Sba Drive-by Appraisal Request

[Proactive]

I received a phone call from the Small Business Administration yesterday requesting a "drive-by appraisal" for a property in a nearby town. I quoted my normal fee and the SBA quickly faxed over a contract to sign. No problem.

When I pulled up the property information I discovered that the subject was a 5500 sqft commercial building (Oops, I'm Certified Residential). I emailed the SBA and politely declined the assignment and referred them to a local Certified General.

Had I not been so busy when I took the initial call I probably would have thought to ask about the property type (After all, SBA=business=most likely commercial property, right?).

This morning it's been on my mind... is a "drive-by" assignment common for commercial properties? The SBA really jumped on my 2055 exterior fee quote; is there as much pressure on fees in the commercial sector as there is in residential?

 

[Ramon Tate]

Drive-by for improved commercial :blink: ?!? I hope the order was the result of a property i.d. snafu. I can't fathom anyone actually requesting something like that, let alone putting my signature on an appraisal report for it. If SBA has approved drive-by for improved commercial then the conlusion is inescapable.............. The inmates are running the asylum!

 

[PL1957]

Originally posted by Ramon Tate@Mar 23 2005, 12:27 PM
Drive-by for improved commercial :blink: ?!? I hope the order was the result of a property i.d. snafu. I can't fathom anyone actually requesting something like that, let alone putting my signature on an appraisal report for it. If SBA has approved drive-by for improved commercial then the conlusion is inescapable.............. The inmates are running the asylum!

Actually, a "drive-by" for improved commercial property is probably better than a drive-by for residential. Many commercial properties are bought and sold primarily based on their income stream. Drive-by's can work wonderfully for those.

For example, the sale of a typical Walgreen's/CVS. Usually, it's being bought by an investor who is concerned with the 20+ year lease. Can an appraiser value the property without doing an interior inspection? Sure, why not?

SBA loans are generally for owner occupied properties. In that case, you're not going to have an established income stream. I'd definitely want to walk through it to see the physical characteristics. On the other hand, if the SBA is foreclosing, I think I might be satisfied just driving by.

 

[Proactive]

I just received the following SBA response to my email sent yesterday:

Good morning Steve, Sorry about the commercial building. Our files does not indicate what the structure is and so we assume it is a residence. I will keep your number in case we have another residential appraisal in the area. Thanks. Rod

As Gilda Radner used to say when in her Emily Litella character on SNL....

...Never mind. :redface:

 

[Carnivore]

Now I can understand driving by a commercial enterprise that was not open to the public.

A CVS, you got to be kidding, you could at least go in and buy a coke! :lol:

I can picture it now.


"You!, over there, What are you doing?"

"I am just going to get a coke of cola!"

Alright Sonny, just as long as you dont try and conduct an appraisal!!!"

:rofl: :rainfro:


Its to late, the nuts are loose!

 

[Ramon Tate]

Originally posted by PL Norusis@Mar 23 2005, 12:51 PM
Actually, a "drive-by" for improved commercial property is probably better than a drive-by for residential. Many commercial properties are bought and sold primarily based on their income stream. Drive-by's can work wonderfully for those ......Can an appraiser value the property without doing an interior inspection? Sure, why not? ....On the other hand, if the SBA is foreclosing, I think I might be satisfied just driving by.

You'd sign a market value report that an investor would be using to make a purchase decision without an interior inspection?!?!? Well, if you're willing to do it, that's up to you. With money-losing investors constantly looking for someone to sue, your list of extraordinary assumptions better be comprehensive and air-tight.

But with what I've discovered during commercial inspections over the years - market value opinion without interior inspection? NO WAY!

 

[PL1957]

Originally posted by Ramon Tate@Mar 23 2005, 10:22 PM
You'd sign a market value report that an investor would be using to make a purchase decision without an interior inspection?!?!? Well, if you're willing to do it, that's up to you. With money-losing investors constantly looking for someone to sue, your list of extraordinary assumptions better be comprehensive and air-tight.

It happens all the time, often at the clients request. As long as it's stated in the scope of work, there's absolutely nothing wrong with it.

We just completed an assignment where we appraised a portfolio of industrial buildings without doing any interior inspections. The client was a potential purchaser of the company that occupied the buildings and the seller was adamant that no physical inspections of the real estate could be made, so as not to alarm the employees. We looked at what we could see from the outside, relied on public records and seller provided information for the balance. We gave the client what he was looking for - an indication of what the real estate is worth. He can now add this to his company acquisition equation and make a more intelligent decision.

We appraised a portfolio of free standing retail buildings which were going to be auctioned off as part of a bankruptcy. No access was availabe to the interiors of the buildings. We did the appraisals for a bidder at the bk auction, providing him with a solid basis for his bid.

As long as your client knows what you are doing and is comfortable with it, there's no reason why you can't provide the service.

 

[Carnivore]

PL,

Serious question here, are you trying to suggest that your client would have made a decision to purchase something sight unseen had USPAP not allowed such flexibility for an appraisal? The reason I ask the question is that this goes againts the sellers and buyers best interest in a transaction. I think its doubtful your scenario is played out that often.

How do you reconcile your report with the requirement of credible results? Stay with me here, because I think we are actually going to be in agreement on an issue related to diminished content of our work products. I happen to think that scope of work should actually be demonstrated in narrative format within the final reconciliation statement.

If I am not making sense just say so, I am a big boy.

 

[PL1957]

Originally posted by Andrew Picarsic@Mar 24 2005, 06:36 AM
PL,

Serious question here, are you trying to suggest that your client would have made a decision to purchase something sight unseen had USPAP not allowed such flexibility for an appraisal? The reason I ask the question is that this goes againts the sellers and buyers best interest in a transaction. I think its doubtful your scenario is played out that often.

How do you reconcile your report with the requirement of credible results? Stay with me here, because I think we are actually going to be in agreement on an issue related to diminished content of our work products. I happen to think that scope of work should actually be demonstrated in narrative format within the final reconciliation statement.

If I am not making sense just say so, I am a big boy.

Andrew,

The client would have had something similar to rely on regardless of whether an appraiser prepared it or not. If we had claimed USPAP doesn't let us do an assignment without a physical inspection, they could have hired brokers to provide BPO, CPAs to run the cash flows, or CREs to counsel them on the transaction. There is no shortage of professionals available to provide a needed service.

As to the credibility of the appraisal ... IMHO that is more closely tied to the competence of the appraiser than to whether an interior inspection is made. I'd have a lot more confidence in an appraisal if I know it was prepared/reviewed by an experienced practitioner, as opposed to someone who meets the state's minimum requirements for certification.

We, as a profession, are much better served by providing the client with a specific list of what we did or did not do (scope), and letting them make the decision as to credibility, than relying on some blanket checklist purporting to provide credibility (USPAP).

 

[Carnivore]

PL,

In academic discussions such as this it is presumed that the practioner would have the required competence unless that was the main point. In this case competence was not the issue, but I will give you the minor point. I prefer to think of this as trust and confidence issue which is a topic for another day.

I dont want to be combative, but I sense a certain disdain for USPAP. FTR, I dont exactly ike it, but it does at least provide an industry wide minimum standard that even inexperienced appraisers can follow with reasonable success.

In my state only NC licensed appraisers can provide valuation services identified as an appraisal. Brokers can do BPO's but only for pursuit of an agency contract.

If the credibility of the results relies more on your experience/competence, considering EA, why even bother driving by?

Thank you for your time. It was interesting.