Indiana Tax Court affirms removal of Obsolescence Adjustment to Residential Property, as Homeowners fail to show comparable subdivision sales were similar.

Indiana Tax Court affirms removal of Obsolescence Adjustment to Residential Property, as Homeowners fail to show comparable subdivision sales were similar.

Homeowners failed to rebut Assessor’s removal of obsolescence – resulting in 26% assessment increase to their property.

Case Name: Marinov and Marinova v. Tippecanoe County Assessor

Date Issued: February 20, 2019

Property Type: Single-family residence

Assessment Year(s): 2014

Point of Interest: Assessor removed an obsolescence adjustment, causing a 26% assessment increase for a home over its 2013 value. Assessor offered a sales comparison analysis to support his value. Homeowners’ list of comparable assessments failed to support a reduction under a “Section 18” analysis, and they failed to identify the cause of or quantify the impact of obsolescence.

Synopsis: For the January 1, 2014, assessment, Assessor removed an obsolescence adjustment for Homeowners’ single-family residence. The adjustment was first applied to the home for the 2007 assessment based on an appraisal presented in connection with the 2006 appeal of the property. Removing the adjustment caused a 26% increase over the property’s 2013 value.

Due to this massive increase, Assessor under Indiana Code § 6-1.1-15-17.2 (which shifts the burden of proof when certain assessments increase by more than 5% year-over-year) had the burden of proof on appeal. To meet his burden, Assessor presented a sales comparison analysis based on sales of seven, two-story homes in 2013 within a 1,400 foot radius of the subject home. To account for differences between the subject home and the comparable sales, Assessor presented a linear regression model based on 101 property sales from within the subdivision. He relied on information from these sales to develop a time trend analysis. Based on this information and analysis, the Assessor reasoned that removing the obsolescence adjustment brought the subject home’s value in line with those of comparable properties in the neighborhood.

Homeowners responded with a list of property assessments in the subdivision showing increases of only 0%-2% between 2013 and 2014.

The Indiana Board of Tax Review upheld the assessment. On appeal to the Tax Court, Homeowners raised three issues, which the Court rejected in turn:

1. Assessor failed to physically inspect the home. This was not necessary, the Court held, because 2014 was not a general reassessment year and assessing officials annually apply a trending process to determine adjustment factors.

2. Reduce the subject home’s 2014 value to its 2012 level, because the property had not changed since that assessment date. The Court noted that each assessment year stands alone, and “property values can fluctuate each year for a variety of reasons, including factors extrinsic to the property.”

3. The increase of the subject home’s assessment was far above that of comparable properties in the subdivision. Under Indiana Code 6-1.1-15-18, Homeowners were permitted to introduce evidence of the assessments of comparable properties to challenge the subject home’s value. But, under the statute, the “determination of whether properties are comparable shall be made using generally accepted appraisal and assessment practices.” Homeowners offered no credible evidence that the purportedly comparable neighborhood properties were, in fact, comparable to the subject home.

Finally, the Court concluded that Homeowners “did not properly rebut the Assessor’s removal of the obsolescence adjustment because they failed to both identify causes of the purported obsolescence and to quantify the amount of obsolescence they claim should be applied.” Conclusory statements about “serious defects” in the property were not probative and did not rebut the Assessor’s decision to remove the obsolescence adjustment

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