An appraiser’s role in the valuation process is first and foremost to maintain the public trust in the profession. It is imperative that an appraiser conducts themselves in an ethical manner to provide an objective analysis of a property in order to estimate the value of that property based on well-supported market evidence.

Real estate appraisers are required to have a college degree and be licensed in the state they are practicing in, even if they are only trainees. Commercial real estate appraisers are general certified to handle all types of assignments, while residential appraisers are limited to single-family homes up to four-plexes with a value of under $1.0M.

An appraiser with the letters ‘MAI’ after their name is indicative of a professional that has passed rigorous course-work, experience reviews and a written report qualification that measures the ability to apply advanced techniques in a competent manner. The MAI designation is intended to indicate that the appraiser is dedicated to their profession and gone to considerable lengths to demonstrate their ability to perform at the highest level in maintaining and promoting the public trust in the appraisal profession. At Pacific Coast Valuation Group, all appraisals are completed by MAI appraisers.

A real estate appraisal is a written or verbal presentation of an opinion of value by a licensed appraiser. The analysis follows an agreed upon scope of work that analyzes everything about the real estate from the location, legal restrictions and encumbrances, highest and best use analysis and an analysis of the market conditions that influence value. A Cost, Income and or Sales Comparison approach may be utilized to determine the current (or retrospective or future) date of market value for the property. Each approach looks at the property from a different perspective, but not all approaches may be relevant to each property or scenario requested.

The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what they consider their own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto
5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

There are three approaches used by appraisers to value an existing building.
The Cost Approach estimates the value of the site and the cost to replicate the existing improvements using current cost estimates and deducting accrued depreciation. This approach is generally most relevant for new or proposed construction to determine feasibility. It can also be used to value specialty properties, such as churches, where the income approach may be less reliable of an indicator.

The Sales Comparison approach compares the property against recent sales of similar buildings to estimate the current value of the subject. This approach is relevant in almost all assignments and is the most common approach.

The Income Approach analyzes the current income and expenses from existing tenants and applies a rate of return (capitalization rate) on the net cash flows to determine the value of the property to an investor. For an income-producing property, this approach is particularly relevant as it is often viewed as a more reliable indicator for an investor.

Appraisal reports are divided into three main types of report formats:

1. Detailed Appraisal report that includes all information required to understand everything about the property being appraised.
2. Summarized Appraisal report that includes enough information to understand the conclusions provided within the report.
3. Restricted Appraisal (brief) report that cannot be fully understood without a thorough knowledge of the property being appraised.

The detailed report is typically reserved for institutional-sized properties or assignments or properties that are proposed where as much detail as necessary is required to satisfy regulatory (or investor) requirements.

The summarized report is the most common report type for a typical transaction involving a property with a value less than $10.0M or for estate purposes where the report needs to be IRS compliant and/or meet the typical lender requirements for a real estate loan.

A restricted appraisal report is most useful for lenders or property owners that need an update of a previous report or are seeking a valuation for internal purposes/decision-making where both parties are very familiar with the property.

The highest and best use of a property is that use which would provide the highest return in the form of value and must pass several tests. The use must be legally permissible (allowed by zoning). It must be physically possible to locate on the site and the location must support that use. The use must also be feasible in that the value created exceeds the costs to create.

A ‘green’ building is a reference to construction or design that maximizes efficiency of operations by limiting its carbon footprint. Some examples that go into consideration are solar panels, green roofs that capture water, plumbing systems that circulate gray water through on-site filters, rotating exterior window shades to prevent heat intake and heating systems designed to work with the interior build-out in an efficient manner. Use of recycled materials in construction and providing bike parking and on-site showers also work to reduce the overall environmental impact.

At its simplest, estate planning is the process of anticipating and arranging, during a person’s life, for the management and disposal of that person’s estate during the person’s life and at and after death, while minimizing gift, estate, generation skipping transfer, and income tax.

Knowing the value of the real estate included within the overall estate is an important part of the process. While an estimate may be fine for the purposes of establishing the estate, an appraisal is typically required during probate, in order to comply with IRS requirements. We are experienced with this process and have an IRS-compliant format for reporting this information.

The typical delivery time for an appraisal is 2 to 3 weeks, depending on the complexity of the property, i.e., number of tenants/leases to analyze, type of property or location. A property with more than 20 tenants can take more time to analyze on a tenant-by-tenant basis, while certain property types inherently require more market research and therefore require more time to complete. Examples include golf courses, assisted living facilities and hospitality properties. Location can also play a role in delivery times, as more remote properties may have limited data sources from which to draw.