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  #1  
Old 11-11-2011, 09:16 AM
Terrel L. Shields's Avatar
Terrel L. Shields Terrel L. Shields is online now
 
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Default Have You Ever Been Told.You Can't Call It.

An appraiser took an assignment that I had turned down. She told me that the banker said that they will not allow them to call it "Special Purpose" property....which it is. The banker said the EXAMINERS told them that they would not accept a report for same..

a.- It must contain a sales approach
b.- It must have comparables
c.- It must have a market value definition that excludes "special purpose"
d.- You cannot weight either cost or income approaches.

So...how is a bank going to finance say, a church? a housing project for rehab inmates? a one-of-a-kind farm operation? Do you pull comps from 100 miles away? Do you pull comps from 6 or 8 years ago? Does it really make sense to do either for many properties???

It sounds to me like the examiners are overstepping but they still rule the roost. And further, the lenders are like deer in the headlights on this. They simply cannot buck the examiners without endangering the very existence of the bank.
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Old 11-11-2011, 10:35 AM
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This is such a classic case of the patient telling the doctor what to do...
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  #3  
Old 11-11-2011, 10:36 AM
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Most of those don't really seem to fit the definition of a special use property (IMO.)
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Old 11-13-2011, 08:44 AM
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Default

Quote:
"Special-Purpose property: A limited market property with a unique physical design, special construction materials or a layout which restricts its utility to the use for which it was built.."

"...called special-purpose or special-design properties. Examples of such include houses of worship, museums, schools, public buildings, and clubhouses."
all above from "The Appraisal of Real Estate" 12th ed, page 25-26.
Quote:
Most of those don't really seem to fit the definition of a special use property
So what source are you using to suggest a church isn't a special purpose property? Or a minimum security "half way" house? or say a vineyard in non-vineyard country...the only apple orchard in the county with an on site cider mill...a bean elevator...like this..or a Motocross race track...as a "for instance".

Special purpose does not mean there are no similar properties ever. It means they are of unique construction therefore frequently do lack comps. That does not mean we don't have tools to value them otherwise.
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Last edited by Terrel L. Shields : 06-10-2012 at 12:25 PM.
  #5  
Old 11-13-2011, 08:57 AM
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As far as I'm concerned, if the examiners are now over-correcting and making up for lax enforcement over the last few years when that kind of thing was pushed to the limit, it's the price one has to pay until it all shakes out.

You make the examples that aren't optimized by the client assignment condition, but you don't specifcy what kind of property the subject was for the assignment you turned down and the other appraiser accepted.
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Old 11-13-2011, 11:10 PM
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It was a faith based private half-way house for rehab inmates who work at a local chicken plant while attending classes on how to live drug free. The rate of relapse is incredibly low. There are two of these facilities. Owned and built by the same guy.

But I am getting push back on some farm-commercial Ag properties.

I certainly do not understand the mindset of an examiner who requires a bank to revalue a performing loan. This is the real problem for this bank. A poultry farmer might never have missed a payment but if he owes more than the farm is worth, the examiners are telling the bank to make them pony up the difference....often $100,000 or more. Obviously not one single one of them can come up with $100,000. So the bank gets the property back and the operating farm loses its contract and the bank sells the property for say $100,000 - $250,000 when the note was for $600,000 and the last appraisal was for $500,000. Almost all these farms take at least a 50% haircut when they lose the contract. Why not cut the note back to a level they can service, say $500,000, with a clawback provision and let the farmer continue?
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  #7  
Old 11-14-2011, 05:20 AM
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I'm pretty sure Steve Martin invented the term: Special purpose.
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Old 11-14-2011, 05:34 AM
Mary Tiernan Mary Tiernan is offline
 
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now that's too funny TC
  #9  
Old 11-14-2011, 07:18 AM
Restrain Restrain is offline
 
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The poultry operation is a classic example of appraising a going concern over the value of the real estate. I would hope that the appraiser separated the parts so that the lender would understand the differences.
  #10  
Old 11-16-2011, 10:16 AM
MNRural MNRural is offline
 
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If your client/bank ends up with it, what can they sell it for? Seems pretty simple. "the most probable price.............."

That is what they want to know, irrespective of all of the terms and conditions you state. A cost approach or special value definition that does not tell the client what they could sell it for does no good.

If no one would ever buy one of the 'special use' properties that you mention, why would any sane bank give out their depositor's money?

On another note, most of the half way houses and group homes I have dealt with are run by former druggies themselves. They eventually relapse or are very very bad businessmen and the client is eventually forced to sell at liquidation prices.
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