common level ratio factor for Cumberland County at the time of this appeal was 1.00. Accordingly, both parties agree that the fair market value of the property 1 Notes of Testimony, Hearing held March 2, 2007, p. 54 (hereinafter “N.T. __”). 2 N.T. 4-5; The parties seem to disagree as to the date of appeal. In its Trial Memorandum, Appellee asserted that the effective date of appeal was May 1, 2006, which depicts the effective date of the “40 day notice” which Appellants appealed. Appellants assert in their Pre-Trial Memorandum that the assessment appeal took place June 6, 2006. We are of the opinion that the approximate one month discrepancy makes no difference in the valuation of the home; however we will find the date of appeal to be June 6, 2006, since Appellee’s expert assessed the home as of that date. See Appellee Ex. 5. 2 3 will be the tax assessment. Having considered all relevant testimony and evidence we find that the market value assessment for the subject property for the 2006 year is $2,396,180. STATEMENT OF FACTS The subject property is located on a 3.54 acre lot in Whitney Ridge Estates – a suburban residential neighborhood in Cumberland County. The two-story, seven bedroom house was built 4 in 2005. It boasts 8263-8719 square feet of exquisite, unique craftsmanship on the main two 5 levels and 4402-4963 square feet in the elaborately finished basement. Several outstanding features in the home include: stone patio, balcony, iron fence, in-ground pool, basketball court, four fireplaces, walkout fully finished basement, macadam driveway, four car garage, and a beautiful view of the surrounding mountains. The home is located near all necessary support 6 facilities such as schools, shopping centers, recreation, and employment opportunities. Beyond the seven bedrooms, the home includes a large interior exercise room, wine cellar, and a covered 7 octagon porch/gazebo outdoor living area. The actual cost to design and build the home was 8 between 3.7-3.9 million. 9 William Gregory Rothman, a PA certified General Real Estate Appraiser, testified for the Petitioner as an expert witness. Mr. Rothman considered both a cost approach and a sales 10 comparison approach in order to arrive at an actual value for the Jackson home. While Rothman did conduct a cost approach, he did not believe that it was a reliable standard. In his opinion, because the property was “overbuilt”, the cost of the property does not necessarily 3 N.T. 4-5 4 Appellant Ex. 2; Appellee Ex. 6 5 N.T. 31-34; Appellee Ex. 6 6 Appellant Ex. 2; Appellee Ex. 5 & 6 7 Appellant Ex. 2; Appellee Ex. 8 8 Appellant Ex. 2; Appellee Ex. 5 9 The parties stipulated Mr. Rothman as an expert. N.T. 7 10 Mr. Rothman testified, and Ms. Stouffer agreed, that the income approach was not a reliable method for arrive at actual cost in this instance, because in the income approach rent is capitalized and residential real estate in a single family home is not generally rent oriented in this particular market. N.T. 13 & 75 3 reflect an accurate value of the property. Rothman chose to base the value of the home on the comparative sales approach and chose four comparables he felt were similar to the subject 11 property in look, locale, size, quality, and market appeal. 12 Rothman used a square footage adjustment based on a $200 per square foot standard. Rothman did not assess the square footage of the basement in the same manner as the rest of the home, although 73% of the basement (4402 square feet) was finished in the same manner as the 13 two main living floors. He chose instead to include a $100,000 blanket adjustment for the 14 finished basement footage. In reaching his assessment, Rothman emphasized that there has never been a sale of 15 property less than ten acres in Cumberland County which has sold for more than $2,000,000. He also noted that in order to buy a $2,000,000 home in Central Pennsylvania a buyer would 16 need a household income of $550,000-$560,000. Only 2.5% of Central Pennsylvania residents make an income over $200,000. Between 1989 and 2002, only eleven homes sold for more than 17 $1 million (an average of 1.5 per year). Rothman further stated that most persons financially capable of buying such high priced houses, will opt to build a home rather than buy and normally 18 resale of such properties will bring much less than it cost to actually build them. Accordingly, 19 the high end market is currently in a weakened state. Homes recently put on the market for 11 N.T. 14-15 12 N.T. 32 13 N.T. 33 14 N.T. 37 15 N.T. 15 16 N.T. 26; This statement is based on an 80% loan value. 17 N.T. 27 18 N.T. 28 19 N.T. 24 4 more than $2,000,000 have either sold for much less than the posted price or have been removed 20 due to lack of interest. 