Arm's Length Sale?

[djd09]

Ohio: Supreme Court clarifies rule on appraisal evidence as window to contest property tax valuation nears​

October 11, 2018

David Kall

Blog Post

The Ohio Supreme Court recently reaffirmed a new rule allowing property owners to rebut the presumption that a recent, arm’s length sale is the best evidence of value for real property tax purposes. Last year, we reported on the court’s decision in a case called Terraza 8, LLC that required tax boards to consider an owner’s appraisal evidence when determining value despite a recent, arm’s length sale of property encumbered by a lease. The recent, arm’s length sale is still presumed to be the best evidence of true value, but property owners may overcome that presumption with appraisal evidence.

Recent, Arm’s Length Sale Not Conclusive Evidence of True Value​

The rule could have big implications for taxpayers planning to challenge auditor valuations this winter, particularly for leased properties. For tax purposes, property values are based upon the unencumbered, fee-simple value of the property. County auditors may fail to take into account how the creditworthiness of existing tenants can affect the sale price for recent, arm’s length sale of leased properties. The Terraza 8 case gives owners the opportunity to present appraisal evidence to show that the sale price may not reflect the true value of property as if unencumbered.

Last month, in Westerville City Sch. Dist. Bd. of Ed. v. Franklin Cty. Bd. of Rev., the Supreme Court reaffirmed the Terraza 8 rule and clarified when owners may present appraisal evidence. The court explained that owners do not need to make a threshold showing before a tax board must give full consideration to appraisal evidence. Appraisal evidence must be considered even where there is a sale of the property and the sale’s voluntary, recent, and arm’s length character have not been “impugned.”

what is USPAP definition of arms length?...fannie also thinks one inch below grade is basement oh nevermind

 

[John Hassler]

All sales have two attributes.

They are:
1) Either arm's-length (AL) or non-arm's-lenght (NAL); and
2) Either for market value (MV) or non-market value (NMV).

There are four possible combination of the above.
AL-MV
AL-NMV
NAL-MV
NAL-NMV

Based on the OP this is an AL-NMV sale.

 

[Hondo]

I have done many of these over the years and have always checked "Arms-Length Transaction" it is just a program that is administer by the government that controls what can happen with the property for a period of time, here it is usually 15 years. Attached is a program brochure from the local government that might be helpful, whoever administers the program in your area should have something similar and I have found them to be very helpful with comp information since they are typically not sold through the MLS.

Also you should have some verbiage in the report that states it is a restricted property, similar to this:

The subject is an 'ADU' unit, that is, it is an affordable dwelling unit which is a part of a subsidized program sponsored by the government. Its prices for resale are set by the government and not determined by market factors, the prices are typically well below market values. See attached Loudoun County ADU program brochure for additional information.

 

[Tom D]

here is the deal, i'm giving you a $350,000 cost home for $250,000, out of government's good will, but you can't be greedy and sell it for $325,000 tomorrow. kinda makes sense when giving a helping hand. none of these homes would have an owner staying more than 1 day, if they could flip it fast enough. but, i'm stilll buying it cause i get a brand new home that i don't have to spend any money on it for a while. so this buyer isn't thinking about their interest? good for buyer, bad for tax payers who payed the difference.

 

[Mark K]

I've only skimmed the responses but from your original post, my opinion is that it is AL but it does not meet the (usual) definition of Market Value.