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Face Time Critical for Appraisers of Real Property

Posted on March 22nd, 2017 | Author: Tim McKeown

A recent New Jersey Tax Court opinion highlighted the need for expert witnesses to verify the integrity and accuracy of the market data that forms the basis their opinions; otherwise, the opinions are entitled to little weight. In VBV Realty LLC v. Scotch Plains Township, plaintiff’s appraiser employed the income capitalization and sales comparison approaches to derive an opinion of value for the subject property as of the respective valuation dates. Plaintiff’s appraiser attributed the greatest degree of weight to the sales comparison approach and relied on the income capitalization approach as a “supportive measure.”

The appraiser ultimately arrived at value of $1,440,000 for the subject property.

Unfortunately for the plaintiff, the court found that the appraiser did not contact or consult with any transaction participants to confirm the sale terms, to inquire whether the seller or the buyer was unusually motivated by economic factors to dispose of or acquire the property, to ascertain the length of time that the property was exposed to the marketplace, or to inquire whether the sale was subject to satisfaction of any conditions. Thus, the court found that plaintiff’s appraiser failed to abide by the fundamental tenets of the sales comparison approach and the requirements mandated by our Legislature under N.J.S.A. 2A:83-1, and accorded the appraiser’s opinion on value “no weight.”

The court stated that although public websites and real estate marketing and listing service websites can be valuable tools in the appraisal community for identifying prospective comparable properties, it is the process by which an appraiser verifies the accuracy of that data and information that is a hallmark of a sound opinion of value. Thus, data and information that have not been verified, confirmed, or corroborated with individuals possessing firsthand knowledge of or familiarity with a market transaction is of little value to the court. In addition, adjustments made to comparable sale or lease transactions must have a foundation derived from the marketplace or analysis of objective data, and not based solely upon subjective observations and personal experience.

While the internet is a treasure trove of information and statistics, it is simply not enough to rely on that alone when giving a judge an opinion as to the value of real estate in a tax appeal case. Appraisers must get out and talk to the people involved in comparable sales transactions in order to confirm the accuracy of the information obtained from the web.