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How Do I Get This Through Their Thick Skulls?

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Indiana Jones

Member
Joined
Oct 16, 2002
Professional Status
Licensed Appraiser
State
Indiana
Got an order this morning from a bank client. Looked up the address, oops, it's commercial. Zoned Commercial, taxed as commercial. LOOKS commercial (two story, all glass main level with showroom, warehouse in back). Declined the order and told them it's commercial. They sent it back with the following message: " This property is zoned HC, Highway Commercial. We are aware of that. need residential appraisal. The Property is being used as a residence. Highest and Best Use is not an issue." Umm, wrong.
It looks like because the owners live in the upstairs level of this thing, and some knucklehead appraised this a SFR years ago, it's in their portfolio under Residential and now want to refinance it again. How do I get them to understand that, yes, H&BU is an issue?
 

Indiana Jones

Member
Joined
Oct 16, 2002
Professional Status
Licensed Appraiser
State
Indiana
Just say "no". Otherwise shoot them a quote of $5,000 and I'll drive up and help you for half plus mileage & motel. You do have reciprocity in Indiana, right?

I did that. But they are a good client and I want them to understand the ramifications.

And thanks for the offer. :)
 

Michigan CG

Moderator
Staff member
Moderator
Joined
Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
But they are a good client and I want them to understand the ramifications.

Good clients need explanations. Can you spend an hour and do a Highest and Best Use analysis for them?

Or maybe you know who they use for commercial work and have the CG explain it to them?
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
I've been in this situation before.
Some clients get it and some don't.
The last assignment I did that was similar to what you describe was +$2,000 fee on a 1,200 single-story building. It was all about H&BU and then finding the right comparables based on the H&BU. In my case, the property could be used for residential but wasn't legally permitted to be used as such as-it-was. Had they gone through the process correctly, then it would have been an atypical residential property (that would have been its H&BU).

I'm not making a competency-judgment here but I will make a license-level statement: If your forum license-identification is correct (license level), IMO this type of assignment (even if it turns out to be residential H&BU) is complex and your license regulations may prohibit you from completing it.
On the other hand, if that is incorrect or there is no issue with you completing the assignment, and you are competent to do so, then here's my advice:
A. Tell them that the fee will be $X (I'd charge at least 5x what you would normally charge for a standard appraisal because this could take up to 5x as long).
B. Tell them that 25% of $X is to research the H&BU. If you conclude H&BU is residential, then you'll complete the assignment and collect the full fee.
C. If you determine the H&BU is commercial, then you'll stop the assignment, and get paid the 25%.

That's how I do it (and my clients accept that).

Good luck!
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
I think in days gone by bankers played a little fast and loose with lending guidelines. And in the early days many of us were valuing small commercial and mixed use properties, and probably not doing a particularly good job, but in my state, legally we could as long as below the de minimus. Mixed use is really very difficult often because of the lack of sales and the subsequent externalities that it created. I can't think of a mixed use property which doesn't suffer functional, external or both obsolescences.
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Retired Appraiser
State
California
Is it even safe to live in that commercial-like building (to use it as a residence)?

Look what just happened in Oakland.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Look what just happened in Oakland.
No one was to even live there were they? Says something about "affordable" housing doesn't it?
Mixed use varies in types. Associated buildings or apartments within a shop. IMGP4360 (Medium).JPG H_14500HWY12.JPG IMGP4741 (Medium).JPG
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Back in the foreclosure days, got an order for a residence. Got into it, turned out to be a metal frame building 10 miles out of a small town, used as a nightclub. H&BU, barn.
 

Ariba

Senior Member
Joined
Feb 8, 2004
Professional Status
Certified Residential Appraiser
State
Colorado
[QUOTE}Says something about "affordable" housing doesn't it?[/QUOTE]

No, it says something about paying a living wage.
 
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