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View Poll Results: Is the Freezers in a Meatlocker Real or Trade Fixtures?
It's Real Property built into the building 11 61.11%
It's a Trade Fixture and should be treated as Personal Property 7 38.89%
Voters: 18. You may not vote on this poll

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  #1  
Old 09-28-2011, 07:57 PM
Terrel L. Shields's Avatar
Terrel L. Shields Terrel L. Shields is offline
 
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Default Personal Property (FF & E) or Real?

A butcher shop has a locker. Actually, it has 2 coolers. One is to chill meat - keeping the temperature at 35 or so. The other keeps meat deep frozen after processing...about 10 below.

Each are insulated boxes set into a frame - the boxes are built into the building. The compressors are set on the wall of the outside of the building.

So....are such lockers REAL property or a personal property " trade fixture"? And how would you segregate the values except by the cost approach?

(PS - an appraiser has a complaint filed against him for treating the cooler as personal property and using unfinished sheds as comps...) and the appraiser who did the previous appraisal also has a complaint filed against him apparently initiated by the board...claiming that he should not treat the coolers as real property)
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Old 09-28-2011, 08:03 PM
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Terrel, these assignments are always the toughest. I would believe they would be personal property even though they are permanently affixed to the realty.

A couple of questions ... was an income approach completed? The lease rate would certainly include the "personal property" and could be measured by similar "cold storage".

Is the value being contemplated "market value" or "value in use"?

Do you think its possible to determine value for the structure and add back a depreciated cost (contributory value) for the cooler improvements?

Just thinking out loud here .......
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  #3  
Old 09-28-2011, 10:13 PM
Terrel L. Shields's Avatar
Terrel L. Shields Terrel L. Shields is offline
 
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Not my project but I did one of these some time back. It is a situation before the stae board as we speak.

I broke out the equipment as short-lived but fixed trade fixtures but because the property has to have the equipment in order to be a Meat Market... OK... are we appraising the meat market? or we appraising some generic block building?

If we are appraising generic block buildings then it is not going to capture any of the value of the BEV - on-going concern. And as an owner-operated building there is no "rents".

So....if we are REQUIRED to break out the FFE and BEV....Interagency guideline sez so...then the Real estate is nothing..nigh valueless...even if the only meat market in 20 miles and with no competition..it's just a block building.

But if it is an on going concern and the ASSESSOR is going to value the property on the transaction price (Say, $190,000)...which includes the cooler and hoist & kill track, meat hooks, etc. that are BOLTED to the wall or floor or ceiling. The meat saws, etc. were ID'd and sold as "personal property" and sold separately... ok.

So we have a mortgage on REAL PROPERTY (according to the documents) of $190,000 and a UCC on $30,000 of PERSONAL PROPERTY....??? AND the assessor values the property at $190,000....then how in god's little purple pea patch do you try to break out $20,000 worth of cooler and $20,000 worth of refrigeration from the REAL property to call FFE.?.?.?

Commercial property sells the following ways. You buy an on going enterprise with RE. If the property is viewed as underperforming, then what you pay is for the RE & FFE only. There is no BEV. If the operation ceases...then it sells as distressed property. If it is going great guns, you might pay a premium...there is BEV.

But so much commercial (small) operations are basically buying a job. They are not arbitraging great sums (i.e.- BEV) and the equipment is absolutely critical to holding the value of the property together. Without equipment..??

So when you do break out the FFE, that isn't its value as salvage. And now the FEDs are implying you break BEV and FFE out....for what reason? If separate the building is functionally defecient and the equipment is salvage value even if near new.

It makes no sense. Appraising never does. If you take the garbage disposal out of a house, its a big deal. If you take the Refrigerator out... its' personal property. If they take the stove out....(simply unplug and cart off) ...somehow that is part of the "Real estate" by definition and must be cost to cured???? something isn't right with that picture.
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  #4  
Old 09-29-2011, 08:00 AM
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Was reading recently about a condemnation case where a fast-food establishment was being acquired. Appraiser called everything inside (tables, counters, stoves, coolers, etc.) personal property and gave them no value.

Owner (large national chain) said they were part of the real estate because their policy is to never move this "stuff" (FFE or real estate, you chose) to a new building.

