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### STATE OF MICHIGAN

COURT OF APPEALS

RYAN M. HUIZENGA,

Petitioner-Appellant, UNPUBLISHED September 1, 2016

v No. 327682 Michigan Tax Tribunal CITY OF GRAND RAPIDS, LC No. 14-006527-TT

Respondent-Appellee.

Before: O WENS , P.J., and S AWYER and S HAPIRO , JJ.

P ER C URIAM

.

Petitioner Ryan Huizenga appeals as of right the Michigan Tax Tribunal’s order determining that the issues he raised in his motion for reconsi deration were without merit and setting the true cash value (TCV ) of his property for tax year 2014 at $284,390. We vacate the

tribunal’s decision on reconsider ation and remand for further p roceedings.

Huizenga purchased the subject property for $185,000. He pres ented evidence that the previous owners had entered bankruptcy and that he had purchase d it following a short sale involving two banks, a bankruptcy trustee, and a short sale neg otiator. He explained that he offered $185,000 because of the condition of the property, but said that the banks fought him over the price. After his offer, the property remained on the market for almost 15 months, but no higher offers were made. Huize nga closed on the property in Ap ril 2013. 1

In January 2014, the City of Grand Rapids notified Huizenga th at the taxable value (TV) of the property for 2014 would be $188,300. Huizenga appealed the assessment to the assessor, who, after review, decreased the property’s tentative TV to $15 7,000. Huizenga appealed the assessment before the March Board of Review, which denied his a ppeal and confirmed the

1 According to Huizenga, the prope rty was marketed with a listin g on MLS and with a sign in the front yard.-2- property’s TV for 2014 as $157,000. Huizenga thereafter filed a petition in the small claims division of the Michigan Tax Tri bunal, alleging that the assess ed TCV and TV were excessive. 2

Huizenga and the City submitted valuation disclosures. The Ci ty’s valuation disclosure included the property report card, which indicated that the TCV for the property was $314,085. It also included an appraisal of the property completed by Cher yl Kooiman, an assessment officer with the City. Kooiman’s appraisal used the sales-comp arison approach to value the subject property. There were ei ght comparable properties in Ko oiman’s report and she made adjustments for differences bet ween the subject property and ea ch comparable. According to her appraisal, the TCV for t he subject property was $260,000.

Huizenga’s valuation assigned the property a TCV of $195,000 an d included as support photographic evidence documenting the interior and exterior con dition of the home, quotes on various repairs, three separate appraisals, 3 a linear regression analysis Huizenga prepared that estimated the sale price between $175,010 and $217,990, and pho tographs of the kitchens in the sales comparables used in the appraisals. In his supporting me morandum of law, Huizenga argued that his purchase of the home for $185,000 in an “arm’s length sale” also served as good evidence of value, which was further buttressed by the signific ant repairs needed, the appraisals, and the linear regression analysis.

Following a hearing in the small claims division, the tribunal issued a judgment setting the property’s TCV at $260,000. The tribunal found that the “s ale price, under the circumstances, did not represent the market value of the proper ty,” but did not make an express finding as to whether Huizenga’s purchase of the property for $ 185,000 was a forced sale or was an arm’s-length transaction. T he tribunal also rejected Huizen ga’s linear regression analysis, concluding that the analysis was skewed and was not a typical a nalysis. In determining the subject property’s value, the tr ibunal relied on the five compa rable properties that exceeded 3,000 square feet. These five properties, labeled P-1 (209 Cha rles), P-2 (423 Madison), P-4 (260 Paris), R-6 (238 Morris), and R-7 (319 College), were in the sa me market as the subject property for age, square footage, and location, and sold for $235,000, $ 265,000, $275,000, $335,00, $380,000 respectively. 4 After considering aspects of the se homes that made them diffe rent than

2 In Michigan, property is assessed at 50 percent of its TCV. C onst 1963, art 9, § 3; MCL 211.27a(1).

3 One appraisal was performed by B rian Kaminski. T he Kaminski a ppraisal used six comparable sales and determined that the TCV for the subject property was $200,000. A second appraisal was performed by Christos Tesseris. The Tesseris appraisal use d six comparable sales and determined the TCV for the subject property was $199,000. The third appraisal was performed by Brian Grasmeyer. The Grasmeyer appraisal used three compara ble sales and determined the TCV for the subject property was $199,000.

4 The tribunal wrongly labeled R- 6 as “305 Madison.” However, g iven the judgment’s description of the property, it is clear that R-6 refers to the property located at 238 Morris

Avenue SE.-3- the subject property, and weigh ting those differences according ly, the tribunal determined the property’s TCV to be $260,000, in the “ mid-range” of the compar able sales presented.

