SC Administrative Law Court Decisions

FINDINGS OF FACT

Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, taking into consideration the burden of persuasion by the parties, I make the following Findings of Fact by a preponderance of evidence:

1. Notice of the time, date, place, and nature of the hearing was timely given to all parties.

2. The Petitioner owns properties located at 230 Debbie Lane Road in Barnwell, South Carolina and 52 Calico Lane in Williston, South Carolina in Barnwell County, South Carolina, known as the “Barnwell” and “Williston” properties, respectively.

3. The Williston Mobile home is 2,046 square feet and is a 1999 Belcrest model. It was appraised at $43,400 by the Assessor, H Mikell Anderson, using the Mass Appraisal approach. The Barnwell mobile home is a 1997 General, Admiral II model and is 1,344 square feet. Based on a mass appraisal, the home was valued at $44,400 by the Assessor. Petitioner protested these appraisals on February 27, 2006. As a result, the Respondent adjusted the valuation of the Williston appraisal to $43,100 and the Barnwell to $34,900 by a letter dated March 23, 2006.

4. Petitioner appealed this decision by letter dated May 22, 2006 on the ground that the NADA Mobile Home Manufacturer Housing Appraisal (“NADA”) guide should have been used in determining the fair market value for both properties. Petitioner argues that although he paid $32,615 for the Williston mobile home and one acre of land, the value of the mobile home alone is only $14,000. He paid $20,500 for the Barnwell mobile home; he contends that after deducting the value of the land, the home is worth only $17,000. He also argues that because he is taxed separately on the land on which the mobile homes are located, the mobile homes should be taxed as personal property under the NADA guide.

5. As a result of the appeal, the Assessor conducted a field review of the Williston property and used comparables to determine the fair market value. The first comparable is a 1998 Southern manufactured home located four miles from the subject property. It is 1835 square feet and it sold without land in 2005 for $46,900. The Assessor made a $4,200 adjustment for the difference in size, which resulted in a value of $51,100.

The second comparable was a 1456 square foot Redman manufactured home that was located twenty miles from the subject property. It is a 1996 model and was purchased without land in 2006. The selling price was $34,000 in 2006. When comparing this comparable to the subject, adjustments were made for size and condition. The final adjusted value for the property is $44,400. The third comparable is a 2,052 square foot Fleetwood model that sold for $72,500 in May of 2003.

The comparable is located three miles from the subject property. The Assessor deducted the $5,000 in land value for the .81 acres that accompanied the home in the 2003 sale; $1,000 for a storage building that is located on the land; and made additional deductions for a pool as well as other improvements of the property. After all of the adjustments, the adjusted value was $59,000 for that comparable. Because the comparable sales indicated a range of values from $44,400 to $59,000, the Assessor refused to reduce the value any further because the range reflects a value that is above the original county appraisal. Unsatisfied with this decision, the Petitioner appealed to the Board.

6. The Assessor also visited the Barnwell Property after receiving the May 22, 2006 appeal letter by the Petitioner; he used three comparables to determine the value of that manufactured home. The first comparable a 1995 Henderson manufactured home located nine miles from the subject property on 10 acres of land, sold for $65,500 in 2004. The Assessor made a $22,000 deduction for the land and a $7,400 deduction for the difference in size. The adjusted value came to a total of $34,100.

The second mobile home that was used for a comparable is a 1996 Fleetwood manufactured home with 1620 square feet, located two and a half miles from the subject property which sold for $67,500. At the time of the sale, it was located on 8.99 acres of land. A $1,000 adjustment was made for an open porch, a $1,500 adjustment was made for skirting and a $2,000 adjustment was made for a screen porch. $5,500 was deducted for the difference in square footage and $20,100 was deducted for the value of the land. The adjusted value came to a total of $37,400.

The third comparable is a 1997 Southern Dynasty manufactured home, which was sold in May of 2003 without land. It is 1836 square feet and the purchase price was $40,000. It is located eight miles from the subject property. After a $7,400 adjustment was made for the size differences, the Assessor determined that the value was $32,600. After all adjustments, the comparable sales ranged in value from $32,600 to $37,400. As a result, the Assessor refused to lower the value of the Barnwell property on the basis that the range supports the original appraisal of $34,900. The Petitioner also appealed the Barnwell property assessment to the Board.

7. By letter dated December 13, 2006, the Board lowered the value of the Williston property to $38,900 and the Barnwell property to $28,600. The letter did not state the Board’s basis for its reduction. Unsatisfied with the values assessed on the properties through his appeal to the Board, Petitioner timely appealed the decisions of both properties to the ALC by request dated January 12, 2007.

