Appraisal Articles 2018 Free Appraisal Articles for Appraisers and the Public
As employment decreases, and the demand for office space and retail space also decreases, the number of defaulted commercial mortgages will likely increase. If large scale casino layoffs accelerate, per predictions, the impact to the commercial real estate market in Las Vegas could be significant. Office vacancy rates are already increasing toward 20% in Las Vegas, and the vacancy rate for retail properties is increasing toward 11%.
NAR's decsion to attack the HVCC via the NY Attorney General's Office and FHFA to bring appraisals more in line with sales contracts is not beneficial to the appraisal industry.
Real estate appraisers in 2009 have been struggling with trying to analyze real estate markets that are basically one sided, they simply lack any sort of demand. Like the failure of Economists to explain the reason for the financial collapse, appraisers generally fail when attempting to express "market value" opinions, because as a matter of fact, real estate "markets" do not really exists for some property types in some areas.
It happens all the time, especially in markets like Las Vegas that have suffered significant price decreases. There were many properties that in 2007 had a much higher value as vacant land but in 2014 their improved value is now higher than their land value. Their highest and best use changed with market changes over time.
If you are a real estate agent and an appraiser, like I am, you get to see and hear a lot more than most appraisers relating to what real estate agents are thinking and saying though their newsletters and trade articles, and it's clear to me in late 2014 real estate agents are still unhappy that some portion of their deals are not being appraised at their negotiated sales price.
While inflation has not been an issue for some time there have been recent reports that discuss the fact that inflation has started to creep back into our economy in early 2015 and I have been asked by owners and buyers of residential and commercial real estate if appraisers consider inflation during the appraisal process. Appraisers understand that there are different appreciation rates for residential and commercial properties and that the rates vary by zip code area within any City that is considered. Title companies and Realtor’s often publish “heat maps” that display the zip code areas with dark red color where the highest appreciation rates are.
While the latest statistics indicate a slowly increasing average land sales price per acre in 2013 and 2014 most of the vacant land sales transacted were zoned or planned for residential development. In fact many vacant properties sold in the past 2 years that had commercial zoning and / or commercial planning were subsequently reasoned for a residential use. The commercial land market is still plagued with the high vacancy rates of office properties that have decreased only slightly over the last few years and the office vacancy is in fact still flying high near 20%. That is an amazingly high number when you consider how long it has remained high. As an appraiser I still notice the shiny, empty floors in many new office buildings, the fact of the matter is that there is relatively little demand for commercial land because there is still a glut of developed office properties.
Some real property markets change slowly, especially those that contain more supply of a specific property type than demand, and it's not unusual to see a relatively small increase or decrease in property values based on the sales approach or the income approach. For appraisers these markets make for difficult times. Real property owners and potential buyers realize that there is little movement in prices and few transactions occur, that generally means fewer appraisal reports are ordered.
Detroit's economy has seen extreme highs and extreme lows over the past several years, and there are segments of the economy that are still struggling. Parts of the fragmented residential real estate market still have a lot of healing to do. Commercial real estate in Detroit has seen a significant strengthening and 2015 looks like it could provide more positive movement. Detroit offers its commercial appraisers a wide range of appraisal challenges. Downtown, the riverfront and the suburbs are particularly strong, but a near 20% vacancy rate persists in the office sector.
Appraiser's research the general or overall market, like the entire city, and then they research a submarket area which has often been delineated by brokers due to there being a similar development pattern in an area. While there are usually similar physical and economic characteristics in a submarket property values within it can vary considerably. If it's an area dominated by medical offices, due to its close proximity to a hospital, it is likely that the offices can vary in value significantly due to construction, in finish quality and in age. So appraisers can for example find offices that have sold between say $ 125 per square foot (PSF) and $ 350 PSF.