Matt Simmons has been busy with his fifth edition of “Random Thoughts of an Appraiser!” There are plenty of times where appraisers have collectively had thoughts or concepts that can be communicated and/or questioned in a sentence and don’t need a dedicated article. We are pleased to have Matt Simmons, partner of Maxwell, Hendry & Simmons, offer a periodic collection of observations on what’s going on in the valuation world. Matt is a licensed appraiser and consults on both residential and commercial income-producing acquisitions. Matt’s random thoughts are strictly for your entertainment. Enjoy!
- I’m so tired of reading “light and bright” in MLS descriptions.
- If you’re a residential appraiser, can you sit down with pen and blank paper and fully write out an appraisal report from scratch? The forms train you to think of the appraisal as being the lines on a 1073 or 1004. It lulls you into seeing both development (Standard 1) and reporting (Standard 2) as an outflow of what the form asks of you. That mindset is the gateway to being a form filler. Don’t let it happen. If you can’t write a report outside of a 1004 that should be a red flag.
- Our office is down the street from the winter estates of Thomas Edison and Henry Ford. Every listing around here for a pre-1930 house claims some sort of connection to Edison having been there. It’s preposterous. The man wouldn’t have had time to invent a thing if he’d actually been to all these homes.
- Highest and best use analysis exists on a continuum. On many properties to truly answer the question you would need a land use attorney, engineer, and planner just to get through the first two steps, legal permissibility and physical possibility. That’s not realistic and it’s why sufficiency in the context of intended use is critical. On the other hand, you can’t just wash your hands of a tricky situation with legal permissibility and say you’re not an attorney. If that’s the case, how do you conclude anything about legal permissibility in your appraisals?
- The language in AMC engagement letters about $75 trip fees if an appraisal is cancelled prior to report delivery is laughable. As an appraiser, if a job is cancelled figure out what general percentage of the work is done, apply that percentage to the whole fee, and send the bill. To their credit, we’ve never had an AMC try to argue with us about that.
- Take one manual appraisal task each week and simplify or automate it. Just one. Doesn’t matter how small the task or how slight the improvement. Do that for six months and evaluate. We overestimate what we can do in a day and underestimate what we can do in a month.
- If a property sells in a forest but no appraisers are around to use it, is it actually a comp?
- There’s a lot of confusion about the concept of remaining economic life (REL). I’ve seen this in an engagement letter, “The property must have REL equal to or in excess of the loan term.” It doesn’t work like that. REL and effective age are dynamic. Just because there’s 15 years REL doesn’t mean that the improvements will be done in 15 years. One remodeling project might bring it back to 25-30 years. Same goes for a property with REL of 40 years. That doesn’t mean that deferred maintenance or even changing market conditions won’t render those improvements as worthless in 10 years. Many appraisers feel like they have to conclude that there’s at least 30 years left or it will cause a problem. It won’t. Explain the concept. Your client will thank you.
- Please stop arguing the importance of an appraiser in the inspection process as being our ability to smell cat pee. Is that really how we want to defend the value we bring? Pick us, we can smell pee. Great, so can anyone else. At best that’s an argument for a bifurcated process. I get it. It’s a quick and funny way to demonstrate how pictures don’t tell the whole story, but it makes us seem small and claims our relevance on the basis of something that requires no professional skill. Our unique selling proposition should be the quality of our market analysis, and yes, that involves the inspection. Floor plan functionality, for example, is a market-based element that’s also directly connected to the inspection. Let’s go with that as our example. I think stuff like this matters. It’s branding.
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