8. At the hearing, the Petitioner argued that the NADA guide should be the appropriate method in determining the valuation for the properties and that the decision of the Board should be reversed because the Board failed to state the reasons for its decision to reduce the value of the properties. The Petitioner testified that he has sold mobile homes since 1993 and that he also rents mobile homes. Based on his experience, he believes that the NADA guide is the appropriate mechanism to determine the value of a manufactured home because banks and other lenders use the NADA guide to compute the amount they are willing to lend. He also argues that the community in which a mobile home is located should not be taken into consideration when determining the home’s value. Because mobile homes depreciate in value over the years, he believes that they should not be appraised in the same manner as homes, because homes appreciate in value.

Petitioner introduced ads from the Discount Housing Center and several publications such as The Carolina Trader and the Iwanta website to show the amount that the mobile homes were selling for in the area. However, none of the mobile homes in the listings were located in Barnwell County. He also introduced a comparable sales list he configured from sales that his company had made in the past. In addition, he introduced a letter from an internet website that was sent to appraisers in Alabama and a nationwide HUD document. Both mandated that appraisers use the NADA guide in valuing mobile homes. The Petitioner concedes that he did not have independent appraisals performed on his two properties as the NADA guide requires; and conceded that the NADA value does not tell the entire story, i.e., the condition of the individual mobile home.^[1] He believes that the legislature identifies mobile homes as real property because it doesn’t want mobile home owners to pay the 6% tax personal property tax on the home and claim the 4% homestead exemption.

9. H. Mikell Anderson, the Assessor who appraised this property, testified that the last assessment in Barnwell County was performed in 2006 and the overall increase in the county was 15%. The Assessor originally based his appraisals on the mass appraisal approach and then used comparables. He testified that the NADA guide is not a true reflection of the valuations and actual sales in Barnwell County. He also contends that the Petitioner’s ads showing various manufactured home listings are unreliable because the majority of the mobile homes in the listings were for sale as a result of foreclosures. Treating mobile homes as if they were boats or cars as the NADA guide does would not be in compliance with the laws of this state. The Barnwell County Assessor’s office stopped using the NADA guide in 2003 for determining market value for mobile homes because the values in the guide were not indicative of the sales in Barnwell County.

10. While I find that the Petitioner was a very credible witness and that he made valid arguments for his cause, the Assessor and the Board accurately determined the value of properties under the laws of this State.

CONCLUSIONS OF LAW

Based upon the above findings of fact, I conclude the following as a matter of law:

1. S.C. Code Ann. § 12-60-2540 (2006) authorizes the ALC to hear this contested case pursuant to Chapter 23 of Title I of the 1976 Code of Laws, as amended. The taxable status of real property for a given year is to be determined as of December 31 of the preceding tax year. S.C. Code Ann. § 12-37-900 (2006); Atkinson Dredging Company v. Thomas, 266 S.C. 361, 223 S.E. 2d 592 (1976).

2. In S.C. Code Ann. § 12-37-930 (Supp. 2006) the Legislature set forth how real property must be valued:

all property must be valued for taxation at its true value in money which in all cases is the price which the property would bring following reasonable exposure to the market, where both the seller and the buyer are willing, are not acting under compulsion, and are reasonably well informed of the uses and purposes for which it is adapted and for which it is capable of being used.

Therefore, fair market value is the measure of true value for taxation purposes. Lindsay v. S.C. Tax Comm’n, 302 S.C. 504, 397 S.E. 2d 95 (1990). There is no valid distinction between market value for sales purposes and market value for taxation purposes under S.C. Code Ann. § 12-37-930. S.C. Tax Comm’n v. S.C. Tax Board of Review, 287 S.C. 415, 339 S.E. 2d 131 (Ct. App. 1985).

3. An Assessor’s valuation is presumed correct and the property owner bears the burden of proving the Assessor’s determination is not correct. 84 C.J.S. Taxation § 410 (1954). Ordinarily, this is done by proving the actual value of the property. The taxpayer may, however, show by other evidence that the assessing authority’s valuation is incorrect. If he does so, the presumption of correctness is removed and the taxpayer is entitled to appropriate relief. Cloyd v. Mabry, 295 S.C. 86, 367 S.E. 2d 171 (Ct. App. 1988).

