Property appraisals can be complex and challenging, to say the least. We recently asked five experienced appraisers to tell us about the most challenging appraisal assignments they’ve ever tackled. These professionals agree that difficult appraisal assignments are almost always worth taking since they broaden your expertise.
1. Mushroom-growing facility
“Any special-use agribusiness facility will probably be difficult to appraise,” says Doug Hodge, ARA, MAI, CCIM, senior appraiser with Omaha, Nebraska-based Farmers National Co. “Examples would include a highly complex greenhouse operation, or flour mills or other food processing facilities that involve machinery. They include usually not just the real estate, but the furniture, fixtures and equipment (FF&E), so they require some specialized knowledge.
“An assignment that I found interesting this past summer was a mushroom-growing facility. I needed to understand the whole mushroom production process—from composting to planting to harvesting to packaging, all of which is done in the dark.”
Take nothing for granted when appraising unusual properties, Hodge says. If you look hard enough, you’ll usually find someone who can answer your questions or some reference material that can provide key information.
“In this case, I found a lot of useful data in Europe, where the mushroom-growing industry is bigger,” he says. “Much of the equipment comes from Europe, where the agriculture in general is typically more advanced than you’d find here. I have a small farm, and I buy my specialty equipment primarily from Europe.”
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2. Conservation easement
“I do a lot of conservation easement work, and conservation acquisitions for land trusts,” reports Greg Snyder, ARA, founder and president of Snyder Appraisal Associates (Lancaster, Pennsylvania). “I recently had to appraise a property on the bluff of Lake Erie. There are no sales there. The land has plenty of conservation value; you can understand why the land trust wanted a conservation easement. It’s one of the last pieces of open land on the bluff. However, a good chunk of it was wetlands and didn’t have much market value. An easement limits your ability to develop, and of those 100 acres, maybe 10 were dry enough that you could have built a house with views of the lake. But the easement would have eliminated that possibility.
“I had to network all over New England and Ohio, and still had trouble finding comps. The owners of the property might have high expectations because they know the property has conservation value—but they might not like what I tell them about market value.”
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3. Special use and rural residential appraisal assignments
Paul E. Moore, ARA, RPRA, president of Paul Moore Appraisal Services, LLC (Versailles, Kentucky), agrees that “special use” properties are the toughest to appraise. “Special use” often means “limited use,” and is often a recently defined property type.
“Most likely there will be minimal to no historical information and certainly a lack of comps for developing and reporting a value for these properties,” he says. “However, special use properties can let you add a ‘niche’ to your business that can set you apart from other appraisers.
“Rural residential properties are often difficult to appraise. Seldom have I found a rural residential appraisal adequately developed and reported, when it was completed by an appraiser who lacks rural property appraisal education and training.”
Twelve years ago, Moore appraised a large commercial greenhouse nursery property. He teamed up with an appraiser who had some experience in that field, and with assistance from other colleagues, they provided an acceptable report. That led to more assignments for commercial greenhouse nurseries, large commercial garden centers, and permanent planting nurseries.
“I was able to build a network of knowledgeable appraisers by becoming a member of the American Society of Farm Managers and Rural Appraisers,” he concludes.
4. Home with a unique view
“The most difficult homes to appraise that I come across are homes with views that can’t be replicated by another lot or home in the area,” says Mark McDaniel, owner of Anderson Appraisal (San Diego, California). “The most difficult that I can recall was situated on a canyon bluff that ran down toward the ocean and beach below. The home was situated and positioned so that the equinox each year was precisely in the middle pane of the middle window in the living room facing the ocean. Due to the contour of the canyon, no other homes in the area had a similar view. Comparing the land sale of the subject property to other competing properties [before the home was built] gave me data that supported a market value of the view.
“Another unusual appraisal involved a geodesic dome home. This structure was actually two dome homes connected by a breezeway: the only dual geodesic dome home I am aware of in the greater market area.”
The best approach to these difficult appraisal assignments, says McDaniel, is to determine the attributes of the property or home that drive the value: e.g., location; living area; quality of home regardless of location.
“The idea is to determine if a potential buyer would also consider buying your competing property,” he says. “If so, the sale is probably a comparable.”
5. Giant distribution facility
Tim Keller, partner with Real Quantum and president of Keller Craig in Overland Park, Kansas, says a particularly memorable appraisal was a 1.2 million-square-foot distribution facility: almost 30 acres under one roof.
“They had more than five miles of conveyor belts,” he recalls. “We were appraising the furniture, fixtures, and equipment, not just the fee-simple value of the real estate. They had a tremendous backup water system for their sprinklers: a water tower just like you see for a city, in case there was a fire in a building this size. Looking at the roof alone took over an hour. The other thing that made it interesting was that it had multiple ownerships. Many original owners were no longer alive, and their kids had no idea what they had.”
With unusual commercial appraisal assignments, Keller says, the hardest part is finding out who the players are—owners, tenants, brokers, investors—and knowing the circumstances.
“Then the rest of it falls in place,” he says. “Every complicated appraisal assignment is fun. If you’re competent to take the assignment, take it. You’ll learn from it.”
Article written by Joseph Dobrian. Joseph Dobrian has been writing about commercial and residential real estate, and real estate-related finance, for more than 30 years. His by-line has appeared in The Wall Street Journal, The New York Times, The New Yorker, Real Estate Forum, Journal of Property Management, and many other publications. He is also a noted novelist, essayist, and translator. His website is www.josephdobrian.com, and he can be contacted at firstname.lastname@example.org.