COURT FILE NO.: FS-18-101 (Owen Sound)
DATE: 20210422
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Jessie Miller
Robert E. Scriven, for the Applicant
Applicant
- and -
Sarah Machan
Carol A. Allen, for the Respondent
Respondent
HEARD: April 13, 14 and 15, 2021
REASONS FOR JUDGMENT
Sproat J.
INTRODUCTION
[1] The sole issue for trial was the value of the matrimonial home, located at 337 Augusta St. in the hamlet of Ayton, as of October 1, 2017.
[2] To avoid identifying any of the comparable properties, given the appraisers had to make critical comments on certain properties, I will simply refer to Mr. Byars’ three comparables as Comparable One, Two and Three in the order they are listed at page 12 of the Joint Document Brief and similarly Mr. Santin’s three comparables as listed at page 98 of the Joint Document Brief.
THE EXPERT EVIDENCE
Randy Byars for the Applicant
[3] Mr. Byars started working in real estate as a licensed salesperson in 1992. In September 2005 he started with Georgian Appraisals and thereafter took one appraisal course per year with a view to becoming a licensed appraiser. He received his accreditation as an appraiser in 2014. Since that time, he has prepared approximately 100 – 200 appraisal reports per year. He works primarily in Grey–Bruce, exclusively on residential appraisals.
[4] Mr. Byars decided that it was important to find comparables in Ayton or the immediate vicinity. He selected three comparables and, based upon them, gave the opinion that the matrimonial home had a value of $260,000.
[5] In cross-examination Mr. Byars said that he did not take account of factors such as the quality of construction, whether a house had a more modern stylish look, whether it had a large contemporary kitchen, whether it had upgraded finishings such as a vaulted ceiling and whether it was located near a busy highway.
[6] Mr. Byars said that the average sale price in larger centres, with more amenities like Durham and Mt. Forest, is approximately $50,000 more than in small communities such as Ayton.
Dan Santin for the Respondent
[7] Mr. Santin has been an accredited appraiser since 1998 and has done 300 – 700 residential appraisals a year.
[8] Mr. Santin began by looking for comparables in Ayton or the immediate vicinity. Mr. Santin identified what he termed his Comparable One (which was Mr. Byars Comparable Two) being a house in Ayton located not far from the matrimonial home.
[9] Mr. Santin testified, however, that he viewed his Comparable One as a relatively poor comparable because:
a) it was 25 years old;
b) it was a modular home that had a boxy, modular design of a type he had not seen built in decades;
c) it had a small kitchen with what appeared to be painted plywood cabinetry;
d) only the front wall was brick;
e) although the lot was very large, much of it would collect water which would reduce its utility;
f) it was on a road which was a bypass which had a lot of traffic and was noisy.
[10] Mr. Santin did, however, follow his standard methodology of noting and quantifying adjustments in value as between Comparable One, which sold for $325,000 in April 2017, and the matrimonial home. Mr. Santin opined that Comparable One was superior to the matrimonial home in terms of the lot size which merited a $10,000 negative adjustment. The matrimonial home was, however, superior in a number of other respects and so he made a number of positive adjustments as follows:
a) size of garage - $15,000,
b) heat source - $15,000,
c) curb appeal/design - $20,000,
d) size of the house and interior features - $40,000.
[11] Mr. Santin also made a positive adjustment of $9,000 assuming that in a rising market the value would go up that amount from April to October 2017. The net result was a positive adjustment of $99,000 added to the Comparable One sale price of $325,000 which indicated the matrimonial home had a value of $414,000.
[12] Mr. Santin did not use Mr. Byars’ Comparable One because, although located in Ayton, the agreement to sell was made in October 2016. In his opinion there was a rising real estate market such that it was better to find a comparable close in time, even if some distance from Ayton, than to use a dated comparable just because it was in Ayton.
[13] Mr. Santin also did not use Mr. Byars’ Comparable Three, located in a rural area near Durham. Mr. Santin did not view it as comparable because:
a) it was 24 years old;
b) it was more rural than the matrimonial home;
c) it was wood sided and generally what he termed “cottage grade” quality;
d) the wood was stained, perhaps indicating rot;
e) the quality was nothing like the matrimonial home; and
f) it was heated by a fireplace only and some banks would not finance a property without a central heating system.
[14] In Mr. Santin’s opinion his Comparable Two, located on the outskirts of Mt. Forest, approximately 18 km from Ayton, was the best comparable sale. According to MLS the agreement to sell it was on September 15, 2017 at a price of $425,000. Mr. Santin’s report indicated that his Comparable Two was similar in size, condition, style and garage to the matrimonial home. Comparable Two was superior to the matrimonial home in that it was located closer to Mt. Forest and it had natural gas. Comparable Two was inferior to the matrimonial home in terms of its basement. This analysis also supported his conclusion that the matrimonial home had a value of $414,000 on the valuation date.
