THE ART OF THE ADJUSTMENT PROCESS
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Transcript of THE ART OF THE ADJUSTMENT PROCESS
This seminar is intended to raise issues and be thought provoking rather than a definitive guide to specific adjustment methodology
It is in your best interest to be aware of the
court’s opinions on a particular property type BEFORE appearing before them!https://www.judiciary.state.nj.us/taxcourt/taxcrtopinion.htm
…or your valuation could get booted out!
What is the root
of the issue
?
Incompetence?
Lack of supporting evidence?
Or just poor preparation?
Super Secret Adjustment Sheet – 2013
GBA or SFLA $30 -$130 per Sq. Ft. (except for condominiums)
Heat type Hot water baseboard - $2,500Forced Air – A/C +2,500Land $3 per Sq. Ft. (30% of site value)
Land $10,000 per acre (rural home sites)
Condo GBA $110-180 per Sq. Ft.GRM (Wildwood) 80 – 425 (Stone Harbor)
Cap rate 8.0 – 9.0Fireplace $2,500Pool $25,000Basement $5,000Finished Basement $10,000Entrepreneurial profit ----- 10 Percent
OVER-COMING THEPRESUMPTION OF CORRECTNESSPantasote Co. v. City of
PassaicThe presumption must be rebutted by cogent evidence that must be, ..definite, positive, and certain in quality and quantityPresumption remains in effect even if the district used a flawed valuation method
COMMON ADJUSTMENTISSUES
The Principle of ContributionCustomary, Usual & ReasonableThe SequenceComparative Analysis
QUALITATIVE
QUANTITATIVE
Justify the reasonablenessExtensive discussion of reasoning Location = quantitative It is expected the expert will explain the why’s and wherefores
Should be applied first
MAJOR SALES COMPARISON TECHNIQUES
a. High value residential in day long trialb. Named experts; remember your reputation is on trialc. Quality dispute and bathroom count issued. Sales outside of the subject’s taxing district approvede. Adjustment issues generally are addressedf. Cost approach completed and ignoredg. Property record card need not be reviewedh. Plaintiff’s report and testimony “fatally flawed”I. Appellate court defers to the expertise of the tax courtj. Small, typographical errors do not undercut the reportk. Adjustments must be made to explain differencesl. Attacking evidence post hearing is unacceptablem. Admitting an expert report and evidence and relying upon it was not an “abuse of discretion” by the trial judgen. Multiple approaches to value must be reconciled by the courto. Judge relied on both reports; cherry-picking; trial judge has the
discretion to adjust comparable sales after review and consideration of both reports
Matthew Tuck vs
West CaldwellNeighborhood Analysis
Sale price ranges
Values range per unit
Rejection of comparable sales cited
Motion for reconsideration post judgment
Elrabievs
Boro ofFranklin Lakes
MeasurementsSuggest a mistake, any mistake
Interior inspections
Assessment records presumed correct
Common types of adjustments
Proper comparable sale selection
Comparable sales grid of plaintiffs’ appraiser
Unit of comparison $/Sq. Ft. of gross living area
Using a size related unit of comparison eliminates the need for size adjustments
More from Elrabie….
Condition v. Quality
Admitting reports (and testimony) into the record
Presumptions of correctness is describe in detail
Burden of proof remains with the plaintiff throughout the trial
The sales comparison approach is the best method of appraising a residence
What spills out of your mouth likely is not retractable; less is more
Chapter 123 is inapplicable in the year of a revaluation
Counter-claims (20 days), should not be made to achieve a tactical advantage
In dealing with the public, government must turn square corners!
Without a claim or counterclaim, the court is unable to increase an assessment in a revaluation year where Chapter 123 is inapplicable
Discrepancy in building area; heated space
Estate sales as market evidence
Burden to prove that a sale is not bona fide falls on the challenger using creditable evidence
Failure to explain adjustments
Facts and data are necessary to support an expert’s opinion
Adjustments must have a foundation in market data; possibly supported by a cost manual
No support for the cost approach, not even a definition for the word ‘area’
Both appraisals tossed due to lack of support for adjustments
a. Using sales in another competitive district
b. Selective rejection of unsupported adjustments
c. Judgment based upon a fair preponderance of evidence provided by both parties
d. Cost approach is appropriate for valuing new or relatively new construction since cost and market are more closely related when properties are new; also applicable to special purpose buildings
e. The tax court is regarded as an expert; they may pick and choose what they rely upon from the expert’s testimony, reports, and the record
f. The court may not apply its own adjustments without support
Silverman v. Allenhurst
g. Very often “adjustments made to comparable sales are subjective in nature.”
h. Excess land substantiation: $1.5 million per acre
i. Declining Director’s Ratio equates to an advancing market
j. Errors in the direction of the adjustment, superior or inferior?
k. Paired Sales Analysis not included in the report is not considered
l. Unsubstantiated effective age adjustment are unacceptable
Silverman v. Allenhurst
Bogusevich
v. Township
of Ocean
a. Subjective nature of adjustments acknowledged
b. No interior inspection of comparable sales conducted
c. No adjustment for bathrooms, redundancy of GLA he
says?
d. Exterior photographs helpful
e. GLA and site adjustments rejected due to lack of support
f. Land abstraction example detailed (an example for you to
you)
g. No adjustment for basement or basement finish (could be
compared with office area in an industrial warehouse)
h. Subject purchase price ignored; expert includes no
analysis in report; USPAP error of omission; purchase price
could be controlling with support
Com
para
ble
Sale
s Sele
ctio
n
Selected Sales must have the same highest and best use. The sales must be as similar as possible to the subject, reflecting the actions of typical buyers. You must assume the posture of the typical buyer. The goal is to find sales that require little adjustment. Common adjustments should be linked to the buyer’s perspective.
Common Adjustment Issues
A Comparable Sale Should be a Realistic Alternative Investment for Buyers in the Subject’s Market
An Adjustment Derived from a Single Pair of Sales is Not necessarily Indicative
Just As a Single Sale Does Not Reflect Market Value
LOCATIONLOCATION
LOCATION
Underlying Land Values and their Analysis
Substantiate Location Adjustments and Much
More!
1. Make every attempt to inspect the interior of comps
2. Review the comp sale photos in the MLS
3. Determine the Q&C from the property record card for the subject and comps
4. Last ditch: Make no adjustment for Q & C!