Huizenga moved for reconsideration, asserting that the tribunal (1) erroneously used a property that did not exist, due to an error substituting “305 Madison” for 238 Mo rris; (2) used actual sale prices instead of adjusted sale prices; and (3) wro ngfully rejected his linear regression analysis. The tribunal found that each challenge was without m erit. 5

Nevertheless, the tribunal determined that it had erred when se lecting the sales comparables used to determine the property’s TCV. 6 Specifically, the tribunal found that P-1 and P-4 should not have been included in the comparison based o n their days on the market and

that P-2 should not have been selected because its sales date w as too remote to the tax day at

issue to be a reliable indicator of value. The tribunal then c onsidered additional sales comparables that it had not previously included in the comparis on—305 Morris and 438

Madison. The tribunal concluded that 305 Morris should be acco rded little weight given the significant differences between it and the subject property and that 438 Madison was properly excluded as too remote to the tax day at issue. Of the two rem aining sales comparables, the tribunal found that R-7 had properly been given minimal weight because of its updated kitchen and that the adjusted sales price of R-6 is the “most reliable indicator of value.” The tribunal further found that it had erred by basing the property’s TCV on the “mid-range,” or average of the comparable sales, because the average of such values does n ot meaningfully lead to a final value. Accordingly, th e tribunal assigned t he property a TCV o f $284,390.

Huizenga first argues that the t ribunal’s valuation is not bas ed on competent, material, and substantial evidence because no reasonable person could fin d that a property that sold for $185,000 in an arm’s-length transac tion is actually worth $284, 390. 7

5 The tribunal member that made the initial decision in this cas e retired before hearing Huizenga’s motion for reconsider ation. As a result, the decisi on on reconsideration was made by

a different tribunal member.

6 Mich Admin Code, R 792.10257 provides that the tribunal may re consider any decision or order upon its own initiative. A ccordingly, although Huizenga did not challenge the selection of sales comparables, the tribunal was free to revisit that determ ination during his motion for

reconsideration.

7 “Review of a decision by the MTT is very limited.” Drew v Cass Co , 299 Mich App 495, 498; 830 NW2d 832 (2013). “In the abs ence of fraud, error of law or the adoption of wrong principles, no appeal may be taken to any court from any final agency provided for the administration of property tax laws from any decision relating to valuation or allocation.” Const 1963, art 6, § 28. Unless fraud is alleged, this Court reviews the tribunal’s decision for a “misapplication of the law or a doption of a wrong principle.” Liberty Hill Housing Corp v City of Livonia , 480 Mich 44, 49; 746 NW2d 282 (2008) (citation omitted). “Th e tribunal’s factual findings will not be disturbed as long as they are supported by competent, material, and

substantial evidence on the whole record.” Drew , 299 Mich App at 499 (citation and quotations omitted). Substantial evidence is “more than a scintilla of ev idence, although it may be-4- The starting point for determini ng the TV of real property is to determine the property’s

TCV. Detroit Lions, Inc v City of Dearborn , 302 Mich App 676, 696; 840 NW2d 168 (2013). A petitioner bears the burden of e stablishing a property’s TCV. MCL 205.737(3). TCV refers to “the usual selling price at the p lace where the property to whi ch the term is applied is at the time of assessment, being the price that could be obtained for the p roperty at private sale, and not at auction sale . . . or at forced sale.” MCL 211.27(1). In othe r words, TCV “is synonymous with

fair market value.” WPW Acquisition Co v Troy , 250 Mich App 287, 298; 646 NW2d 487 (2002).

Although Huizenga argued before the tribunal that he purchasedthe property in an arm’slength transaction despite the fact that it was a short sale, t he tribunal never determined whether the sale was an arm’s-length sale or whether it was a forced sa le. If the sale was a forced sale,

then it would not be indicative of the TCV of the subject prope rty and it would be proper for the

tribunal to not consider the sal e price in its determination of TCV. If however the sale was an arm’s-length transaction, then th e sale price may be relevant t o determining the property’s TCV.

See Prof Plaza, LLC v City of Detroit , 250 Mich App 473, 476; 647 NW2d 529 (2002).

The fact that Huizenga purchased the property at a short sale i s not dispositive on the issue of whether the property was purchased in an arm’s-length transaction or in a forced sale. “[A]n arm[’s]-length transaction is characterized by three elem ents: it is voluntary, i.e., without compulsion or duress; it generally takes place in an open marke t; and the parties act in their own

self-interest.” Mackey v Dep’t of Human Servs , 289 Mich App 688, 699; 808 NW2d 484 (2010) (citations and quotations omitted; second alteration in origina l). The Tax Commission’s Bulletin 6 of 2007 provides further guidance in determining whether fore closure sales, or other similar types of sales, are arm’s-length transactions. It indicates th at the following should be considered (1) “[a] determination as to whether the type of sale being rev iewed is a measurable portion of the market[;]” (2) “[a] determination that the sale property wa s properly exposed to the market[;]” (3) “[a] physical insp ection of the property to make a determination that the assessment reflects the condition of the property at the time o f sale . . . [;]” (4) “[r]eceipt of a properly completed real property statement to determine the ter ms and conditions of the sale unless adequate alternative sta tistical procedures are utilized to ensure the sales are an adequate part of the market[;]” and (5) “[a] determination that the part ies to the transaction were not related and each was acting in their own best interest.” Howev er, because the tribunal did not resolve this issue, we cannot ana lyze Huizenga’s claim that the tribunal’s decision was not based

on substantial evidence because of the substantial difference b etween the sale price and the TCV as determined by the tribunal on reconsideration. Accordingly, we remand to the tribunal to make a determination as to whether the sale was an arm’s-length transaction or a forced sale.

