Appraisal Articles 2018 Free Appraisal Articles for Appraisers and the Public
The initial reaction of most appraisers to that comment is to ask “are you buying the real property, the business entity or both?” It’s amazing when at times you discover that a buyer doesn’t even know what he or she is wanting or trying to buy. For appraisers the assignment is dramatically different if it’s just a real property appraisal versus a business appraisal that includes the real property. Most qualified real property appraisers wouldn’t have a problem completing an appraisal of the real property. If the party needs a business-only appraisal most real property appraisers would pass the client along to someone who appraises businesses. An assignment can however swerve quickly if it has to include both the real property and intangible assets like licenses and business income and it’s then described by the client as a “going-concern” appraisal including the real property. That usually means that it’s not just a real property appraisal that’s needed, it’s real property
The following graphic, based on Greater Las Vegas Association of Realtor data, says it all. The number of sales (in purple) are falling while the average price of a home (in green) is rising. As I discussed in a previous article this change in market conditions is playing havoc with the market and it has since 2015. For sellers, they want to increase the sales price of their homes in keeping with the trend. For buyers they are having to bid higher and higher to purchase the home that they want.
Do some real estate agents / brokers have unreasonable appraisal expectations? If the agent / broker starts your conversation by saying “I already have an appraisal but it’s too high” or they say “it’s too low” you are headed for problems. My last assignment the agent had a high appraisal, he didn’t disclose the value to me and I didn’t ask, but he couldn’t put the deal together so called me and asked for another appraisal. My appraisal was “too low” for him so he asked his money back. I have refunded appraisal fees, not many over 40 years, but if there is a valid reason I will consider it. The value being “too low” is not a valid reason.
I have appraised properties and found on occasion that the assessments and taxes being paid by the owner are extremely high or extremely low. It’s one of those things that just jumps out at you, if you have completed reports on similar properties you get used to seeing assessments and the taxes paid fall into a typical or normal range. Owners get into a pattern of paying their taxes without question. Many run businesses and they just don’t think about property taxes. If the taxes are $ 6,000 per year or $ 16,000 per year, they just make the payment and think about the size of their tax deduction and they don’t consider that their property taxes may be $ 10,000 higher than they should be annually.
If you are lucky enough to find a home, especially in one of the high housing demand states, you should be happy that rates aren’t 8.0% or higher. I know that sounds painful, no one wants to hear that a situation that is becoming worse is not that bad, but I can honestly say that I would be happy with a 4.75% to 5.25% mortgage interest rate. If you have ever taken a 30-year home mortgage with an 8.0% to 10.0% interest rate, like I have, you can put recent increases in perspective. If you have only been around to see 3.31% to 5.0% mortgage interest rates I’m sorry to inform you that you are out of touch with reality. It doesn’t take much to get back to higher rates, probably not as high as the record 18.63%, but higher than the near 5.0% that we have today. Those who decided to wait for rates to fall may never get another chance to buy or cash out for years.
There is an explosion of cannabis businesses in Nevada, as in other recreationally approved states, and major investments are being made in grow facilities. Buildings used for this purpose are usually modified industrial building and there are often a number of specialty improvements that must be made to them. Some of the improvements add to market value while others do not. It's up to a real property appraiser to analyze the improvements and make determinations about what is contributory and what is not.
There are times when appraisers run across a property or properties that have multiple problems. When a property has functional issues, like a poor layout, that can be the basis for a downward value adjustment in a report. When you additionally have other negative factors like; significant depreciation due to physical age, electrical issues, plumbing issues, equipment problems like faulty HVAC units and locational issues you can be working on a property that has so many problems that market value can be significantly decreased. Appraisers have to gauge the impact of each building problem. If your subject property is an office building that has almost a star-like shape with lots of corner areas that create dead or useless area, those areas are going to cause a loss in value.
It's my opinion that that it's very difficult to have an entire career in the real property appraisal business without having at least a complaint or two or maybe even a legal entanglement. Not everyone gets caught up in a messy situation while licensed, but a lot more appraisers have had a problem than are willing to admit. If you make even the smallest mistake as an appraiser you can catch a regulatory complaint or get sued by a lender. When you are dealing with opinions of value there always seems to be someone who is not happy with your results and those are the people who will try to find something wrong with what you did or how you did it.
Here are a few important things that you can do to get control of high appraisal fees: 1. Make sure that you are working with a lender who lets you order the appraisal report yourself. If the lender stays involved your appraisal may be ordered through an Appraisal Management Company (AMC) or from a small, pre-selected group of appraiser that work for the lender and that will likely increase the fee. If it’s a large assignment or multiple properties not getting direct bids could double or triple the appraisal fee.
You are going to use that new industrial building that you just purchased for indoor tennis courts, and you want to know if those improvements will make the building worth more money? Or you already purchased and remodeled an industrial build to grow marijuana, and now it’s your opinion that those grow improvements are going to make it much more valuable. The problem that appraisers confront every day is that many parties who purchase industrial buildings and then modify them for a specialty purpose believe that there is an entire market full of people out there who are interested in purchasing the modified building, with its improvements, and they believe that there are many people willing to pay a premium for the improvements.