Court Rejects Property Owner’s Unverified Sales Evidence at Trial–Affirms City’s Value
In the recent unpublished opinion in Rosenberg v. City of Newark, Docket No. 018031-2009 (Tax Ct. August 16, 2012), a New Jersey Tax Court judge affirmed a property’s assessment after rejecting comparable sales evidence provided at trial by a pro se plaintiff as proof of the fair market value for his two-family rental property. The judge found the plaintiff, testifying as his only witness, failed to provide testimony about the circumstances surrounding each sale, and did not have sufficient knowledge of the interiors of the property because plaintiff had not inspected the interior of any the comparable properties. Newark’s Chief Tax Assessor testified that one of the comparable sales had a lis pendens filed that provided notice of a pending foreclosure action, and the lis pendens signified that the seller was under financial pressure to sell. He also testified that a second sale was an estate sale, as well as potentially between members of the same family, and that both facts would indicate that the sale was not an arm’s length transaction. Here, the judge found that the evidence presented by the plaintiff was not reliable proof of the market value of the subject property for the reasons stated by Newark’s Chief Tax Assessor.
In both real property tax appeals and eminent domain cases, a property’s value is determined by its fair market value. Fair market value can be determined by the comparable sales approach, the cost approach, and/or the income approach. When using the comparable sales approach, as the plaintiff did here, the sale of the comparable property is compared to the subject based on its type, size, age, condition, and potential other factors, and adjustments are then made to the sales price based on differences between the two properties. This method also requires an investigation into the circumstances of the sale to determine whether or not it was an arms’ length transaction between a knowledgeable buyer and seller, neither being under any compelling obligation to act. Courts will reject sales as evidence where the seller was influenced to sell the comparable at a price much higher or lower than similar properties.
It is vital for a witness to thoroughly investigate the background of a comparable sale before relying on the sale. Failing to research the sale can lead to having the evidence found unreliable, or worst, being made to look like an incompetent witness on the stand at trial despite having presented other credible evidence and testimony. The plaintiff’s mistakes in this case could have been avoided by hiring a competent attorney and appraisal expert to establish the value of the property.
For more on cases focused on expert testimony and report issues, or lack thereof, please see the following blog posts:
Experts’ Opinions on Golf Course Valuation Not Up to Par
Apples and Oranges? Another Tax Appeal Dismissed
