Opinion
Docket No. 012017-2011
08-10-2012
Matthew Tuck v. Township of West Caldwell
Matthew S R Tuck, Pro-Se Matthew O'Donnell, Esq. O'Donnell McCord, P.C.
NOT FOR PUBLICATION WITHOUT APPROVAL OF
THE TAX COURT COMMITTEE ON OPINIONS
Mala Narayanan
JUDGE
Via Electronic and First-Class Mail Matthew S R Tuck, Pro-Se Matthew O'Donnell, Esq.
O'Donnell McCord, P.C.
Dear Mr. Tuck and Counsel:
This letter opinion constitutes the court's decision with respect to the above-captioned matter involving the value of plaintiff's residence at 325 Passaic Avenue, West Caldwell, designated as Block 3307, Lot 4 ("Subject") for purposes of local property tax. For tax year 2011, pursuant to a district-wide revaluation, defendant ("West Caldwell") assessed the subject property as follows:
+----------------------+ ¦Land ¦$184,800¦ +-------------+--------¦ ¦Improvements ¦$424,700¦ +-------------+--------¦ ¦TOTAL ¦$609,500¦ +----------------------+ Plaintiff appealed to the Essex County Board of Taxation ("County Board"). West Caldwell did not cross-appeal. The County Board reduced the assessment and entered judgment as follows:
+----------------------+ ¦Land ¦$155,300¦ +-------------+--------¦ ¦Improvements ¦$424,700¦ +-------------+--------¦ ¦TOTAL ¦$580,000¦ +----------------------+ Plaintiff then timely appealed the judgment to the Tax Court maintaining that the assessment should be lowered to $528,375. West Caldwell timely counterclaimed claiming that the original assessment of $609,500 was deficient.
For the reasons explained below, the court finds that neither party has proven that the value of the property should be other than the value of the judgment reached by the County Board. Therefore, the judgment of the County Board is affirmed. FACTS
The court adduces the following facts from the testimony of the trial witnesses and from the evidence accepted into the record. Plaintiff as owner of the Subject, and having resided there for the last eighteen years or so, testified on his own behalf. West Caldwell presented its assessor and its valuation expert as its witnesses.
This evidence includes photographs taken by plaintiff in connection with his appeal for tax year 2004 of the Subject's roof, interior, basement, and surrounding streets. Plaintiff also produced (1) a map showing the location of both plaintiff's and West Caldwell's comparable properties in relation to the Subject; (2) a chart of plaintiff's comparable sales analysis; (3) photographs of neighboring properties to the Subject; (4) the Subject's description as generated by a field inspector of Appraisal Systems, Inc., the entity performing the revaluation; (5) a printout from Appraisal Systems, Inc.'s website showing non-usable sales; (6) photographs of West Caldwell's comparable properties. Evidence admitted by West Caldwell includes: (1) a sketch of the dimensions of the Subject generated by the township assessor in 2004; (2) the property record card; and (3) its expert's appraisal report.
Plaintiff is not a licensed appraiser, has never testified as an expert appraiser, and never prepared any appraisal reports. West Caldwell's real estate valuation expert was accepted by the court as such, without opposition from plaintiff.
The Subject comprises of a lot measuring about 0.33 acres and is improved with a two-story Tudor/colonial-style residence built sometime in 1915, and a two-car garage. It is located on a corner lot, at the intersection of Passaic Avenue and Pinetree Place. Passaic Avenue is a busy county highway.
The first story has a living room (with an oak floor), fireplace, dining room (with flagstone tiled floor), dinette, kitchen, laundry room, half bathroom (2-fixture) and foyer. Portions of the living room have stucco. It is set up with radiator heat. The ceilings are 8 feet tall. The dinette has a cathedral ceiling. The kitchen and laundry floors are tiled. The stone wall goes from the family room into the dining area.
On the second story are three bedrooms and two bathrooms, with independent central air conditioning. The master bedroom's entrance has a wooden archway and door, which plaintiff claimed requires replacement as it cannot be varnished anymore. It also has 8 foot tall ceilings, with skylights and recessed lighting. The master bedroom, which is directly over the two-car garage, has a 6-fixture bathroom with a whirlpool tub. The other bathroom is 4-fixture, tiled, with a whirlpool tub. On the third floor attic is a bedroom and an unusable bathroom, the bathtub having been gutted out.
There are casement windows throughout the house. This means that the windows open out instead of sliding up and down.
