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FREQUENTLY ASKED QUESTIONSOn Commercial Real Estate Appraisal Services in the Washington DC, Maryland, and Baltimore AreaYour Commercial Real Estate Appraisal Questions Answered [.Part
1.] Contacting Us for the First Time What's in your commercial appraisals? You specify what you want within the bounds of the Uniform Standards of Professional Appraisal Practice (the law appraisers are governed by). Generally, an appraisal reads like a narrative report, from 40 to 100 pages. It details your assignment and provides: > an overview of the area, community and neighborhood There are many choices available to you according to your needs. Click here for an explanation. Do you appraise properties in areas you don't hold a license? Although we can appraise properties anywhere in the United States, we limit national assignments to industrial property portfolios only. ValuStar's primary trade radius in Metropolitan Washington, D.C. and Baltimore. What is the range of services you provide? We can provide: > Tax assessment review, advise and appraisals When hiring an appraiser, what questions should I ask? > What type of professional designations do you have and from whom? Like any job you are contracting out, it pays to compare the resumes of appraisers whom you are interested in having prepare a bid. This is the first place to start. Another way of evaluating qualified appraisers is to know what training and experience they have above a minimum level. Professional designations typically require more experience and training than a state license. What appraisal approaches will you use in appraising my property? The three most commonly accepted valuation approaches to value are the cost approach, the sales comparison approach and the income approach. The cost approach combines the value of the land and depreciated site improvements with the depreciated value of the building. The sales comparison approach compares the property to others and adjusts for differences. The income approach takes market rents, subtracts a vacancy allowance and expenses, and takes the resulting net income and turns that into value using a factor. We are not required to provide all three approaches and it is rare that all three are done. Appraisal theory has largely discredited the cost approach as reflective of market value and commercial appraisers seldom provide it. The sales comparison and income approaches are the primary valuation methods used for commercial properties. Even then, there are times when one of these approaches does not reflect the market and although it might be performed, it is given little or no weight in deciding on the final value conclusion. We know our markets and can advise you which approach or approaches would apply. We won't recommend two approaches when only one reflects the market. Call us. How do you determine what approaches to value you will use when you provide a bid? Having performed many appraisals on a wide range of property types, our fees typically reflect the cost to perform two approaches to value, usually the sales comparison and income approaches. Even if we do not perform an approach, many times we still invest time in searching for data. This occurs most frequently in areas where too few comparable sales occur - we still look for them, but we do not create the market, we merely report it. There are times when a third party, such as a lender, will require the cost approach to be performed. If that is the case, please tell us beforehand so that we can incorporate this into our estimate. An additional fee will be incurred if we are required to perform a cost approach for a third party and you do not notify us beforehand. If I don't like the appraised value, what can I do about it? That depends upon many things. The best place to start is to speak with the appraiser(s) who signed the report. It's possible that he/she may have overlooked one or more important factors which affect the value of your property; if you mention it in your conversation, you may find the appraiser willing to reconsider the value conclusion. Of course, if you are not their client (such as when your bank orders the appraisal), they are not required to speak about the appraisal and may be in violation of the licensing law or professional standards if they do so. It's important to remember that the appraiser is an unbiased third party. Our job is to find out the good and the bad about a property and report it, not to favor a direction. All appraisals are round-tabled by our review staff and carefully scrutinized before they are released, so you get the benefit and knowledge of more people than just those involved with the report. If you are still dissatisfied, you can get a second opinion by hiring another appraiser or insist that a review appraisal be performed on the original report. If there is a large discrepancy in value, you or a third party may be able to negotiate an intermediate position.
That's up to you, but commercial property owners almost always have an attorney or tax consultant. Lawyers are especially helpful in tax court. They are also well-trained in negotiation, so you may even get a favorable result without going to trial at all. We cannot represent; we can only be an expert witness for your case. Appraisal Cost and Turnaround Time .:: top ::.How much do your appraisals cost? Every appraisal is different, so we quote fees individually on a per job basis. Generally, prices depend on the number of properties and the complexity of the assignment, though appraisals used as evidence in court cases command a higher price. Our fees are calculated based on the number of hours it takes to do a report and the fee structure of the personnel involved, with modification for overtime if a rush assignment is required. Why do special purpose properties cost more? Special purpose properties require us to research a wider trade radius, sometimes the entire United States! Fees are based on time estimates, so the more time we have to invest in finding comparable properties, the higher the fee. Also, the market analysis section of the report many times requires a greater amount of research time and it is not uncommon to have to purchase studies performed by industry experts to properly show the dynamics affecting the property type. What is your typical turnaround time? Commercial appraisal delivery times typically range from two to four weeks, depending upon the complexity of the property and your needs. It requires one to two weeks to do the research, verify the factual nature of the information, perform a market study of the area and write the report. Typically, delivery times less than three weeks are rush orders and they command a price premium. I can't find an appraiser to bid an appraisal of my special purpose property. Will you bid it? We appraise special purpose properties in the Metropolitan Washington, D.C. and Baltimore areas only. If the property is located in this region, call us to discuss your situation. How can I help shorten the turnaround time? The number one way to help shorten the turnaround time is to provide us with the written information we need as soon as possible. Copies of leases, deeds, rent rolls, income and expense statements and other items listed on our engagement letter are the needed as soon as possible. Delay in providing one or more of the necessary items will almost always result in a delay in the appraisal process. If you cannot overnight this information to us before we inspect the