Court sided with Owner and the state bought everything inside in addition to the improvements and land.

Your coolers? Could go either way.
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Old 09-29-2011, 08:09 AM
Restrain Restrain is offline
 
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As a pers prop appraiser as well as a RE appr, bev coolers are generally pers prop, since they can and are pulled and replaced regularly. However the big chillers and freezers are permanently affixed and will transfer with the RE. Contributory value is problematic, especially the older units as refrigeration technology has changed so much in the last decade.
  #6  
Old 09-29-2011, 08:24 AM
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Method of attachment!
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  #7  
Old 09-29-2011, 08:50 AM
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Stephen J. Vertin, MAI Stephen J. Vertin, MAI is offline
 
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I find it hard to believe a state board would get involved if the cooler-freezer is the sole issue. Generally something of this nature is a side issue, a thrown-in (with a bunch of other dumb stuff) to scare the accused into coping a plea. There are attorneys who specialize in appurtenance law. Parts are very complicated. Assuming state board members have such expertise is laughable. I sincerely mean that.

While there are a number of variations on issues the general rule of thumb is "if it is attached to the building or land and does value effecting damage when removed" it is considered part of the real estate. Most cooler-freezers (at least in commercial realms) are considered part of the building. Given your description I would venture to say the cooler-freezer is realty.

But for the sake of argument, let’s say it is personal property. Say it has a depreciated cost of $10,000. There are appraisers that would deduct $10,000 from end value of real estate. This method could be used. However, it is my professional opinion it negates real world practice. It is purely academic. Further if these items were removed buyers would have to replace, which would usually encompasses cost new. That is generally a greater $ amount then depreciated cost. Such deductions reduce credibility of the final value outcome. It is generally not practiced in the market.

If in doubt about an item, simply estimate its depreciated cost and address any and all effects on values. Depreciated cost is the only way I know of measuring these items, unless there is an active market. Make the statement it may be personalty but would most likely be sold with the real estate, provide depreciated cost and you come into compliance with Standard Rule 1-2 (e)(iii). Since the standard only requires you identified personal property that are not real estate but included in the appraisal you have complied. There is no rule that it can not be included in the final value figure. By simply assuming the limited personal property would be sold with the property and its value is included in the real estate you have made everyone happy.

Last edited by Stephen J. Vertin, MAI : 09-29-2011 at 03:46 PM.
  #8  
Old 09-29-2011, 10:16 AM
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Terrel L. Shields Terrel L. Shields is offline
 
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It is now policy of the Interagency guidelines to break out such "Personal Property" this one is 20' x 20' - compressor is in a shed on the side of the building. Note lights inside were wired from outside.

The people who sell this stuff are selling the compressor equipment and the foam walls. The units are site built although portable units are available.
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Last edited by Terrel L. Shields : 02-11-2012 at 10:31 AM.
  #9  
Old 09-29-2011, 01:45 PM
Stephen J. Vertin, MAI's Avatar
Stephen J. Vertin, MAI Stephen J. Vertin, MAI is offline
 
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Quote:
It is now policy of the Interagency guidelines to break out such "Personal Property" this one is 20' x 20' - compressor is in a shed on the side of the building. Note lights inside were wired from outside.

The people who sell this stuff are selling the compressor equipment and the foam walls. The units are site built although portable units are available.
Several comments and questions:

Could you please post the link to the Interagency guidelines of which you speak? I can not find it in the regs. I do recall something of this nature years and years ago (15 at least). However, this was the subject of an old string (about 3 years ago). No one ever found its reference. Are you saying this is brand new? That makes it even stranger that the State Board is pursuing a new FDIC supplementary standard violation.

The picture does not tell much. If they removed the cooler-freezer would it leave a big hole in the wall with useless space? Sounds like the portables would surely be personalty.

Last edited by Stephen J. Vertin, MAI : 09-29-2011 at 03:47 PM.
  #10  
Old 09-29-2011, 02:04 PM
Lost Cause Lost Cause is offline
 
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Stephen, I always find your comments to be informed and informative. But, c'mon, it's not reality and personality, it's realty and personalty.

Or was it the reality that this is a sticky and ugly appraisal issue, but its got a great personality?
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