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Confused and Stubborn Clients

by Administrator on Mar 11, 2013 Business Operation 679 Views

Have you ever had a phone call from a past client or a potential one who just doesn't want to hear what you have to say?  I have had many, you tell them facts about a property that they want appraised and after your explanation how the appraisal should be completed they just say "that can't be right!"

One example that I have seen played out over and over again is the elderly care facility / group home that is being run within a single-family residence.  The owner wants a normal conventional loan and contacts a conventional lender, they have a great down payment and they will pay a premium interest rate so the lender really wants the deal and usually wants to close it quickly.  I have seen these as the first and as the appraiser of last resort. 

The owner of properties like this usually purges their long term residents from the property for a few days or a week, invites me in for an inspection and then tells me that the two kitchens and seven bedrooms can be modified to "put the property right."  Then he tells me that the property benefits from its special licensing and that the approval for the use would be passed on to a buyer. 

For a residential appraiser it's a trap.  It looks like a single-family residence, in fact most of these properties are in normal subdivisions and you would not pay any attention to the building if you didn't see inside of it.  The problem is that there is often a significant cost to cure the modifications that have been made to convert the property to an assisted living type use.  Some owners argue that since their property has a huge income, maybe $ 2,000 per month for 15 residents or $ 30,000 gross a month, that the gross income is a basis for an increased property value.

It's my opinion that care facilities are businesses, and must be valued as businesses. The real property is one factor, but there are significant staff, food and energy costs associated with running them.  Appraisers must navigate carefully through the elderly care / group home assignments and remember that the income generated by them is not attributable to real property only.

Ask yourself "do most buyers care that an elderly care / group home license has been approved for the property?"  Most single-family buyers don't care about that license and the value of the license is near $ 0.  It has to do with running a business out of a residence and really doesn't affect the value of the property (in my opinion) for its single-family highest and best use.

Other clients have advised me that I should "assume" that the highest and best use of a property is for its residential use.  They simply don't want to hear what my opinion is regarding highest and best use, it may interfere with their plans to make a residential loan on a property.  This is another instance when it’s important for an appraiser to say no thank you to an assignment.  If the neighborhood / land use pattern has started to change to or there is planning in place that indicates that a different use would likely be allowed, you would be making a mistake to not consider these factors.

Some clients think that since they have directed the appraisal assignment and given you the favor of doing the business that the appraiser should be beholden to them and they will try to influence the outcome.  We all know that this type of activity is not supposed to happen.  If you take the time to explain the facts to a potential client and they still just keep on coming at you it's definitely assignment termination time.

 

Update 2014: Looks can be deceiving, if you notice that there are 8 adults in the back yard when you are doing an exterior only appraisal you need to advise the client that you suspect that there may be a business being conducted from the property and that the business may have required modification of the interior.

For more appraisal information contact Glenn Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada appraiser who can be contacted via email or via his business website Appraiser Las Vegas  (http://www.appraiserlasvegas.com), or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/

Article source: http://www.appraisalarticles.com/General-Appraisal-Articles/General-Appraisal-Articles/Business-Operation//4323-Confused-and-Stubborn-Clients.html

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