The Subject also has a basement which is under the dinette and kitchen. It is finished with one room. It has two boilers and two water heaters. The walls are made of cinder blocks and the floor is concrete.
The residence's exterior is made of stone. There is a sewage treatment plant located some distance behind the residence.
It is undisputed that the highest and best use of the Subject as vacant and as improved is its current use, namely, as a single family residence.
From the photographs of the Subject, it is evident that there is some visible water damage to a portion of the basement near the utilities. Plaintiff credibly testified that the sump pump overflows with water, and there are drainage issues which cause the basement to flood. Other than the water damage to the portion of the basement, no other portion of the Subject, exterior or interior, reflects any visible destruction, deterioration or damage of such magnitude so as to adversely impact the appearance or utility of the Subject. The court finds the interior of the residence, such as the flooring, walls, and amenities, to be in an overall fair condition, and the exterior to be in a good condition.
Plaintiff took the photographs in connection with his property tax appeal for tax year 2004. He authenticated the photographs and credibly testified that the condition of the Subject depicted in the photographs remained unchanged. The court therefore finds these pictures relevant and usable for this tax appeal.
For purposes of his valuation evidence, discussed below, plaintiff used the gross living area ("GLA") as 3,113 square feet ("SF"). He testified that the stone wall in a portion of the living room is at least three feet in width, resulting in less habitable space within the home. The photographs reflect that the stone walls in the living room area are thicker and West Caldwell does not dispute this fact. However, the wall thickness is not present for the rooms in the second story or in the attic area.
The assessor testified that the GLA should be 3,473 SF, the amount he had calculated in 2004 after an inspection related to a prior tax appeal because he was unable to do a more recent inspection for purposes of this tax appeal. West Caldwell's expert used the same area as plaintiff explaining the discrepancy as a result of excluding the finished attic area. The court finds 3,113 SF as the Subject's GLA as being more credible. CONCLUSIONS OF LAW
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 is because "in tax matters it is to be presumed that governmental authority has been exercised correctly and in accordance with law." Pantasote Co. v. City of Passaic, 100 N.J. 408, 413 (1985). The presumption remains "in place even if the municipality utilized a flawed valuation methodology, so long as the quantum of the assessment is not so far removed from the true value of the property or the method of assessment itself is so patently defective as to justify removal of the presumption of validity." Transcontinental Gas Pipe Line Corp. v. Township of Bernards, 111 N.J. 507, 517 (1988) (citation omitted).
Due to the "strength of the presumption," a taxpayer has the burden of proving "that the assessment is erroneous" with evidence that must be "definite, positive and certain in quality and quantity to overcome the presumption." MSGW, supra, 18 N.J. Tax at 373 (quotations omitted). The evidence "must be sufficient to determine the value of the property under appeal, thereby establishing the existence of a debatable question as to the correctness of the assessment." West Colonial Enters., LLC v. City of East Orange, 20 N.J. Tax 576, 579 (Tax 2003) (citations and quotations omitted), aff'd, 21 N.J. Tax 590 (App. Div. 2004).
West Caldwell moved to dismiss the complaint for plaintiff's failure to overcome the presumptive correctness of the County Board's judgment pursuant to R. 4:37-2, at the end of plaintiff's case. It argued that relief was warranted because plaintiff conceded that he was not a valuation expert, and further because he had not provided evidence to demonstrate that the County Board's judgment was erroneous.
The court had reserved judgment on the motion.
In deciding motions under R. 4:37-2, the court must accept as true all proofs of the party challenging the assessment and accord that party all legitimate favorable inferences. See also Dolson v. Anastasia, 55 N.J. 2, 5-6 (1969) ("judicial function . . . is . . . mechanical" in deciding a R. 4:37-2(b) motion where court is "not concerned with the worth, nature or extent . . . of the evidence"). Plaintiff produced evidence such as the measurement of the Subject's GLA, its location relative to a sewage treatment plant, and its general condition which in turn, raise a question about the Subject's assessed value. Viewing this evidence with "rose-colored glasses," MSGW, supra, 18 N.J. Tax at 379, the court finds that plaintiff has overcome the presumption of correctness of the County Board's judgment.
