Analyzing Economic Issues in an Appraisal Report

Most appraisers write their reports for a single user, or produce a "one off" report.  The report may be written for a bank, a government agency, a corporate user or an individual, but generally the report will have a very limited readership.  Even if you reuse your economic analysis section over and over for an entire year it is unlikely that it will be seen by more than a few hundred to a few thousand people, even fewer if you realize that relatively few of your clients will actually read what you had to say about the economy.

 If you are like me, you read, study, think about and then summarize your thoughts in writing regarding the national and local economy.  As an actual participant in your local economy you feel like you are on the front lines.  You know the demographics, you review, chart and table the data each year, you may even attend presentations on economic activity in the County, and your feelings about how the local economy is changing usually go well beyond the numbers alone.

 Appraisers generally keep their economic analyses in the 5 to 20 page range in a typical commercial narrative report.  They talk about changes in the population, the labor market, household income and usually they go on to discuss at some length the housing market.  Since appraisers understand that relatively few people will bother to read their economic analysis, many revert to cutting and pasting tables and charts from one of the most popular local economic presentation reports.

 Facts are facts, right?  Why spend a lot of time explaining the economy in an appraisal report when relatively few people are even going to read it?  Unlike documents that are written to obscure what is happening I take advantage of the opportunity to explain to the reader what my opinions are about what is really happening.  If the unemployment rate is falling “like a rock” from 10% to 9% to 8% and then to 7% or below simple because the number of people being counted as unemployed is changing, I'm going to talk about it. 

There are times and places in life where you can take advantage of the fact that you have a freedom of expression and when I am writing an appraisal report I take advantage of the fact that it is one of those times and places.  If the local construction business is suffering, if retail space is being hit by high vacancy rates because of the Internet or if the land market is suffering because of some new zoning overlay being put in place I am going to talk about it in my report, no holds barred.

Of course it's not appropriate to discuss politics in any appraisal report.  It's an opinion of value that you are providing and if you do not want to alienate 50% or more of the clients who do read your work you will avoid discussions of that type, but an honest assessment of the economy is important.  There are underlying logical reasons why a real estate market is trending upward or downward and even if no one else cares about the reasons you should.

For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email at grigdon@cox.net or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.

Article source: http://www.appraisalarticles.com/Narrative-Report-Writing/4529-Analyzing-Economic-Issues-in-an-Appraisal-Report.html