4. In estimating the value of property, all of the factors which affect market value or would influence the mind of a purchaser should be considered, such as location, quality, condition and use. See 84 C.J.S. Taxation § 410 at 784; § 411 at 794 (1954). Cost minus depreciation can be an acceptable method to determine fair market value. 84 C.J.S. Taxation § 410 (1954). Evidence of the purchase price of assessed property, while not conclusive, is to be accorded substantial weight on the issue of fair market value. Belk Dep't Stores v. Taylor, 259 S.C. 174, 191 S.E.2d 144 (1972).

5. The Constitutional and statutory authority which is applicable to this case is S.C. Cons. art. X, §1, which provides that “fair market value” is the standard for property taxation in this State. S.C. Code Ann. Section 12-37-930 (Supp 2006) provides that all property is to be valued “at its true value in money which is the price which the property would bring following reasonable exposure to the market, where both seller and buyer are willing, are not under compulsion, and are reasonably well informed of the uses and purposes for which it is adapted and for which it is capable of being used.” In short, the fair market value of property is the measure of its true value for taxation purposes. See Lindsey v. S.C. Carolina Tax Comm’n, 302 S.C. 504, 397 S.E.2d 95 (1990).

6. The date for valuation for property for tax purposes is “the thirty-first day of December next preceding” the tax year under consideration. S.C. Code Ann. § 12-37-900 (Supp. 2005). In the case at hand, the tax year is 2006; therefore, the valuation date is December 31, 2005.

7. To determine a fair market price for the Property, comparison of the sale price of other properties of the same character may be utilized. Cloyd, supra; 84 C.J.S. Taxation §§ 410-411 at 785, 797 (1954).

8. In estimating the value of land, all of its elements or incidents which affect market value or would influence the mind of a purchaser should be considered, such as location, quality, condition, and use. 1969-70, Op. S.C. Atty. Gen., No. 3045 at 337; See also 84 C.J.S. Taxation § 410 at 784; § 411 at 794 (1954).

9. “Appraisal is, of course, not an exact science and the precise weight to be given to any factor is necessarily a matter of judgment, for the court, in the light of the circumstances reflected by the evidence in the individual case.” Santee Oil Co., Inc., v. Cox, 265 S.C. 270, 217 S.E.2d 789 (1975). While it is impossible to predict with certainty what a particular property will sell for, utilizing comparable sales is a good indicator of what a potential purchaser will likely pay. That is, utilizing comparables present probative evidence of the market value of the subject property if the comparables are similar in character, location, and physical characteristics. See 84 C.J.S. Taxation § 411 (1954).

10. The assessment of all property shall be equal and uniform. S.C. Const. art. X, § 1. However, complete equity and uniformity are not practically attainable when valuing property. Wasson v Mayes, 252 S.C. 497, 502, 167 S.E.2d 304, 306-307 (1967).

11. The intentional and systematic undervaluation of certain properties, while other properties in the same class are valued at fair market value, is constitutionally proscribed. See Sunday Lake Iron Co. v. Wakefield Township, 247 U.S. 350 (1918); Owen Steel Co., Inc. v. S.C. Tax Comm’n, 287 S.C. 274, 337 S.E.2d 880 (1985). The burden of proving an intentional and systematic undervaluation rests with the complaining party. Sunday Lake Iron Co., 247 U.S. at 353. This burden is not met by a showing that some properties are undervalued in relation to the taxpayer’s property. See Sunday Lake Iron Co., 247 U.S. at 350; Owen Steel Co., Inc., 287 S.C. 274, 337 S.E.2d 880 (1985). The taxpayer has failed to establish either that the Assessor has intentionally or systematically undervalued property in Barnwell County, or that his property has not been equitably valued.

12. The Petitioner did not use a particular method in valuing his properties, but rather he argues that the fair market value should be derived from a nationally recognized publication of vehicle valuations pursuant to S.C. Code Ann. §12-37-930 which states that “the fair market value for vehicles, watercraft, and aircraft must be based on values derived from a nationally recognized publication of vehicle valuations, except that the value may not exceed ninety‑five percent of the prior year’s value.” He contends that the NADA guide is the appropriate nationally recognized publication because it contains retail figures for mobile homes and explains the procedure to be utilized in determining various wholesale values for mobile homes. Petitioner also argues that the NADA guide is the accurate measure of fair market value because it is the guide banks use to configure the amount that they are willing to lend purchasers of such homes. However, S.C. Code Ann. §12-37-930, is inapplicable to the taxation of mobile homes because there is a specific statue that addresses the appropriate way to tax such property.

