September 11th, 2009
Issues in Land Appraisals
I get this call yesterday from an appraiser with questions on some lots I
have listed. He was a commercial appraiser doing a job for a Big Bank and
land falls under commercial appraising. I told him the lots were on MLS with
all the relevant data. He told me he didn't have access to MLS.
How could this appraiser accept an assignment to value residential lots when
he has no access to residential data? An appraisal is about more than what
has sold-you need to understand the immediate market where the property is.
What other options people have. Often by studying active listings I find
they may provide more information about the current market than older sold
properties if there are no recent sales.
Laziness when it comes to research is another problem I'm seeing. I reveiwed
an appraisal of a large townhome development. The appraiser claimed there
were no comparable sales of townhome lots. Not true-it took some work to
find it, but I found a townhome lot sale in the very next town.
Ignoring the homeowners association is something I see. In a partially
completed development this can be a real issue. It affects holding costs and
appeal of the property to the end consumer. A well run and well funded
association keeps the property looking spiffy! But an underfunding or poorly
run one can result even in the nicest developments looking tired and worn. I
think winter will help those as the snow covers the weeds.
Using boiler plate market data for the Twin Cities is a common problem-- as
opposed to really taking the time to analyze, define, and understand what is
happening in the particular market the property is loctated in. To ask the
question: if a buyer were interested in buying in THIS development, what are
their other options?
This generalization of the housing market is resulting in some appraisers
being overly aggressive in assuming longer absorption times than may be
appropriate for a particular development. The end result is developers and
banks need to tie up additional capital because the appraiser was lazy.