[15] Mr. Santin testified that houses in Ayton might be worth 5 - 10 percent less than comparable properties in larger centres such as Durham or Mt. Forest.
ANALYSIS AND CONCLUSION
[16] Both expert witnesses were well qualified in appraising residential real estate. I would not distinguish then in terms of their background and experience. I am also satisfied that they both were attempting to honour their obligation to provide an impartial, fair and accurate opinion.
[17] Having said that, it was Mr. Byars’ first time testifying as an expert in court and Mr. Santin may have testified once before in the distant past. I think they prepared their reports as they would a typical appraisal and not in as methodical a fashion as a typical expert appearing in court. For example, Mr. Santin’s report in error indicated that the subject property was owned by an estate. He also understated the distance from the matrimonial home to neighbouring larger centres. None of this, however, caused me to doubt they were honest witnesses.
[18] Mr. Byars opined that the real estate values in Ayton were fairly flat from 2016 to 2018. This was based on a total of 26 sales. With such a small sample, median and average prices could be significantly affected by a sale of one or two particularly expensive or inexpensive properties.
[19] Mr. Santin also provided graphs depicting that the median sale price in Grey County increased by approximately $55,000 from July 2016 to October 15, 2017. I accept his opinion that there was an upward trend in real estate value in Grey County and that upward trend would be applicable with some variation in quantum throughout the County.
[20] I am also concerned that Mr. Byars restricted himself to the small number of sales in Ayton or the immediate vicinity. Mr. Byars indicated that he did so in part so that he would not have to adjust for location. That suggests to me that he could have gone farther afield and then made an appropriate adjustment. He also in-chief made reference to the fact that prices are typically $50,000 higher in larger centres such as Durham and Mt. Forest than in small communities such as Ayton. Again, that suggests he could have made an adjustment.
[21] I prefer the approach of Mr. Santin who took into account comparables approximately 20 km away. While each case must be decided based on the evidence at trial, I do note that in Vanderven v. Vanderven, 2021 ONSC, the court accepted the evidence of an experienced appraiser who used comparables 16 and 21 kms from the subject property.
[22] Factors such as modern look, spacious contemporary kitchen and location (in the sense of the character of the immediate neighbourhood) are all relevant factors that should have been taken into account by Mr. Byars. Given the difficulty in finding good comparables in Ayton, I think it particularly important to adjust for all relevant factors.
[23] I note that in Vanderven the court accepted the evidence of an experienced appraiser who adjusted the value of comparables taking into account factors including the layout of the main floor rooms; the condition of the roof, walls and windows; and the state and use of nearby properties.
[24] Mr. Santin has probably conducted on the order of 10,000 appraisals in Grey-Bruce since 1998. I find that he had the knowledge and experience in the market to fairly make the adjustments I will later describe.
[25] My responsibility is to not simply choose which expert I prefer and adopt his number. While I prefer the approach of Mr. Santin, he recognized that there is an element of judgment and subjectivity in adjusting from the value of comparables. In closing submissions, both counsel made the point that an appraisal is more art than science. Given Mr. Byars’ significantly lower number, I find it is appropriate to discount Mr. Santin’s number by recognizing that there is a reasonable range for adjustments and using the lower end of that range.
[26] Both Mr. Santin and Mr. Byars used as a comparable the April, 2017 sale of a home in Ayton, located near to the matrimonial house, for $325,000. As discussed, Mr. Santin made a total of $109,500 in adjustments ($99,500 positive and $10,000 negative) for features such as lot and garage size, style, age and condition to arrive at the value of the matrimonial home. It is reasonable to conclude that reasonable appraisers might differ within a range of 20 percent as to the appropriate adjustment. If I, therefore, take the low end of the range, and assume the adjustments should be varied by 20 percent (to decrease the positive adjustments and increase the negative adjustment) the arithmetic result would be to value the matrimonial home at $392,100 (20 percent of $109,500 in adjustments is $21,900 which I deduct from Mr. Santin’s appraised value of $414,000).
[27] Based on the totality of the evidence I, therefore, conclude that 337 August St. in Ayton had a value, which I round to $392,000, as of October 1, 2017.
[28] Ms. Allen should provide me with a Costs Outline and brief written submissions on costs within 15 days. Mr. Scriven shall respond within 10 days of receiving submissions from Ms. Allen. Reply, if any, within a further 5 days. The submissions should be sent to OwenSound.SCJ.courts@ontario.ca.
Sproat J.
Released: April 22, 2021
COURT FILE NO.: FS-18-101
DATE: 20210422
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Jessie Miller
Applicant
- and -
Sarah Machan
Respondent
REASONS FOR JUDGMENT
Sproat J.
Released: April 22, 2021