Once the presumption of correctness is overcome, the court must evaluate the evidence adduced at trial to make an independent determination of value "based on a fair preponderance of the evidence." Ford Motor Co. v. Township of Edison, 127 N.J. 290, 312 (1992). See also MSGW, supra, 18 N.J. Tax at 376-77 (at the close of trial, the court must "weigh and evaluate" the evidence to "determine whether the plaintiff has demonstrated, by a preponderance of the evidence, that the assessment should be adjusted" irrespective of whether the "the defendant has asserted a counterclaim . . ."). The court's "independent assessment" must be "based 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).
B. Valuation
The sales comparison approach is generally accepted as an appropriate method of estimating value for a residence. Brown v. Borough of Glen Rock, 19 N.J Tax 366, 377 (App. Div.), certif. denied, 168 N.J. 291 (2001). The value is derived by comparing similar properties that have recently sold, identifying appropriate units of comparison, and making adjustments to the sale prices of the comparable properties based on relevant, market-derived elements of comparison. Appraisal Institute, The Appraisal of Real Estate, 301-02 (13th ed. 2008). Since a purchaser in the marketplace on October 1, 2010 would use comparable sales to determine the fair market value of the Subject, the court finds that this approach is the most appropriate here.
I. Plaintiff's Value Conclusion
Plaintiff provided three comparable sales to which he made several adjustments. He personally inspected each of the comparable properties and observed their characteristics. All are located in West Caldwell and are within 1.35 to 2.23 miles from the Subject, which proximity was the reason plaintiff chose them as comparables.
His first comparable, 19 Jameson Place ("Comparable One"), is a bi-level house built in 1961, and sold for $505,000 on September 8, 2009. Plaintiff made the following negative adjustments: $5,000 for location; $14,343 for GLA; $5,731 for superior lot size; $4,600 for age since the Subject is considerably older; $10,000 for a "new EIK;" $12,000 for a new addition; and $2,000 for a larger lot in a quiet neighborhood. He made positive adjustments of $10,000 for its brick and wood siding since the Subject had a stone façade over a wood frame; and, without any specific details or explanation, a single $78,400 upward adjustment for "fair estimate of better features in Subject property over" Comparable One. These adjustments provided a net positive increase to the sale price of Comparable One to $539,726.
He calculated the GLA price per SF of the Subject at $186.32, which was the assessment of $580,000 divided by the GLA of 3,113 SF. For his Comparable One, he divided the sale price of $505,000 by the recorded GLA of 3,204 feet for per SF value of $157.62.
Plaintiff's second comparable sale ("Comparable Two") located at 23 Stonybrook Road sold on July 8, 2010 for $430,000. To the sale price, he made negative adjustments as follows: $10,000 for location; $5,731 for superior lot size; $4,900 for age (the Subject being older); $15,000 for "new EIK;" $5,000 for stainless steel appliances; $5,000 for a family room separated by a breakfast bar; $3,000 for marble floor in the foyer; $3,000 for new windows; $5,000 for terrazzo floors in the den and family room; $10,000 for improvements to exterior landscaping; and $6,000 for a "large level yard to Memorial park." He made positive adjustments of $117,705 for its inferior living area; $10,000 for wood siding; and without providing specific details, or any explanation as to how he generated the figure, a lump sum upward adjustment of $57,800 as a "fair estimate of better features in Subject property over" Comparable Two. The result was a positive increase to the sale price by $72,167, or an adjusted sale price of $483,074.
Plaintiff divided the sale price of $430,000 by the recorded GLA of 2,444 SF to reach a value of $175.94 per SF.
Plaintiff's third comparable sale ("Comparable Three") at 101 Fairfield Avenue sold on January 28, 2010 for $370,000. He made negative adjustments as follows: $5,500 for age; $12,000 for a "large EIK with cabinet space;" $4,000 for a family room with a half bathroom. His positive adjustments were: $182,162 for the comparable's inferior living area; $1,662 for its inferior lot size; $10,000 for wood shingles; and again, without providing specific details, or any explanation as to how he generated the figure, an upward adjustment of $20,000 as a "fair estimate of better features in Subject property over" Comparable Three. The result was a net positive increase to the sale price of $178,966 and an adjusted sale price of $562,324.
Plaintiff divided the sale price of $370,000 by the recorded GLA of 2,086 SF to reach a value of $177.37 per SF.
Based on the above adjusted sales prices of the three comparables, plaintiff concluded the Subject's value as $528,375.
Plaintiff did not provide photographs of the interior of any of the comparables. He relied upon the Garden State Multiple Listing Services ("MLS") for pictures of the comparables' exteriors. He did not verify any of his comparable sales, and thus did not know the parties or the terms of the sales. He deemed them usable because they were listed on Appraisal System's website as usable sales for purposes of the 2011 revaluation in West Caldwell.