21 Additionally, Rothman maintains that the Jackson property is overbuilt and includes many features that a typical resident would not care to include in the purchase value (for example the full-sized basketball court which may have cost $40,000 to build but would be of little interest to an older buyer). After considering all these factors, and having considered multiple market comparables, Mr. Rothman opined that although the property may have cost nearly 22 $4,000,000 to build, the actual market value was only $2,000,000. Lesa Stouffer, a Certified Pennsylvania Evaluator, testified for Respondent. Like Mr. Rothman, Ms. Stouffer also chose to conduct both a cost approach and a comparable sales approach. She achieved roughly the same figures as Mr. Rothman in the cost approach but also 23 thought the comparable sales approach to be the best for the present circumstances. She used 24 three comparables – two of which were used by Mr. Rothman in his report. Ms. Stouffer took a different approach, however, in her determination of the value of the property. She opined that 25 the walkout basement would add a value to the property of $100,000, that the deck, porch, and 26 external living area would each increase the value by $100,000, and that the basketball court 27 added a $40,000 value to the property. She added a subjective value of $75,000 for the fine 28 view of the mountains and $100,000 for the superior quality of construction. Ms. Stouffer used a $250 square foot standard for the main two living floors. Unlike Mr. Rothman, she chose to 20 N.T. 49, 51 21 N.T. 32 22 Appellant Ex. 2 23 N.T. 75-76 24 N.T. 76 25 N.T. 87 26 N.T. 89 27 N.T. 90 28 N.T. 94 & 106 5 include the finished basement footage in her square footage assessment but used only a $75 per 29 square foot standard in assessing the finished basement footage. Using the sales comparison approach, Stouffer was of the opinion that the actual market value of the property was 30 $2,750,000. Both experts agreed that the property is both overdeveloped for the location and that there is no home in Cumberland County which is truly comparable to the subject property. Stouffer was of the opinion that certain aspects, such as the walkout basement, finished basement, superior construction quality, and view added a significant amount of value to the property. Rothman disagreed with this assessment and stated that Stouffer artificially inflated the land value by adding additional value for the property view (which Rothman alleges is included in the 31 value of the lot property) and construction quality. The experts also disagree as to the amount of finished square footage in the basement. Mr. Rothman claims that 73% of the basement is 32 finished, which provides a total square footage of 4,402 while Ms. Stouffer claims that the 33 amount of finished square footage is 4,963. DISCUSSION In tax assessment cases, 72 P.S. 5453.602(a) demands that a reviewing court determine the “actual value” of a Petitioner’s property. Specifically, “actual market value is that price which a purchaser, willing but not obligated to buy, would pay an owner willing but not obligated to sell, taking into consideration not only the present use of the property, but all of the uses including the highest and most profitable use to which the land is adaptable and available.” 29 N.T. 85, 89; 30 N.T. 92. Stouffer’s original assessment was $3,156,810.00. Prior to the hearing on March 2, 2007, there was a tax assessment appeal board hearing held October 19, 2006 at which point the assessment was lowered. N.T. 92-93 31 N.T. 113. Rothman believed that the construction quality of the comparables was at the same level, thus no adjustment was appropriate. 32 N.T. 33 33 N.T. 88 6 , County of Monroe v. Bolus613 A.2d 178, 182 (Pa. Cmwlth. 1992) (citation omitted). The Court may utilize either the current market value or adopt a base year market value in order to assess actual property value. 72 P.S. 5453.602(a)Both parties offered expert witnesses in the field of . real estate value assessment. While coming from different backgrounds and experience, the Court found both experts to be equally well qualified. As is no surprise, the Court also found that each expert’s testimony was colored somewhat by a bias for the party for whom they were testifying. As the testimony in this case readily demonstrates, the field of real estate appraisal does not lend itself to scientific analysis and is perhaps best described as an “art” which relies in large part on very subjective factors. It is the responsibility of the trial judge to “weigh the conflicting testimony and values expressed by the competing experts and arrive at a valuation based on the credibility of their opinions.” Bolus, 613 A.2d at 181. As with any other evidence, the trier of fact is free to believe all, part, or none of the expert testimony presented during the hearing. Kraner v. Kraner, 841 A.2d 141 (Pa. Super. 