Huizenga also argues that the t ribunal’s valuation is not base d on competent, material, and substantial evidence because it adopted, without explanatio n, the City’s adjustments to comparable sales.

substantially less than a pre ponderance of the evidence.” Leahy v Orion Twp , 269 Mich App 527, 529-530; 711 NW2d 438 (2006) (citation omitted).-5- The Legislature has not prescribed a method for determining TC V and, instead, has listed a number of factors to be considered in making a valuation dete rmination. See MCL 211.27(1). In the absence of legislative guidance regarding methodology, t he tribunal and the courts have recognized three acceptable and reliable methods of determining TCV: “(1) the cost-lessdepreciation approach, (2) the sales-comparison or market appro ach, and (3) the capitalizationof-income approach.” Meadowlanes Ltd Dividend Housing Ass’n v City of Holland , 437 Mich 473, 484-485; 473 NW2d 636 (1991) (footnote omitted). “Variati ons of these approaches and entirely new methods” may be utilized “if found to be accurate and reasonably related to the fair market value of the subject property.” Id . at 485. “It is the duty of the Tax Tribunal to select the approach which provides the most accurate valuation under the c ircumstances of the individual

case.” Antisdale v City of Galesburg , 420 Mich 265, 277; 362 NW2d 632 (1984).

On reconsideration, the tribunal a dopted the sales-comparison a pproach. Under this method of determining true cash value, the tribunal analyzes “r ecent sales of similar properties, compar[es] them with the subject property, and adjust[s] the sa les price of the comparable properties to reflect differences between the two properties.” Meadowlanes , 437 Mich at 485 n 19. Applying this approach, the tribunal evaluated the sales c omparables in the four appraisals submitted by the parties and selected several properties as app ropriate to use in determining value. The tribunal, however, t hen winnowed that list down fur ther, ultimately finding that the “most reliable indicator of value is the adjusted sales price o f R-6.” The tribunal did not explain what adjustments it made, why it made them, why the adjustments were necessary, or why the rejected comparables could not be adjusted to account for the d ifferences between them and the subject property. Instead, the tribunal accepted without expla nation the adjustments to R-6 that were made by the City’s assessor. Notably, the assessor offere d only a cursory explanation for the adjustments to the eight comparables in her appraisal. Wit h regard to R-6, the assessor concluded that the adjusted value was $284,390, and the tribuna l concluded that $284,390 was the TCV was the subject property.

Because the tribunal provided no reasoning in support of its wh olesale adoption of the City’s adjustments to R-6, it is not possible for us to determi ne whether the decision is supported by competent, material, and substantial evidence. The fact tha t the City’s valua tion contained an adjustment to R-6 is insufficien t given that (1) the assessor p rovided little explanation for the adjustments and (2) the tribunal is required to make an indepen dent determination of value. See Jones & Laughlin Steel Corp v Warren , 193 Mich App 348, 355; 483 NW2d 416 (1992) (“The tribunal may not automatically accept a respondent’s assessment , but must make its own findings of fact and arrive at a legally s upportable true cash value.”). Accordingly, we remand to the tribunal to provide an explanat ion and findings of fact to supp ort the adjustment to R-6 and its conclusion that R-6’s adjusted sales price is the most reliable indicator of the subject property

value. 8

8 Our conclusion that substantial evidence does not support the tribunal’s determination renders moot Huizenga’s assertion that t he tribunal’s valuation was err oneous as a matter of law because it exceeded the range of values that witnesses assigned the pro perty. In any case, we note that-6- Finally, there is no merit to Huizenga’s remaining challenge, i .e., that the tribunal committed an error of law by rejecting his proposed “linear reg ression analysis.” The tribunal is charged with selecting the mos t accurate valuation methodology using its superior expertise. See

id . at 353. While Huizenga claims that linear regression analysi s is the “most accurate” method of valuation because it can be verified, he has not explained w hy, under the facts of this case, the sales-comparison approach, which is a well-accepted and reliabl e method, is defic ient. The tax

tribunal must select the valuati on approach that provides the m ost accurate valuation under the circumstances, Antisdale , 420 Mich at 276-277, and we give deference to the tribunal re garding the appropriate method of valua tion and the interpretation of s tatutes pertaining to valuation, because these are matters within the tribunal’s area of experti se, see Schultz v Denton Twp , 252 Mich App 528, 529; 652 NW2d 692 (2002). Huizenga has not demon strated why this Court should stray from this principle.

The order granting reconsidera tion and corrected final opinion and judgment is vacated and this matter is remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.

/s/ Donald S. Owens /s/ David H. Sawyer /s/ Douglas B. Shapiro

the tribunal’s valuation was within the range of evidence, as t he property report card valued the property at $314,085.