It is indisputable that to perform a proper sales comparison approach, there must be substantial similarity between the subject property and the comparable property. Venino v. Borough of Carlstadt, 1 N.J. Tax 172, 175 (Tax 1980), aff'd, 4 N.J. Tax 528 (App. Div. 1981). Here, none of the comparables were the same style as the Subject, Comparables One and Three being bi-levels, and Comparable Two being a split-level. There was no market-based data or information to show that the buy-sell market for a Tudor/colonial home is substantially similar and competitive to that of a bi-level or split level home, and has the same utility, value or desirability as those styles. See The Appraisal of Real Estate, supra, at 301 (comparable properties should be sought in a competitive market by considering characteristics such as "property type, date of sale, size, physical condition, location, and land use constraints" since the "goal is to find a set of comparable sales as similar as possible to the subject property to ensure they reflect the actions of similar buyers"). Although plaintiff stated that his primary consideration for comparability was proximity to the Subject, and therefore, did not consider similar styled buildings such as the Subject, proximity is but one factor in the analysis of the sales comparison approach.
Because the sales comparison approach requires making adjustments to certain elements of comparison so that the comparable equates to the Subject, these adjustments must be carefully scrutinized. Adjustments of large magnitude "vitiate[] comparability." M.I. Holdings, Inc. v. City of Jersey City, 12 N.J. Tax 129, 137 (Tax 1991). In that case, the court held that relying on one sale and making adjustments ranging from 22% to 63% could not be probative of market value for the subject property because the adjustments rendered the properties incomparable. Id. at 136. See also 125 Monitor Street LLC v. Jersey City, 21 N.J. Tax 232, 243 (Tax 2004) ("[a]djustments that are too large suggest a lack of comparability between the concerned sales and the subject property and present a misleading indication of the subject property's value"), aff'd, 23 N.J. Tax 9 (App. Div. 2005).
Plaintiff's total gross adjustments were 28.13% for Comparable One; 33.12% for Comparable Two, and 63.6% for Comparable Three. The comparability of properties offered by plaintiff as proof of the Subject's value is undermined by the magnitude of his numerous adjustments. For this reason alone, the court can reject the comparables.
The net adjustments were 6.7% (Comparable One), 16.7% (Comparable Two) and 48.3% (Comparable Three). However, the "magnitude of net adjustments is a less reliable indicator of accuracy" and can be "misleading because [one] cannot assume that the inaccuracies in the positive and negative adjustments will cancel each other out." The Appraisal of Real Estate, supra, at 312.
Moreover, the adjustments themselves are questionable. For example, plaintiff provides a duplicative adjustment in Comparable One where he provides for a negative adjustment for "land area" (this being 0.1186 acres larger than the Subject's total acreage) of $5,731, and then provides another negative adjustment of $2,000 due to the comparable's "large lot size in quiet neighborhood." He does the same for Comparable Two by providing a negative adjustment for "land area" of $5,731, and another negative adjustment of $8,000 due to the comparable's "large level yard to Memorial Park." Clearly, these adjustments double count the total land area and are thus unreliable.
Further, plaintiff's adjustments are unsupported by any market data. It is not an irrefutable truth that the existence of certain amenities (for example, stainless steel appliances, wood shingle exteriors or marble floors in the foyer) necessarily increases the value of a residence and thus decreases the value of the Subject. The court must be given reliable market data showing that a home with such amenities sold for much more than a comparable home without such amenities, thus, the difference is attributable to those amenities. As noted in the treatise, "[t]he value added or lost by the presence or absence of an item in a comparable property may not equal the cost of installing or removing the item." The Appraisal of Real Estate, supra, at 339. Buyers "may be unwilling" to pay higher for an amenity, or conversely, may do so. Ibid. Thus, the "market dictates the value contribution of" certain "individual components to the value of the whole." Ibid. Absent supporting objective information of the market reaction in this regard, the nature and quantity of plaintiff's adjustments are not probative.
