uninsurable = diminished value??

[Ross (CO)]

jtrotta, ......any chance, you might be from the Hartford area ?

 

[Austin]

JTROTTA: You would not believe the number of restaurants I have appraised that were destroyed by fire. When I say destroyed by fire, I mean appraising a pile of very fine ashes less a few water pipes that escape the heat. Every one was a clear case of arson. Always happens right after a new restaurant opens up. That last one I appraised had just sold the business interest and equipment to the tenant and leased the building to the tenant on a hand written lease written on a piece of paper ripped out of a note book. They has purchased the property & business 3 months prior. What they tried to do was create the appearance of a big lease fee value in the property but the idiots didn’t have sense enough to realize that they just purchased it at a bargain basement price only three months prior to the fire. Then they tried to claim enterprise value in the property for the business interest, which they had just practically given away along with the fixtures. All of this on top of a recent history prior to purchase of an on again off again operating schedule which clearly indicated no enterprise value or even an ability to break even. When the building caught on fire, the owner who belonged to the local volunteer fire department that was about two miles away, called the fire alarm in to a similar volunteer fire station that was 15 miles away.
The case before that was similar. I talked to a Realtor that had tried to sell that one. The Realtor asked the owner to see his books. The owner replied that he didn’t keep books but advised the Realtor to come up one Friday or Saturday night and get a table near the bar and he could observe the business first hand. This property was purchased under a contract for deed. They attempted to settle this case by appointing me as an umpire to hire two other appraisers. All three of us appraised it and then I called all three appraisers together to come up with a proposed settlement. The two other appraisers went and interviewed the note holder that sold the property under the contract for deed. This guy gave the appraisers some sob story about that building was his only source of retirement income so they added about $100,000 to their estimates because they felt sorry for the poor old guy. Both of their appraisals were $100,000 higher than mine and when I asked how that could happen, this story came to light. When I told the lawyer for the insurance company he nearly croaked. I told him to just look at it as a cheap jury verdict without all of the hype.

 

[Frank Bertrand]

don't you just love doing a good report and then some committee bargains away your opinion?

Did a assessment appeal for the county the other side challenged it and the cty attorney didn't want to go to a trial as he didn't have the time and the cty baragined away 20% of my value as a compromise. sometimes I wonder why I go through all the work!!

 

[Steve Owen]

When I told the lawyer for the insurance company he nearly croaked. I told him to just look at it as a cheap jury verdict without all of the hype.

Austin, congratulations. That is just hte kind of appraisal story I love to hear. And, that is a big part of the real purpose of appraising - to prevent fraud, not to acquiesce to it.

 

[jtrotta]

Ross (CO)

NO - but have a seven year background in "Fire Loss Dept." when I was a young pup; I peek every now & then as I enjoyed that business when I was in it. Who knows, maybe I'll return to it at some point, to work the aspects Austin has described.

The bevy of knowledged we all have learned and are still learning goes far beyond the scope of a "College Degree", as there is no replacement for experience & wisdom and it is supportable.

Austin, your comments are exactly what I was talking about, but you also brought another good point; "I told him to just look at it as a cheap jury verdict without all the hype" you are probably correct under this aasumption, plus the costs to grind it out in court; the attorney fees; etc. which is what we used to do. Actually did several commercial buildings where we actually went in and did inventory, man was that owner pssd, under the discovery process, we were blowin him away, he thought we'd be outa there in 2-3 days; I was there over two weeks collecting supportable data for court, they wound up setteling out of court, due to expenses.

8)

 

[Terrel L. Shields]

In 1989 there was a huge amount of collapsed poultry barns. About 1,500 barns collapsed in 15-20 counties of OK-AR-MO area. The insurance companies took a big hit. Many of the older wood truss barns were unaffected, but it was the lastest barns that were goners. The newer style of barn has stronger trusses and a retro fitted "snow poles" which are propped under the trusses cured most of the problem. Many companies were reluctant to insure for collapse even if engineering inspected. They got over it for the most part.

Last year an area in the middle of Arkansas saw numerous collapses again after an ice event. Some insurance companies raised rates and/or dropped colapse coverage over the entire state.

Poultry barns are basically uninsurable if they are pre-89 models. I have seen two deals collapse over the insurance and one over the remaining economic life. REL of older houses are now shorter than the term of the loan and FSA will not go there. These houses are now largely discounted to little more than equipment value.

Dave said

capitalize the annual cost difference at an appropriate rate to arrive a discount amount for the affected property.

That is the best way I know.