Question on value in use appraisal

[jtinmichigan]

Typical assumptions and limiting conditions in narrative reports do not allow for public dissemination of reports without the permission of the appraiser via ANY media. The Internet would be a media. It may be in the public record, but you would have to go make a document request in order to obtain the report, and even then you cannot publish the report without the appraisers written approval. At least thats what my limiting conditions say.

I believe that its a typical assumption that typical assumptions and limiting conditions are typical.

 

[Marcia Langley]

bewert,

Also, the stated intended use and type/definition of value are important for you to understand.

Appraisals start out with the client explaining to the appraiser what problem he has that he expects the appraisal to solve.

If I can just be hypothetical and speculative for a moment, let's say the client hired the appraiser and described his problem this way:

"I am considering making an offer on a parcel that is adjacent to mine. If it is economically feasible, I expect to combine the new parcel with the existing parcel. However, I don't want to pay more for the new parcel than the value it would add to my existing parcel. I need an appraisal that will help me dcide on an offering price for the new parcel."

Obviously, the problem to be solved by the appraisal is not what the property would sell for on the open market, but only wat it is worth to that one buyer.

The city counsel would be well aware of this. Their decision would depend on several things but the first consideration might be whether they thought there was any chance the parcel could be sold for more on the open market. Several factors might affect that consideration, including the size and shape of the parcel, the potential driveway access/setback/parking considerations and how that might affect trafic flow. Also, how all of those considerations might affect the type of business that misght be interested in such a parcel if it were offered on the open market.

In other words, the assignment parameters of the appraisal may have very little to do with the decisions that have to be made by the city council.

If the council decided, for example, that the offer on the table was the only one they were likely to get, then holding out for market value as opposed to what one buyer said it was worth to him, may not have been a wise choice.

The buyer had to decide what it was worth to him, the council had to decide if they could expect to do better, or not. The appraisal may have had very little to do with the council's decision.

 

[PropertyEconomics]

I believe that its a typical assumption that typical assumptions and limiting conditions are typical.

How would you like that phrased JT? Having done many many narrative reports in my career I know that all of my reports contain that limiting condition.

 

[PropertyEconomics]

bewert,

Also, the stated intended use and type/definition of value are important for you to understand.

Appraisals start out with the client explaining to the appraiser what problem he has that he expects the appraisal to solve.

If I can just be hypothetical and speculative for a moment, let's say the client hired the appraiser and described his problem this way:

"I am considering making an offer on a parcel that is adjacent to mine. If it is economically feasible, I expect to combine the new parcel with the existing parcel. However, I don't want to pay more for the new parcel than the value it would add to my existing parcel. I need an appraisal that will help me dcide on an offering price for the new parcel."

Obviously, the problem to be solved by the appraisal is not what the property would sell for on the open market, but only wat it is worth to that one buyer.

The city counsel would be well aware of this. Their decision would depend on several things but the first consideration might be whether they thought there was any chance the parcel could be sold for more on the open market. Several factors might affect that consideration, including the size and shape of the parcel, the potential driveway access/setback/parking considerations and how that might affect trafic flow. Also, how all of those considerations might affect the type of business that misght be interested in such a parcel if it were offered on the open market.

In other words, the assignment parameters of the appraisal may have very little to do with the decisions that have to be made by the city council.

If the council decided, for example, that the offer on the table was the only one they were likely to get, then holding out for market value as opposed to what one buyer said it was worth to him, may not have been a wise choice.

The buyer had to decide what it was worth to him, the council had to decide if they could expect to do better, or not. The appraisal may have had very little to do with the council's decision.

My instruction would be I dont want to pay more for the parcel than its value as a stand alone property.
Obtaining the property and increasing both its and my properties value as a result would be entreprenuerial profit. Thats the purpose of my acquisition but the price I am willing to pay is only that of the value of the site as a stand alone tract.

 

[jtinmichigan]

I believe that its a typical assumption that typical assumptions and limiting conditions are typical.

I believe that I like the way I phrased that just fine thank you.

 

[PropertyEconomics]

I believe that I like the way I phrased that just fine thank you.

My apologies for you missing the point .. but in any case phrase as you will.

 

[bewert]

It's public record, so I'll scan the valuation, etc. parts and post them.

FYI, the RMV of the land for every other property on the street is $42-$58/sq ft. This appraisal came in at $20 sq ft.

 

[PropertyEconomics]

It's public record, so I'll scan the valuation, etc. parts and post them.

FYI, the RMV of the land for every other property on the street is $42-$58/sq ft. This appraisal came in at $20 sq ft.

Sure hope that report isnt copyrighted if you are going to post part of it.

Secondly, is the parcel which is the subject an economic unit unto itself?

As I noted in a previous posting, its difficult to understand an appraisal when one doesnt know the market or have the entire report in order to undertsand the analysis. Mr Evans suggested hiring an appraiser to review the report and I suppose that is the best advice provided thus far.

 

[bewert]

More details

The Council Memo describing this transaction is here (note that it did not seem that any Council members actually read this before the transaction):
http://www.ci.bend.or.us/city_hall/meeting_minutes/docs/IS_CC_sale_of_ppty_at_14th_and_Galveston.pdf

Below is my email back-and-forth with the appraiser

Hello zzz,

I was looking at the appraisal you recently did for the
city and had a question on your choice of comparables.

Since three properties close to this property have sold
since November, 2006, why were none of them used as
a comparable? They seem to be much better comparables
than the five properties you chose, as they are close-in on the
same street, within one block, and have the same zoning.

The comparables you chose were in outlying areas, much
larger, and only one had the same zoning.

Thank You,

Bruce Ewert
Bend Weekly



Bruce

Please tell which three land sales you are referring to, and I will gladly field your question.




Bruce Ewert to zzz


I may be confused here, but if an owner buys a property with the intention
of tearing down the building, isn't that basically a land sale?

Bruce


zzz, MAI

If that can be verified that may be the case under some circumstances. But where are the land sales?

Bruce Ewert to zzz

Um, it was verified in his application to the City.

See http://www.ci.bend.or.us/city_hall/meeting_minutes/docs/IS_CC_sale_of_ppty_at_14th_and_Galveston.pdf
and your own appraisal about the best use. You noted what he paid, noted that it would be combined, yet did not consider it in your appraisal.

I find that curious.

Your appraisal was based on Value In Use to Pete Wilkinson, as defined
on pages 7 and 9:

"The value a specific property has to a specific person or specific firm
as opposed to the value to persons or the market in general."

You noted on page 21 that Mr. Wilkinson purchased the adjoining 5500 sq. ft. property for $439,000 on Nov. 28, 2006. Also noted on that page was that for the combined parcels "...the possibility of redevelopment is greatly enhanced with the larger site area." Such development assumes that the current improvements will be razed, leaving raw land with a value of $79.81/sq ft to Mr. Wilkinson.

And on pages 28 and 29 you repeatedly state that the maximally productive
and highest and best use of this parcel would be to combine it with the
adjoining Wilkinson parcel, which would "...create an enhancement value
to his property."

Now while we read what Mr. Wilkinson values the adjoining parcel at,
and that combining the parcels would enhance that value, yet you make
absolutely no reference to this in determining the Value In Use to
Mr. Wilkinson.

What is your reasoning behind this?

Thank you,

Bruce Ewert
Bend Weekly

XXXX, MAI to me

Bruce

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.

 

[Pamela Crowley (Florida)]

Mr. Ewert,

I am valiantly trying to contact you, but your company phone directory is totally impossible to get through.

Please call me at 321.514.7703