property, try to have it available for the person who accompanies us through the building. If you don't come up with the value I want, do I have to pay for the appraisal? Appraisers must maintain a third party position to your transaction. No appraiser can accept an assignment where bias could be interpreted. USPAP has a phrase used verbatim by many appraisal firms on their letters of transmittals: "Our assignment was not based on the reporting of a predetermined value, a direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result or the occurrence of a subsequent event directly related to the value opinion." USPAP is very clear on this issue. Appraisers cannot be advocates for any client. Although it may seem unusual to some users to have to pay for a report that did not provide them a favorable outcome, appraisers governed by appraisal licensing laws must remain objective. If there is any uncertainty in the value, clients should have the appraiser perform a restricted appraisal first and then upgrade the report to a summary or self-contained if the value is satisfactory. This is acceptable appraisal practice and one not often suggested by an appraiser. Why are the fees for commercial appraisals so much higher than residential appraisals? There are many reasons why there is such a great discrepancy. The most important difference is the amount of time it takes to prepare each type of report. Most skilled residential appraisers can do a residential report in a half-day whereas a skilled commercial appraiser needs at least a week. Residential reports are on a common form with a standardized property type whereas commercial appraisals are mainly free-form documents with information that varies with the property type, market and client needs. . Special use commercial properties take longer and can have a multi-state data search radius, thus making it more time intensive and costly to perform than more common property types such as office and apartments. Using the Appraisal .:: top ::.Can I reuse your appraisal for another purpose? Only if you receive our permission. Be aware that many financial institutions will not accept an appraisal performed for one of their competitors unless the first source provides a written release. Also, we are not required to testify in an assessment reduction case if the appraisal was done for something other than a tax appeal. When ordering, please provide a list of all users of the report. We cannot change a client's name in a cover letter. We can add report users as necessary, however. I want to use your appraisal for financing, but don't have a source. Can you prepare your appraisal for any lender? We can provide some guidance, but you should make sure your lender will accept our report before ordering. Lenders can have different internal guidelines, so knowing what is required helps prevent the additional time it takes to modify a report or do additional report analyses, increasing the time it takes to get a final product to the lender. I paid my lender for the appraisal, therefore I should own it. The appraisal is legally owned by the client, unless the lender "releases its interest" in the document, typically in writing to us. If the lender ordered it, they own it. If you just want a copy of the appraisal, under the Equal Credit Opportunity Act you can be given a copy of it upon written request of the lender. Getting the Value Conclusion Before Ordering the Appraisal .:: top ::.If I didn't order the appraisal, can I find out the appraised value? Only if you ask the person who originated the order and they provide permission in writing. However, ValuStar.net cannot give you this information because it would violate the ethical standards governing our appraisal practice. It doesn't make sense to me to hire you if I don't know you'll come up with the value I need. Can you give me a guarantee? It is a violation of state laws and the appraisal licensing laws of the Appraisal Institute to provide a value opinion without doing an appraisal. Although we cannot provide a guarantee, we can perform a restricted appraisal that will tell you what the property is worth. If the value opinion is acceptable, we can upgrade the report to a summary or self-contained format for a higher fee. We can quote both fees to you so you'll know the best and worst case costs. Surprisingly, the fees are not that different since all the valuation work is done regardless of what report format is prepared. I'm Confused by the Type of Reports I Can Order .:: top ::.I see there are three types of reports I can order. What's the difference? The final appraisal product delivered to you depends on the type of report specified by our agreement. The parameters of the three types of appraisal reports as defined in USPAP are shown in the table below. The primary difference is in the terms describe, summarize and state. Describe means to provide a comprehensive level of detail, summarize is providing a more concise presentation of the information and state means to provide a minimal presentation of the information. The following table is also available here.
What type of report do I need? The appraiser is in the best position to tell you what type of report you need. He/she is required by USPAP to determine the scope of the assignment, the function of the appraisal and use of the report. To do that, he/she will need to understand your needs, so the appraiser is in the best position to recommend one or more of the above choices and to counsel you on what choice(s) would be inappropriate. Appraiser Independence .:: top ::.The appraised value of the property depends upon whether the appraisal is conducted for the buyer, seller or lender. The appraiser has no vested interest in the outcome of the appraisal and should render services with independence objectivity and impartiality - no matter for whom the appraisal is conducted. I paid for the appraisal. Why am I not entitled to get a copy? The client is the person who engages the services of the appraiser, usually in the form of an engagement letter. Many times the lender is the one who issues and/or signs an engagement letter, making them the client. It does not matter who pays the bill. Only the client and those who he has specifically authorized are allowed to receive a copy of the report from the appraiser. If the person who pays the bill is not the client, verbal or written permission is required for the appraiser to release the appraisal to anyone else. The MAI Designation .:: top ::.My lender said I need to get an "MAI appraisal". What is it? The term MAI, which stands for "Member Appraisal Institute", is a registered trademark of the Appraisal Institute. The Appraisal Institute is a trade organization. There is no such thing as an "MAI appraisal." Persons requesting an "MAI appraisal" mean that the report should be prepared by an MAI designated member of the Appraisal Institute. Appraisal Institute members are held to higher standards than licensed-only appraisers, but so too are designated members of other appraisal trade organizations. Each appraiser needs to be judged by his/her merits rather than the association to which they belong. What does it take to get an MAI designation? > Receive a passing grade on 11 examinations that reflect 380 hours of
classroom instruction and that test the appraiser’s knowledge of basic
and advanced appraisal principles, procedures and applications; report writing;
valuation analysis and standards of professional practice
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