Appraising Financial Buildings / Banks

If you have been appraising for a while, or even if you have just been aware of what's happening in your local real estate market, you have probably seen some bank buildings come on the market.  Clearly bank buildings are different from your standard office or retail buildings, they are in fact special purpose properties, and they may take much longer to sell given their obvious limitations and limited market.

Most financial buildings contain one or more specialty improvements, usually in the form of teller areas, vaults, ATM bays and / or teller service drive-through lanes and substantial portions of large financial buildings are often just office areas or teller service areas that can usually be adapted for an office use.  I have seen bank buildings successfully modified for use as medical offices, legal offices and even churches.  Yes, there are physical and functional losses associated with using most financial buildings for alternate uses, but they are at least possible when compared to other specialty buildings constructed for uses like bowling alleys, fitness centers and casinos.

Appraisers analyzing financial buildings must consider how much of an impact their specialty improvements have on market value.  The chance that a bank building will be purchased by another bank is unlikely, sure it happens, but some buildings even have deed restrictions that do not allow another financial institution to use them. 

It's my experience that second owners of bank buildings do not want to pay to demolish existing canopy structures or remove vaults, it's just too expensive.  I have seen a new owner take out the drive-through banking bays but the cost was relatively high just to gain a few parking spaces.  The equipment is gone but removing the bays and the canopy is often just too expensive.

Appraisers must consider how much of a loss specialty banking improvements will suffer.  Each situation is different.  Small branch buildings are often seriously impacted by their layout but larger bank buildings are less affected.  If you have time to research the sales of past bank buildings you may be able to offer a client some evidence regarding past bank building sales.  It is however unlikely that you will be able to find many of such sales.

I generally complete a sales approach and if I cannot find comparable bank building sales I use office buildings, especially if the subject is a large bank building.  Smaller banks or branches are more difficult to find sales for comparison.

The cost approach is often used by appraisers as an important method for valuing bank buildings.  While land, the replacement cost new of improvements and all forms of depreciation may get you to a cost approach conclusion in the end you have to remember that the special use / special purpose of the building and limited marketability are important factors that influence value.

The income approach would also be important if a bank building has a long-term lease on it.  In my experience, most bank buildings are appraised only because they will be or have been abandoned by their original owners, so the income approach often has no applicability.

For more appraisal information contact Glenn J. Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada based appraiser who can be contacted via email or via his business website known as 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/Real-Property-Appraisal/Real-Property-Appraisal/Special-Purpose-Appraisal//4643-Appraising-Financial-Buildings-Banks.html