Commercial comp checks?

[Pamela Crowley (Florida)]

A couple MB over at BrokerOutpost have mentioned getting 'comp checks' on commercial properties from CB Richard Ellis. Can any of you CGs tell us what's really going on there?

 

[PL1957]

A couple MB over at BrokerOutpost have mentioned getting 'comp checks' on commercial properties from CB Richard Ellis. Can any of you CGs tell us what's really going on there?

CB Richard Ellis is the largest commercial real estate firm in the world. Who are these brokers getting "comp checks" from? CBRE Sales/Leasing Brokers? CBRE Appraisers? CBRE Melody financing guys? CBRE Research? CBRE Torto/Wheaton? All of these areas are sources of data that you could perceive as being a "comp check".

I spend significant portions of my day speaking to clients and potential clients about deals that they are looking at. Most of these conversations include talking about market data (specific deals that may have occurred), trends in the market, general activity in the market, etc. Everyone in the conversation understands completely that my comments and opinions may not apply to their specific property, depending on specific property characteristics that wouldn't be evident until you are in the middle of the assignment.

Is there a quid pro quo in getting the assignment based on what the listener want to hear? I sure hope so - but not in the sense of "guaranteeing a value". What I mean is that I hope the people who I am talking to realize that we understand the markets that they are dealing in and have the necessary resources and expertise to complete the assignment in a professional manner.

I don't consider that "comp check", even though I'm sure some residential appraisers will start screaming about USPAP violations and workfile requirements.

 

[Ken B]

A couple MB over at BrokerOutpost have mentioned getting 'comp checks' on commercial properties from CB Richard Ellis. Can any of you CGs tell us what's really going on there?

Can you provide a link to that conversation?

 

[Pamela Crowley (Florida)]

http://www.brokeroutpost.com/loans/brokers/forum/topic.asp?TOPIC_ID=228410&whichpage=1

It's a long thread.

I didn't realize that USPAP is different for Commercial real estate than for Residential...

 

[Smokey Bear]

Comp checks and bidding wars are common in some circles of commercial work. CGs and MAIs have been taking on skippy trainees just to get the lowest bids and still make money.

 

[Michigan CG]

Comp checks and bidding wars are common in some circles of commercial work. CGs and MAIs have been taking on skippy trainees just to get the lowest bids and still make money.

Do you have any evidence of this? Exactly what is your source of this information, and how much do you have? Your statement is a broad generalization. Sure there might be a few, but I would bet my license that this is not common.

I worked for and know MAI appraisers and have never heard of or seen that.

Commercial work is very varied and unless someone works for a large firm they are most likely specialized in one certain property type therefore making the "comp check" extremely difficult.

Mr. PL 1957 works for a large firm where they might have guys who only do certain types of properties (I don't know, just guessing), but most CG appraisers will have a variety of properties to appraise in a given time period.

Late last year, on my desk, I had a grain elevator, a run down motel, a warehouse, two shopping malls and a bar. The properties were anywhere from 1 mile to 120 miles from my office. There is no way to give a "comp check" on any of these properties.

I have a current assignment where I could actually give a "comp check" sort of. It is an office property where I am to determine Market Rent. I know that the office market in this particular area is approximately $18-25/SF and I can say that over the phone because that is my experience and knowledge and that is factual. However without analyzing the subject property's lease and the comparable property terms can I accurately give a close range of value over the phone without a lot of work. If I were appraising this property I would have (assuming 5,000 SF) a PGI of $81,000 to $125,000. I then need to know who pays what, but let's assume an absolutely net lease less management, R & M and Reserves and good condition with no deferred maintenance. So I am going to guesstimate 8% owner cost. So now I have a range of GI of $74,520 to $115,000.

Now what is the cap rate.....um I have no idea, but let's guess 8 to 12%. So now I have a value range of $621,000 to $1,437,500.

There is your comp check on a simple office building.

 

[Michigan CG]

Comp checks and bidding wars are common in some circles of commercial work. CGs and MAIs have been taking on skippy trainees just to get the lowest bids and still make money.

ADDITIONALLY....while you have my feathers in a ruffle, did you notice that I did not talk about sales in the above post? Commercial properties are valued on their ability to generate income. This is not something I can analyze over the phone in ten minutes. I know how to do a residential comp check, pretty easy to come in within $20,000 with a simple MLS search because it is based solely on the sales comparison approach. There is no income approach on a SFR and the cost approach is highly subjective.

I would like to know how many MAI appraisers hire skippy to give out commercial "comp checks". I doubt there are many, it takes a little effort to get that alphabet soup behind their names.

It is funny how some want to generalize the whole industry when they do not know about the whole industry and how it works.

 

[Smokey Bear]

I was working on getting my CG for a company that turned out to be really bad. They expected a value on the property days before the completion date, and when I finally got a copy of the engagement letter, it had a clause in it that said if they weren't notified by x date the property wouldn't hit value, they didn't have to pay for the report. I called up the office screaming and they said it was standard and demanded by the clients. I mentioned that the person writing the contracts needed to stop that immediately and also needed to take a USPAP class.

They generally hired one MAI to supervise 10-15 commerical trainees remotely, often from another state. I "fired" one of them (refused to work for him anymore) when I found out he removed pictures and comments about roof issues before turning in the report.

I came back to commercial when they got a new CG (not MAI) who loved to teach. After talking with him, I decided to work with him, but got continual pressure from the company on values, on having the value before I've completed the report etc.

I finally caught them (by accident) changing my report (comps included) to bump up the value by $100k. I quit that day. They still owe me about $10k. Later, the owner lost his license for forging signatures on a report. He's still running his company, and at the time, the FBI couldn't be bothered with it.

BTW, the MAI that changed my report got an earful from me. He lectured me like I was a child, said it was perfectly ok for him to change the report if, in his opinion, he didn't agree with me, even though my signature was on the report and he never saw the property. I told him that he was an unethical scumbag and that I'd never work for him again. He must not have gotten it, because a few months later he called to see if I'd work with him again. He liked having the whole state of California for his territory, along with Florida and Maryland (where he lived, when he wasn't in Europe). Guess what I told him? Hint: I think I burned up a few cell phone lines in my diatribe.

 

[Smokey Bear]

It is funny how some want to generalize the whole industry when they do not know about the whole industry and how it works.

Timothy, you don't know what my background and knowledge is, so you're just making ASSumptions.

And FYI, a comp check isn't about finding out what the value of the property is ahead of time, it's for bidding purposes. The person who bids the highest gets the job. Maybe you don't encounter this, but others do, including the CGs I started working with back in '89. They're having trouble staying afloat because of the commercial skippy mills, and they're good people and good appraisers.

 

[Michigan CG]

A couple MB over at BrokerOutpost have mentioned getting 'comp checks' on commercial properties from CB Richard Ellis. Can any of you CGs tell us what's really going on there?

In response to the original question, I have been asked for a comp check once for a bar. The idiot scum mortgage broker was a former residential MB who was transitioning to commercial. He asked for a comp check on a restaurant/bar. I laughed at him and told him his comp check would be $3,500.

My latest assignment was for vacant land on an interstate. The client gave me "sales" and told me his property was worth $5,000,000. After 10 days of doing my job I came in at $2,000,000.

I have talked to CB Richard Ellis folks over the years (most recently in Toledo) and I can tell you they are very professional people and that company did not get to where it is by giving out comp checks on commercial properties. If they offered me a job I would take it tomorrow.