Question on value in use appraisal

[bewert]

All,

I am a writer and citizen of Bend, OR, where we have had a bit of a run-up in values that is now reversing itself. I have a question concerning how you use an adjacent parcel purchased by the buyer in an excess land value in use appraisal.

At our last City Council meeting a buyer approached the Council with a request, supported by staff, to purchase a 4400 sq ft property on the corner of a roundabout in an up and coming commercial area close in to the river and downtown. His appraiser valued the property at $91K and the Council approved the sale for $100K.

In Nov. 06 the buyer purchased the adjacent 5500 sq ft property, with an 80 year old 725 sq ft house and 500 sq ft garage, for $439K. His proposal submitted to the city, as well as the appraisal's HBU scenario, requires the demolition and asbestos abatement of this improvement.

In the appraisal, the appraiser listed five raw land sales scattered around the city, ranging from 23087 sq ft to 174012 sq ft. Only one parcel, the 174K one, even has the same zoning, Commercial Convenience.

Even though the appraiser noted that the HBU would be combining the two parcels, and that doing so would enhance the value of the buyers adjacent parcel, the appraiser made no mention or calculation regarding the parcel in determining the valuation.

In looking over the appraisal, it seems that although "...the value reflected in this report is Value In Use and not Market Value", he used "comparables" to determine the valuations. But not the adjacent parcel's purchase price, which to me seems the most obvious comparable. And just across the street, on another corner of the roundabout, a 10,500 sq ft property with a restaurant of 1000 sq ft sold for $620K in Jan, 08.

Is this a feasible appraisal? I've questioned the appraiser about it, and when I detailed these facts to him he replied by saying:

"By the nature of your questions and tone of your messages, you obviously have no understanding or background in complex commercial real estate valuation. I don't know who you are or what your objectives or motivations are. I have no obligation to spend an in-depth amount of time explaining any more of this to you. If you would like me to explain all of this in intimate detail to you I would be glad to do so. I charge $250 per hour for consultation services with a minimum of four hours."

I am considering writing an article about this purchase for the local weekly, since it was preceded by several hours of public debate over $140K in monies for maintaining our bus system at current levels. This sale took all of 15 minutes, even though I expressed my concerns and listed the surrounding land values. At least two of the seven councilors also expressed some concern.

Any input is greatly appreciated.

 

[Marcia Langley]

bewert,

First let me say that the appraiser had a specifically named client in his appraisal and his is obligated to only discuss it with that client.

I am a huge proponent of freedom of the press but honestly, he has confidentiality concerns that are not only good business but also prescribed by laws and regulations.

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As to your specific problems with the appraisal, it sounds like an extremely complex problem and you are not likely to get satisfying answers here.

It's just very very hard to give an opinion on something one has not researched for one's self.

Howver, in general, an appraisal of a vacant lot should be compared to other vacant lots with similar HBU and zoning. An improved lot should generally be compared to other improved lots with similar HBU and zoning.

Two seperate parcels would generally require two seperate appraisals but it depends on the assignment. If the assignment were to study the impact on HBU and value for assembling the two lots versus valuing them seperately, then the appraiser would detail the thought process that led him to one conclusion or the other.

There are just so many variables it is impossible to sort them all out here.

I take it you feel that the city was somehow remiss in depending on this appraisal to make their decision. I'm wondering if the city only had one appraisal on which to make their decision?

 

[bewert]

Re:
I take it you feel that the city was somehow remiss in depending on this appraisal to make their decision. I'm wondering if the city only had one appraisal on which to make their decision?

Yes, this is the only appraisal, brought to the city by the buyer from his appraiser. There was very little review--as far as I can verify only one person reviewed the appraisal, as it was presented to the city a few hours before the Council meeting.

 

[Michigan CG]

Someone needs to hire a competent review appraiser. I personally would recommend an MAI appraiser to look over the appraisal, and notify the appraiser you tried to talk to that you are doing so. The review will be insightful, and the possibility of the review might make the original appraiser think twice.

 

[PropertyEconomics]

I personally think this assignment may have been very complex, we do not have all the facts nor have we personally seen the appraisal report, and to merely comment here would be imprudent. There are simply too many unknowns and for these reasons no one here can give you a professional opinion that would assist you in your endeavors.
The appraiser is correct in not giving you information because you were not the client. It is a matter of confidentiality, even if the appraisal has been entered into public record or has come into the public domain.
I wish someone here could offer you more help ... its just simply impossible to do with the amount of information provided.

I wish you well.

 

[Jerry Bone Jr]

In looking over the appraisal...

You have a copy of the appraisal, post it up here for all to see.

 

[Michigan CG]

You have a copy of the appraisal, post it up here for all to see.

That might just be a little unethical.

 

[Carnivore]

That might just be a little unethical.

Tim,

Respectfully, the citizen is not bound by any ethics, except for those that involve being a good citizen. FTR, I like your first suggestion for the review.

I may be a little confused, was this a municipal parcel sold to a private entity? If so I dont blame the OP(original poster) for his concern. Something on face does not seem proper! We all know how bad the back scratchin can get in small towns and hamlets.

Certainly sounds like a very complex assignment.

 

[jtinmichigan]

If the appraisal was submitted to the City, it becomes part of the public record and should be available to the general public.

 

[Marcia Langley]

Yes, this is the only appraisal, brought to the city by the buyer from his appraiser. There was very little review--as far as I can verify only one person reviewed the appraisal, as it was presented to the city a few hours before the Council meeting.

bewert,

I agree that it is problematic that the city based their decision on a single appraisal that was prepared for the buyer/client. In a perfect world, the city should have hired their own appraiser. But that in and of itself does not mean there was anything biased about the appraisal. These complex appraisals are expensive and small towns may be loathe to pay for them.

I suppose you have already researched the town laws and regs regarding the protocol for selling public property and found that there is no requirement for the city to hire an appraiser directly?

The sort of detail you are seeking could only be discovered by hiring another appraiser.

The appraiser was hired as an unbiased expert. The only way to do a check and balance on his report is to hire another unbiased expert.

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One thing you might do that might help you understand the appraisal is to seek out any language that specifically describes the assignment conditions (the assignment parameters that set the assumptions, limits, and conditions on the validity of the appraisal). By accepting the appraised value for setting the selling price, the city has also accepted any assumptions, limits, and conditions that the opinion of value was subject to.