Similarly unsupported are plaintiff's blanket sizable upward adjustments to each comparable for the Subject's purported superiority. Plaintiff's laudable admission that he did this to prove he was being objectively fair, and thus, not trying to escape from paying his fair share of taxes, is nonetheless legally insufficient. There is no explanation as to what features of the Subject plaintiff chose for comparability, and how each such feature translated into specific dollar amount value adjustments. Absent a factual basis and legitimate quantification of the adjustments, it is difficult to gauge the credibility of the same. See e.g. WCI-Westinghouse, Inc. v. Township of Edison, 7 N.J. Tax 610, 621-623 (Tax 1985), aff'd, 9 N.J. Tax 86, 87 (App. Div. 1986). Adjustments, even when made by a valuation expert, are not simply a mathematical exercise of adding and subtracting numbers to achieve final adjusted sales prices which are in the vicinity of the Subject's desired valuation. Cf. Pansini Custom Design Assocs., LLC v. City of Ocean City, 407 N.J. Super. 137, 144 (App. Div. 2009) ("averaging" the adjusted sale prices of comparables reduces value determination "to a simple mathematical formula and is an unacceptable methodology").
Plaintiff argued he is entitled to some reduction in assessment for GLA because the stone walls in the interior of certain portions of the first floor are at least three feet in width and thickness. He pointed out that because of this factor, although the Subject looked large from the outside, it was actually much smaller inside. He maintained that a prudent buyer, who may be attracted to the stone exterior of the Subject, would nonetheless balk at the extension of the concrete walls in the first floor. Plaintiff relies upon ANSI Z765-2003, a study of measurement of residential properties developed by the American National Standards Institute in this regard.
Both of West Caldwell's witnesses explained that the GLA cannot and should not be reduced by the thickness of the concrete walls because this is not an accepted appraisal methodology or technique. Rather, the accepted practice, even by federally published standards, is to measure the GLA from the outside walls of the house only. This practice provides uniformity in appraisals because the concrete walls do not generally extend to the upper stories of a home (as is the case with the Subject), therefore, the GLA accounting for thickness of interior walls would differ from floor to floor, and from style-to-style of a home, making it impossible to determine what is includible in measuring the GLA of a residence.
West Caldwell's witnesses are correct that the GLA is measured only from the outside. See The Appraisal of Real Estate, supra, at 237 (GLA as defined by federal agencies such as Fannie Mae, is the "total area of finished above-grade residential space; calculated by measuring the outside perimeter of the structure and includes only finished, habitable, above-grade living space"). While plaintiff is correct that ANSI Z765-2003 is "[a]nother widely accepted [GLA] measurement standard for residential properties," see The Appraisal of Real Estate, supra, at 236, that standard also uses a measurement methodology consistent with West Caldwell's position, namely, that the GLA is measured from the exterior (but excluding open spaces in the interior). See ANSI Z765-2003 (the "finished square footage" of a particular level in a detached single-family home is the "sum of the finished areas on that level measured at floor level to the exterior finished surface of the outside wall or from the centerlines between houses, where appropriate"). Thus, under either approach, GLA is not reduced by the space occupied by interior walls.
The publication is available for purchase through the ANSI website at http://www.nssn.org/search/DetailResults.aspx?docid=350600&selnode (last visited July 31, 2012).
The court finds persuasive West Caldwell's argument that the measurement of GLA should not be reduced by the size or dimensions of interior walls. In any event, plaintiff has not provided any objective evidence in this regard. None of plaintiff's comparables had stone walls in the interior which cut into portions of the living areas, or were the same style as the Subject's, thus, there is no market data from which the court can extract a value (increase or decrease) attributable to the concrete walls. The lack of comparability and market evidence also impairs this court's ability to evaluate plaintiff's implied argument that the Subject merits a lower value due to functional inutility. While it may be true that a prudent informed buyer would not pay the same price for a house with a smaller living area, it may also be true that a buyer could prefer the Tudor-style stone exterior and stone wall interior. Cf. Elrabie v. Borough of Franklin Lakes, 24 N.J. Tax 158, 178 (Tax 2008) (finding unpersuasive an expert's opinion that smaller sized comparables were appropriate because the subject property though large from the outside would not appeal to buyers because it was older, un-renovated, with only average quality amenities).
Indeed, plaintiff used 3,113 SF as the Subject's GLA in making adjustments to his comparables.
Plaintiff also argued that a reduction in assessment is warranted because of the proximity of the Subject to a nearby sewage treatment plant, which plant was not visible from the Subject, but which at times, created a noxious odor. He stated that he would have paid a much lower price for the Subject had he been aware of this fact.