13. S.C. Code Ann. §12-43-230(b) specifically addresses how mobile homes are to be taxed for ad valorem tax purposes:

for the purposes of this article, all mobile homes in this State and all improvements to leased real property made by the lessee shall be considered real property and shall be classified and assessed for ad valorem taxation in accordance with the provisions of 12-43-220.^[2] "Mobile homes" is defined as a portable unit designed and built to be towed on its own chassis, comprised of a frame and wheels, connected to utilities, and designed without a permanent foundation for year-round residential use. A mobile home may contain parts that may be folded or collapsed when being towed, and expanded on site to provide additional space. The term "mobile home" shall also include units in two or more separately towable components designed to be joined into one integral unit for use, and capable of being again separated into the components for repeated towing. It may also include two units which may be joined, on site, into a single residential unit. (emphasis added)

14. The Assessor’s use of comparables is in compliance with this statute because comparables are frequently used in the assessment of Real Property. See Smith v. Newberry County Assessor, 350 S.C. 572, 580, 567 S.E.2d 501, 505 (Ct. App. 2002). (holding that the use of the comparable sales approach is widely recognized as a valid method of arriving at the fair market value of real estate). Initially, the Assessor used the mass appraisal method to value the Property. Subsequently, it conducted a more in-depth and personal evaluation of the Property which consisted of a field review. It considered both the comparable sales method and cost approach method in arriving at a value of $43,100 and $34,900 for the Williston and Barnwell properties respectively. Therefore, it appears that the Assessor accurately valued the properties using widely accepted methods of appraisal.

15. Respondent correctly asserts that S.C. Code §12-37-250(B) also supports the use of S.C. Code Ann. §12-43-230(b) in determining the fair market values of the mobile homes. S.C. Code §12-37-250(B), which is essentially the State’s Homestead Exemption Act, states that:

if a person would be entitled to a homestead tax exemption pursuant to this section except that he does not own the real property on which his dwelling place is located and his dwelling place is a mobile home owned by him but located on property leased from another, the mobile home is exempt from personal property taxes to the same extent and obtained in accordance with the same procedures as is provided for in this section for an exemption from real property taxes; provided, however, that a person may not receive the exemption from both real and personal property taxes in the same year.^[3]

16. The Court finds that the methods used by the Assessor are correct and more accurate in valuing the Property. The Assessor correctly used the methodology outlined for valuing property using the sales comparison approach contained in Chapters 17-19 of The Appraisal of Real Estate, 12^th Ed., 2001. The evidence supports the finding of the Assessor and the Board that the values of $38,900 and $28,600 are the amounts a willing buyer would pay to a willing seller for the Williston and Barnwell Properties respectively. The three comparables utilized by the Assessor are reliable indicators of value.

17. Petitioner asserts that the Board’s letter reducing the values of both properties was not in compliance with S.C. Code Ann. §12-60-2530(J)(3)(a) which states that “…the written decision of the board shall explain the basis for the decision…” The Board’s letter of December 13, 2006 states in part that “after a review of the presentation at the hearing on December 12, it is the decision of the appeals board to lower the Assessor’s value” of the Williston and Barnwell mobile homes. While I find that the letter lacks the specificity that this Court would expect to be included in a written decision of the Board, I find that the phrase “after review of the presentation” is minimally sufficient to satisfy this statute. This phrase, in conjunction with a reading of the thirty six page transcript of the hearing before the Assessor, raises the inference that the Board of Assessment Appeals based its decision upon the same evidence that was also presented to this Court. The transcript of the Hearing before the Assessor reveals that Petitioner presented extensive testimony and exhibits to the Assessor. This transcript was transmitted to the Board of Assessment Appeals for its review.

Further, based on the Petitioner’s prompt filing of his Notice of Appeal, the Petitioner had notice of the Board’s decision. As a result, the Board’s omission of specific information about the basis for the decision was harmless error, and the decision will not be reversed on this ground. See Walker v. Frericks, 292 S.C. 87, 95, 354 S.E.2d 915, 920 (Ct. App. 1987) (“This court will not reverse a judgment on the basis of harmless error.”).

18. Based on the evidence presented before me, I find and conclude that the market value of the Williston and Barnwell properties respectively are $38,900 and $28,600 for the 2006 tax year.

ORDER

Based upon the above Findings of Fact and Conclusions of Law:

IT IS HEREBY ORDERED that the Assessor value the Williston and Barnwell properties at $38,900 and $28,600 for the for the 2006 tax year.

AND IT IS FURTHER ORDERED that this matter be remanded to the Board to specify the reasons for its reduction in value of the Williston and Barnwell properties.

AND IT IS SO ORDERED.

___________________________________

CAROLYN C. MATTHEWS

Administrative Law Judge

October 5, 2007

Columbia, South Carolina