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Bank Appraisals For Ad Valorem

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Gobears81

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Nov 7, 2013
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Certified General Appraiser
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Illinois
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I have several banks to appraise for ad valorem purposes and while it is not at the same level of discussion as big box for this type of intended use, this property type seems to have quite a few tax appeals. The properties that I am appraising are owner occupied, in small communities, and not occupied by a national bank. Most of the cases that I've seen where one bank buys out another, their prices are not typically recorded on green sheets. Also, there are some cases where former banks sell, but with deed restrictions barring another bank from occupying it. I've seen multiple sales of banks reflecting leased fee interests, but nearly all are in larger communities and not really encompassing the market for what I am appraising. Do any of you have any thoughts on this type of appraisal, etc.?
 

WestMichiganCG

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Sep 4, 2014
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Michigan
I've done a few for ad valorem taxation. First off, I have not used sales with deed restrictions as the banks I appraised were operating under their highest and best use. It doesn't make sense to say a bank is the highest and best use and then use a comp that can be an office but not a bank. There are also different types of banks. I've seen many 1970's and 1980's banks used as comps that are the older vault style banks. These banks have fallen out of favor in our area. The newer banks typically have small, 3,500 square foot branch offices without vaults, a few offices for closings, a teller window and a front desk in the lobby for people to cash checks. There is functional obsolescence in the older comps and using them is like comparing class A office to class B office. My best comps have occurred through mergers where a bank gets bought by another bank. I researched mergers then did a Google search for the bank locations that were bought out then did a search on the local agency's website for the sales prices. I also did research on what bank land was selling for. Some of the market values from the opposing side were coming in below land value with the highest and best use still stated as a bank. I ran a cost approach on a few of my appraisals and stated the estimated depreciation to put it in perspective.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
I've done a few for ad valorem taxation. First off, I have not used sales with deed restrictions as the banks I appraised were operating under their highest and best use. It doesn't make sense to say a bank is the highest and best use and then use a comp that can be an office but not a bank. There are also different types of banks. I've seen many 1970's and 1980's banks used as comps that are the older vault style banks. These banks have fallen out of favor in our area. The newer banks typically have small, 3,500 square foot branch offices without vaults, a few offices for closings, a teller window and a front desk in the lobby for people to cash checks. There is functional obsolescence in the older comps and using them is like comparing class A office to class B office. My best comps have occurred through mergers where a bank gets bought by another bank. I researched mergers then did a Google search for the bank locations that were bought out then did a search on the local agency's website for the sales prices. I also did research on what bank land was selling for. Some of the market values from the opposing side were coming in below land value with the highest and best use still stated as a bank. I ran a cost approach on a few of my appraisals and stated the estimated depreciation to put it in perspective.
I was a little worried that my thread topic was too open-ended, but this is exactly the type of discussion that I was hoping for. Thanks!
 

Pittsburgh Pete

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May 6, 2008
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Certified General Appraiser
State
Pennsylvania
My thoughts would center on the definition of market value and the idea of the "most probable sales price." If the predominance of sales have the deed restriction impacting them, I would go in that direction. It boils down to who/what is the market for such properties. You're not valuing them under their current utilization necessarily but rather what they would sell for. What/who is the market?
 

Michigan CG

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Michigan
It boils down to who/what is the market for such properties. You're not valuing them under their current utilization necessarily but rather what they would sell for. What/who is the market?

I agree with this. Bank buildings are closing as America becomes more digital, when is the last time someone built a new bank branch?
 

Artemis Fowl

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Mar 16, 2004
Professional Status
Certified Residential Appraiser
State
Michigan
I agree with this. Bank buildings are closing as America becomes more digital, when is the last time someone built a new bank branch?
OMG sorry but like 3 new in my area this past year. Small CU branches. We have a beautiful old bank building downtown being redeveloped into residential condos. Early-century stuff is gorgeous and some treasures were exposed as renovation proceeded. The vault is a shiny steel monster...10ft round door looks 2ft thick. Would never build a bank branch like that today...shame.
 

Gobears81

Senior Member
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Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
OMG sorry but like 3 new in my area this past year. Small CU branches. We have a beautiful old bank building downtown being redeveloped into residential condos. Early-century stuff is gorgeous and some treasures were exposed as renovation proceeded. The vault is a shiny steel monster...10ft round door looks 2ft thick. Would never build a bank branch like that today...shame.

A nice resource for bank branch trends, just hover over your area on the map:

http://www.us.jll.com/united-states/en-us/research/industry/banking-and-financial-institutions

I've appraised three new bank branches being built in the past four years or so. In general, I agree with Michigan that there are more closing than opening though
 

DREA Dean

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Apr 16, 2015
Professional Status
Certified General Appraiser
State
Pennsylvania
I agree with this. Bank buildings are closing as America becomes more digital, when is the last time someone built a new bank branch?

There have been quite a few opened/built near me in recent years, but there have also been closings due to mergers. It seems like they close and get built at about the same pace, but the old ones seldom get used as banks (I can think of one that was bought by a small community bank). I've seen them bought and used for retail, office, vet clinic, medical office. I haven't used any as sales or researched any of the deeds to see if there are deed restrictions. Certainly, they sell for a lot less than the cost of building a new one.
 

Sid Holderly

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Jun 16, 2005
Professional Status
Certified Residential Appraiser
State
Indiana
In a small town near me, a new branch was built about 2 years ago. This was the 2nd branch (2 different main banks) available making 3 possible choices for banking in a town of 1200. Now, this year the old hometown bank has closed and the building for sale. So, now 2 choices a branch of a local bank (3 total sites in 3 towns) and branch of a large regional (now multi-state)bank which had origins as a local bank. A couple of small town south a local with 2 branches has merged with another small out of county bank with a couple of branches. The only place bank buildings are empty is in the city, populations greater than 50,000.

The lending authority after mergers is often placed outside of the rural area (and include higher fees) and the majority of the local community does not like that. The dollars needed to operate current agricultural operations have also expanded too far above the capability of many local banks. Local farmers and agribusiness do not like having to go to the large regionals & nationals where they have no history or know if the person on the other end knows anything about their banking needs.

It is all trending to on-line with the younger end of the operators with the older end saying no way.
 
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