all you need to know about appraisal services.
- Appraisals are dependent on quality market data. A quality source of data is information from market participants such as buyers, sellers, investors, owners, and tenants. A recent interview with a Near South apartment owner indicates that he is getting strong demand for his units based on a low supply of affordable housing units. The owner indicates that the market segment he serves are working-class people who don’t need all the amenities associated with the newer multi-family units located near the Central Business District. Affordable housing continues to be in short demand in the Lincoln market .
- Appraisals rely heavily on public data sources. However, blind trust in public data is not a strong business plan, and especially for real estate appraisers. I see multiple instances where the actual sale price differs from the sale price reported to the government. Verification of data is an important step in the appraisal process, so the sage advice of “trust but verify” applies in the real estate appraisal process.
- Location, location, location is an oversimplification of the real estate market. Appraisers need to focus on location as a component of value, with specific consideration of how location influences the likely user of the real estate. Proximity to area highways may be important to a trucking company, but less important to a residential development. Conversely, proximity to shopping areas may be important to a residential development, but less important to a trucking company. Location is important in the context of the property being appraised and the most likely use or of the real estate.
- The real estate condemnation process is typically used by the government when the government needs to acquire property rights from a landowner for a public purpose. One of the key issues in condemnation appraisal is that the government needs to pay market value for the property rights being acquired. Some appraisers may be engaged as an expert to provide an opinion of value for the government, while other appraisers may be engaged as an expert to provide an opinion of value for the landowner. The key issue for appraisers who address condemnation issues of to be consistent in their analyses. This consistency applies no matter who engages their services. In other words, appraisers need to avoid being advocates for their clients, and instead, appraisers need to be advocates for their opinion of value.
- How do you know where the City of Lincoln will expand next? Urban development needs public utility extension including water, sanitary sewer, and electrical services. Water service is under pressure and can be pumped over hills and existing electrical service is available in areas around Lincoln. The wild card utility for urban development is access to sanitary sewer service. In the Lincoln market, sanitary sewer service is primarily a gravity system, wherein the sewage must drain downhill to the treatment plant. For most of Lincoln, the end destination for sewage is the treatment plant located near North 26th and Theresa Street. Some properties in the eastern part of Lincoln drain to the Northeast Waste Treatment Plant located near North 70th and McCormick Drive. In recent years, lands located east of 84th Street have seen new urban development pressure due to the extension of sanitary sewer service to the areas. That is why we are now seeing multiple new developments in East Lincoln. So if you want to discover the next great place to develop as Lincoln continues to grow, just follow the planned sanitary sewer lines and you will be in the right area.
- Estate taxes are where two sure things in life meet…death and taxes. When a person who owns real estate passes away, often the real estate passes to designated people inside or outside of the family. Appraisers are often called to assist with a value estimation related to state or federal estate taxes. Appraisals related to estates are typically retrospective appraisals where the value estimate has an effective date as of the date of passing. In a retrospective appraisal, the appraiser needs to consider the market conditions and values at a point in the past and the appraiser should generally only rely on data that was available on the retrospective date of value. Retrospective appraisals are difficult appraisal assignments because of the potential market and property differences occurring between the date the inspection/analysis are completed versus the effective date of value.