2004). We will begin our determination of the actual value of the Jackson property by removing additional value determinations from Ms. Stouffer’s assessment which, in our opinion, do not truly reflect marketable value. The additional $100,000 adjustment for the value of a walkout basement and the $75,000 adjustment for the value of the view appear to us to be overstated. The mere fact that this is a walkout basement is not likely to persuade a buyer to pay an additional $100,000 for such a high priced home. What is significant about the basement is not that it is a “walkout” but rather it is the overall quality of this basement which makes it equal to the living space on the upper floors. In the same vain, this Court accepts Mr. Rothman’s opinion that the beautiful view is already included in the value of the lot itself. We additionally will not include the $40,000 adjustment for the basketball court, which in this Court’s opinion is more of 7 a detractor than an added feature. We also will not include the $100,000 adjustment for the overall quality of the construction, since the other comparables appear to us to also display superior craftsmanship. It is not the craftsmanship that distinguishes this home from the comparables but rather its superior design and grandeur. After subtracting these values from Ms. Stouffer’s evaluation of $2,750,000, her adjusted assessment becomes $2,435,000. Considering the assessment of Mr. Rothman, we do not agree with his assessment of the finished basement. Mr. Rothman did not include the finished basement footage in his overall assessment of the usable square footage of the home. Instead he simply made a blanket $100,000 adjustment to his comparables for the finished basement space in his report. Roughly 73% of the basement is fully finished in a style and quality equal to that of the first and second floor living quarters. It is our belief that, considering the beauty, utility and superior quality of the finished basement area, the square footage should be adjusted using a cost per square foot measurement. Ms. Stouffer agrees that the footage in the basement is commonly assessed at a lower value and used $75 per square foot. We find this figure very low. Even Mr. Rothman in his cost analysis indicated that the basement square footage cost approximately $117 a square foot and the garage cost $112 per square foot. In determining the value of this superb basement, this Court finds that a realistic figure for this home would be $90 per square foot. We will accept Mr. Rothman’s opinion that 4,402 square feet of this basement is finished. Applying the $90 per foot assessment to this square footage brings Rothman’s adjusted assessment to $2,396,180. We are aware that the credible evidence suggests that there is limited demand in the current market for a home such as the Jackson’s. It appears that no home has ever sold in our county which would reflect the cost-value of this house and property. Significantly, testimony has shown that homes recently put on the market for more than $2,000,000 have either sold for 8 much less than the requested price or have been removed from the market due to lack of interest. We do not believe, however, that this should be a determining factor upon which the assessment of this home’s actual value must rest. To follow such a blind guide would mean that no matter how large or magnificent a home one built, the value could never be more than $2,000,000 in this county. While a house has not yet sold for such a price, there is no credible evidence to show that this home would not sell for more, considering its truly superior quality and grandeur. In examining the evidence presented in this case, none of the so-called “comparables” in any way approached the true splendor of this home. Having considered both assessments in light of the current market status, we find a reasonable assessment of the Jackson home to be $2,396,180. This figure accounts for the discrepancies in the subjective assessments between the two experts and is, in our opinion, a reasonable and prudent assessment of what a buyer would be willing to pay for the home given its quality and location. Accordingly, the following order will be entered: ORDER OF COURT th AND NOW , this 27 day of August, 2007, the market value assessment for 2006 of the subject property is $2,396,180. By the Court, M. L. Ebert, Jr., J. Michael J. Pykosh, Esquire Attorney for Appellants Stephen D. Tiley, Esquire Attorney for Appellee 9