When dealing with a complex property, many appraisers may feel a bit overwhelmed or hesitant. When one of these assignments roll across your desk there is something that is going to result in a conversation. Is it a million dollar mansion? Does the house have a historical value? Will the owner be waking up to a mountain or ocean front view?
Although complex properties may not be for everyone, Dustin Harris offers a few words of wisdom to help any appraiser work through the problem.
Buzz: Dustin, thank you for joining us today. At Valuation Expo you shared some of your experience with complex properties. Can you tell us about your experience in that field?
Dustin: Yes, it was a great privilege to speak again at the Valuation Expo in Las Vegas with some knowledgeable people such as Danny Wiley, Scott Sparks, and Rick Langdon. Our panel spoke on a variety of topics, but all related to the non-cookie-cutter type appraisal assignments. Specifically, I was asked to speak on complex assignments – a topic I deal with weekly (if not daily). As your readers may know, I cover a very rural and unique area. Consequently, I do not get a lot of homogeneous appraisal assignments. For over two decades, I have also been covering the high-end area of Jackson Hole, Wyoming; a resort area of the Rocky Mountains.
Nearly every assignment I take in that location is unique and some are just out of this world. When you are dealing with homes and properties worth over $10 million, you better come prepared to spend some time and have some experience. Otherwise, you do not last long in an area such as that.
Buzz: Are there any tools you can recommend for appraisers to use which can help them during a complex assignment?
Dustin: There are all kinds of tools out there for appraisers. Frankly, I use good old-fashioned Excel for most of my number-crunching and analysis. I did a webinar not too long ago with Josh Wallit on how to use Excel for regression analysis, among other things.
The take away is this; do not use any tool you do not understand backward and forward! You cannot stand before a state board review and use the excuse, “Well, that is what the computer told me to do.” The black box excuse does not go very far in that situation. In the end, you are the appraiser. You need to know what you are doing and be able to tell a complete and compelling narrative.
Buzz: Can you give us an example of a complex assignment you were faced with? And how did you complete the job?
Dustin: One of the appraisal assignments I shared as an example in my presentation was a property I appraised as part of a review. The property abutted a home of a famous actor in Jackson. There were many complexities with this assignment including a river that ran underneath the house that was grandfathered in. The improvements were dated, but if the home were to be torn down, they would lose that grandfathered exception and no longer be able to build near or on the river.
I had to complete a cost-benefit analysis and look at the value being on vs. near the river. The other issue I had to deal with was the benefit or drawback of living near a celebrity. Is it something of value to be able to brag to your friends that you live next to a famous celebrity? Or, is it a drawback to have to deal with the sight seers who might come down your lane to get a glimpse of them in their natural habitat? One of the ways I answered this question was to find a home that had been sold adjacent to the home of a famous actress and determine if it had made a difference in value. In other words; paired sales of sorts. Spoiler alert; it had not.
Buzz: During the Complex Properties session at Valuation Expo, the panel you were on discussed learning your clients’ needs and how to best communicate your findings. Why is it so important in situations like these to be able to explain your conclusions?
Dustin: Complex properties are, well, complex. They are not just complex to appraise, they are also complexities in understanding them from the reader’s perspective. Every appraisal needs to have a fair amount of explanation. Complex properties need even more.
Your client may not always agree with your methodologies, but your client should never be confused by what you did. It is not just about the how, it is also about the why. Be the appraiser and the author. Write a story and make sure your client walks away with a clear picture as to what was done and why.
Buzz: Have you found a “method to the madness” when it comes to handling the properties an appraiser may not see every day?
Dustin: I used to be intimidated by unique, large, high-value, or otherwise complex properties. I think that is natural. They can be a bit scary. Anymore, they excite me and are part of why I still find it fun to be an appraiser. It is easy to look at a crazy property and say, “Oh boy, how in the world am I going to handle this?” Frankly, it is one of the reasons I can charge such a high fee for these types of homes. Most other appraisers shy away from, or otherwise refuse to do them.
Yet, it all comes down to the fundamentals. Just use the same principles and methodologies you learned in Appraisal 101. Going back over a year or to another market is not the exception on these types of assignments. Look at them as a problem to be solved, then solve that puzzle!
Buzz: Dustin, before we conclude this Q&A, is there anything you would like to add?
Dustin: Yes. As a coach and mentor for other appraisers, my expertise is not really about teaching my clients how to be better appraisers, there are already many good teachers for that. My forte is helping appraisers to be better business owners. So, I will leave you with this; charge what you are worth for these types of assignments. Find out what you are worth per hour, multiply that by the amount of time you think it will take to complete the assignment, and bid your fee based on that calculation. Do not be afraid to ask for a higher fee. You deserve it, and most clients will pay the amount you determine – assuming it is reasonable. When someone says “no” to your fee, you should hold your head high and move on to the next opportunity. If they say “yes,” you should feel a sense of success knowing you asked for the fee that justifies your time, expertise, education, and professionalism.
Thank you for the opportunity to answer your questions today. It was a great privilege to be with you again.
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