West Caldwell's assessor agreed that proximity to a sewage plant could impact a property's value; however, without market data showing that the difference in the sale prices of two comparable houses is attributable to the sewage plant proximity factor, he stated that the Subject's value could not automatically be reduced. The court finds this testimony persuasive.Plaintiff provided no market data, nor any proof that the noxious smell has rendered the Subject uninhabitable. Indeed, plaintiff has occupied the Subject for the last eighteen years or so.
Plaintiff's lack of adjustment to his Comparable Three for proximity to the sewage plant is not persuasive because the court found that sale as not being probative for other reasons. See supra.
While this court can make an independent determination of value, Pantasote, supra, 100 N.J. at 416, it cannot make adjustments without sufficient factual evidence in the record. See Township of Warren v. Suffness, 225 N.J. Super. 399, 414 (App. Div.) (court's "independent assessment must be based on the evidence before it and the data that are properly at its disposal") (citations and quotations omitted), certif. denied, 113 N.J. 640 (1988). The court cannot "arbitrarily assign a value to the property not supported in the record." U.S. Life Realty Corp. v. Township of Jackson, 9 N.J. Tax 66, 79 (Tax 1987).
Here, the three factors which could warrant an adjustment to the Subject's value are the thickness of the interior walls in portions of the Subject's first floor; its proximity to the sewage plant; and, the wet conditions in a portion of the Subject's basement. The court has already found that neither the interior wall thickness nor the proximity to the sewage plant merit an adjustment. As to the basement condition, there was no evidence that the other portions of the basement were not being used because of the water damage and so unusable that the entire basement is rendered valueless. Plaintiff's three comparables did not have basements, and thus, this court has no probative evidence in this regard. While it is reasonable to conclude that an informed buyer under no compulsion to buy could require the condition to be repaired or demand reduction in the sale price in this regard, the court cannot speculate such quantification (including the actual SF area impacted by the water damage which in turn, depends upon the extent of damage), without some cogent factual evidence.
In sum, plaintiff has failed to prove the value of the Subject such that the County Board's judgment is incorrect.
II. West Caldwell's Value Conclusion
Although West Caldwell filed a counterclaim, the court need not re-visit or "reconsider the presumption" where, as here, the court has denied its motion to dismiss plaintiff's case under R. 4:37-2(b). MSGW, supra, 18 N.J. Tax at 376-77. Rather, the court should "decide" the case on its "merits" by weighing and evaluating all evidence before it. Ibid.
West Caldwell's expert presented three comparable sales, all located in West Caldwell but towards the northern end, and closer to North Caldwell and Roseland. His first comparable sale ("Comparable 1") was a Tudor-styled home, located at 115 Forest Avenue, which sold July 15, 2010 for $700,000. He made the following upward adjustments: $35,000 because it abuts a stream; $4,575 because the Subject had superior land size; $74,500 because it had 745 fewer SF of GLA than the Subject. He made the following negative adjustments: $35,000 because the comparable had a superior location/view; $35,000 for its superior condition (or 5% which he claimed was typical); $11,130 for its two-room finished basement with approximately 742 square feet of space; $5,000 for an extra fireplace. He stated that he did not make any adjustment for market conditions based upon his paired-sales analysis in West Caldwell and similar towns in Essex County. Neither his report, nor his testimony contained any details of such paired-sales or analysis. The adjustments (gross 28.6%; net 3.99%) gave a net adjusted sale price of $727,945.
The second comparable sale ("Comparable 2") was the April 18, 2010 sale of 128 Smull Avenue, a colonial styled home, for $700,000. The expert made one positive adjustment of $36,300 because the Subject had greater overall GLA. His negative adjustments were: $1,523 because Comparable 2 had a slightly larger lot than the Subject; $35,000 for its superior condition compared to the Subject; $11,205 adjustment for a larger finished basement space; $10,000 because it had a three-car garage; $5,000 because Comparable 2 had an extra fireplace. These adjustments (gross 14.14%; net 3.78%) resulted in an adjusted sales price of $673,572.
The expert's third comparable sale ("Comparable 3") was the June 24, 2009 sale of 25 McKinley Avenue, another colonial home, for $670,000. He made no adjustment for the time between the sale date and the valuation date of October 1, 2010, a span of over 15 months. He contended the real estate market in West Caldwell began to stabilize from the latter portion of 2009 and remained stable between June of 2009 and October of 2010, and up to 2012, as did the real estate market for northern New Jersey. He therefore opined that no adjustment for market conditions was required for sales occurring in 2009.
The expert disagreed with West Caldwell's assessor's testimony in this regard. The assessor had stated that from 2004 to 2008, there was a rapid appreciation of property values, which peaked in 2008. The market then declined until mid-2011, after which it stabilized. The assessor stated that he had compared assessments to sample sale deeds in this regard. He concluded that for purposes of the Subject's assessment date (October 1, 2010) he would not have used sales occurring during the peak period.
The expert made the following positive adjustments to Comparable 3: $10,675 because the Subject had greater land area; $48,900 because the Subject had greater GLA; and $1,635 because the comparable did not have a finished basement (thus, deeming the Subject superior in that it had 109 SF finished area, which at $15 per SF provided the adjustment amount). He testified that there really is no market evidence supporting an adjustment for a finished versus unfinished basement (even if the latter had a larger area), however, such adjustment can be appropriate in older homes because older basements are not well fit up as compared to newer constructions. He also made the following downward adjustments: $33,500 because it was not in proximity to a busy road as was the Subject, and thus had a superior location; $33,500 because it was in better condition than the Subject; and $5,000 for a second fireplace. His net adjustment was $10,790, or 1.61% (and gross adjustment was 19.88%), and his adjusted sale price was $659,210.
Based upon the adjusted sale prices of his comparables, West Caldwell's expert concluded the Subject's value as $680,000. He testified that the Subject is a classic example of the pre-second World War style of housing with an exterior stone façade, and archways between doors in the interior. He conceded that he did not inspect the Subject's interior, but had observed the same from its exterior, and did not see a sewage plant on the Subject's site. He also agreed that the picture of the Subject's exterior in this report was not taken by him personally. He corrected his description in his report of the Subject having a three-car garage instead of a two-car garage, and agreed that he incorrectly listed the township where the Subject was located as Montclair. He testified that he did only a drive-by inspection during rush hour of his comparables. He concluded that the Subject was "a very nice house."
West Caldwell's expert testified that plaintiff had repeatedly barred him or other employees of his company from inspecting the Subject and several attempts were made by his company to procure entry into the Subject for its inspection. The testimony is not credible. The expert admitted that he had received plaintiff's letter which provided several dates and times that plaintiff was available for the inspection of the residence. He testified that by the time he likely received the letter he was simply too busy with the county board appeals or other property tax litigation, therefore, decided to pursue those instead, and did not try to inspect the Subject.
Plaintiff objected to the court's consideration of the expert report and testimony on grounds the expert failed to personally inspect the Subject, or any of the comparables, therefore, his conclusions amounted to inadmissible net opinion. West Caldwell argued that its expert could properly rely upon information provided to him about the Subject from the field inspectors of his company, Appraisal Systems, Inc. and from the property record card. This court has ruled that an expert can rely upon factual information provided by third parties. See N.J. Rules of Evid. 703; Jablin v. Borough of Northvale, 13 N.J. Tax 103 (App. Div. 1991). The lack of first-hand knowledge of the Subject or the comparables through personal inspections, and the reliance upon information provided by the MLS goes to the credibility of the expert's report and testimony, not to their admissibility into evidence.
West Caldwell did not produce the employee of Appraisal Systems, Inc. who performed inspection of the Subject during and for purposes of the revaluation, although the individual was still an employee during trial and no claim was made of his inability or unavailability to testify.
Based on the evidence submitted, the court finds West Caldwell's expert's use of Comparable 3 problematic. On its SR1A, it is listed as an NU-10 (non-usable), which reflects the sale's non-usability for determining assessment sales ratios per N.J.A.C. 18:12-1.1. The NU-10 designation corresponds to those sales where the seller is a guardian, executor, trustee, or administrator. Ibid. The expert testified that although it was unusable for determining the ratio, it was usable for purposes of his valuation because in his experience over the last few years, estate sales like the one in question can be reflective of the market if the seller genuinely intends to receive market value.
The expert's opinion is generally correct. Sales that are deemed nonusable according to N.J.A.C. 18:12-1.1 "serve as a guide as to whether the sale was an arm's length transaction that reflects the fair market value of the subject property." 125 Monitor Street, supra, 21 N.J. Tax at 240, n.5 (Tax 2004) (citing 1530 Owners Corp. v. Borough of Fort Lee, 135 N.J. 394, 403 (1994)). Thus, if "non-market conditions of sale are detected in a transaction, the sale can be used as a comparable sale but only with care." The Appraisal of Real Estate, supra, at 329. In this connection, the "circumstances of the sale must be thoroughly researched . . . [and any] adjustment should be well supported with data" without which the sale as a comparable should be "discarded." Ibid.
However, West Caldwell's expert offered insufficient evidentiary basis to justify applying the principle and accepting the sale as comparable for the purposes of valuation. He did not inquire into the identities of the buyer or seller. He did not consult the recorded deed. He did not discuss the sale with the parties. He claimed that he had tried to contact the realtor from Weichert who did not return his call, but he did not pursue this further. His data source was solely from the MLS. While this is not impermissible, an appraiser must nonetheless verify the accuracy of such data. Id. at 163-164 (the MLS contains "fairly complete information" but can have inaccurate, outdated, or missing details especially given the "competition among aggregators to amass the largest number of listings."). The court has no evidence before it of the facts and circumstances of this sale to determine whether it actually was an arm's length bona fide sale. Therefore, the court rejects the sale of Comparable 3 as not being probative for purposes of being considered in the Subject's valuation.
With regard to the remaining two comparable sales, while both were Tudor style colonial homes like the Subject, and about 15 years younger (built around the 1930s), both were located three miles away from and to the north of the Subject. Those neighborhoods are in a higher socioeconomic stature and thus, the comparables were in an upscale residential neighborhood as compared to the Subject's, which includes a variety of styles such as ranch, bi-level and split level. Further, West Caldwell's expert's gross adjustments to his Comparable 1 were 28.6% and thus of questionable probative value (just as plaintiff's Comparable One which had a total gross adjustment of 28.13%). In addition, the MLS for Comparable 2, which West Caldwell's expert admitted that he had relied upon, noted several amenities reflective of the luxurious north part of West Caldwell, such as a custom designed bathroom, glass gazebo with fireplace, fish pond, basketball court, and underground sprinkler systems, none of which were present in the Subject. The expert's justification that these attributes were similar to the Subject and that, in any event, he had made a $35,000 negative adjustment for the comparable's "superior" condition, is not persuasive. He never inspected the Subject's interior. Unlike the plaintiff, he did not inspect the interior of the comparables. See City of Atlantic City v. Atlantic County Bd. of Taxation, 2 N.J. Tax 30, 37 (Tax 1980) ("[a] comparison sales approach . . . is only as good as the inspections made to determine the comparability between the property to be assessed and the comparable sale"). If, as he testified and as he noted in his report that "all comparables were similar [to the Subject] in terms of 'age/condition-quality of construction,'" then his $35,000 negative adjustment is not justified.
Lastly, none of his chosen comparables had proximity to a waste treatment plant or other similar construction/structure. His factually unsupported opinion that there was no adverse impact upon the Subject due to the sewage plant is insufficient justification for ignoring this aspect in his comparable sale analysis. See e.g. Township of Warren, supra, 225 N.J. Super. at 412 (improper for expert not to make adjustment for quarry condition proximate to the subject property); Ford Motor, supra, 10 N.J. Tax at 174-76 ("In any appraisal analysis the task of an appraiser is to examine a property through the eyes of an informed, prudent purchaser").
The court therefore finds that West Caldwell's expert's comparable sales are of little probative evidence, and West Caldwell has failed to show that the County Board's judgment is incorrect.
After careful consideration of the record and for the aforementioned reasons, the court affirms the judgment of the County Board. The clerk of the Tax Court will enter a judgment affirming the assessment as follows:
The Tax Court may increase the assessment beyond the county board's judgment if the municipality has filed a counterclaim. Elrabie, supra, 24 N.J. Tax at 186. Whether a municipality is entitled to an increase in the original assessment when it defended that assessment at the county board but subsequently files a counterclaim in Tax Court need not be decided here because West Caldwell has not proven the true value of the Subject. See F.M.C. Stores, supra, 100 N.J. at 426-27 (government "must turn square corners" when dealing with the public, and must only appeal its assessment "when it has good cause to believe the assessment does not reflect true value, and not simply to achieve a tactical advantage over, or even strategic parity with, a taxpayer that has independently appealed the assessment") (internal quotations omitted).
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+----------------------+ ¦Land ¦$155,300¦ +-------------+--------¦ ¦Improvements ¦$424,700¦ +-------------+--------¦ ¦TOTAL ¦$580,000¦ +----------------------+
Very truly yours,
Mala Narayanan, J.T.C.