Real estate is one of the primary drivers of wealth in the global economy.
Therefore, those who own, manage, sell, purchase, invest in or lend money on
the security of real estate must have ready
access to unbiased opinions of value.
Sound information, analysis and advice on
issues pertaining to real estate components
such as equipment, businesses and personal property are also critical to those in the
real estate field.
That’s where commercial real estate
appraisers come into play, says Steven
Hodge, vice president of CB Richard Ellis’
Valuation and Advisory Services in Cincinnati. “Appraisers play a vital role by providing an unbiased opinion of value on a
multitude of real estate components,” he
says.
Smart Business spoke with Hodge about
the services that commercial real estate
appraisers provide.
What services can a commercial appraiser
provide?
The common perception of the commercial appraiser is that of an individual or
company providing valuation for financial
institutions in regard to a buy/sell transaction. In addition to providing financial institutions with an analysis of the underlying
asset used for collateral, a qualified
appraiser can assist attorneys, corporations, government agencies and individuals. Appraisals may be required for a multitude of properties, including single-family
homes, apartment buildings, condominiums, office buildings, shopping centers,
hotels, industrial sites and farms, whenever real estate is sold, mortgaged, taxed,
insured or developed.
An appraiser can provide a vital role in
just about every aspect of real estate. An
appraiser can analyze the feasibility of a
project by underwriting a development
prior to committing capital, provide expert
testimony about real estate in litigation
proceedings, perform business or partial
interest valuations, assist in estate planning or provide assessment for tax implications.
When is it necessary to engage an appraiser?
The reasons for performing a real property appraisal are varied. Clients typically
seek out a professional appraiser for an
opinion on the current value of property
being bought or sold, future value of property being built, value for mortgage or lending purposes, feasibility analysis on proposed projects, value to assist in investment decisions, value to measure property
tax assessments and other taxes. They also
will seek an opinion on the value of property to determine compensation where
property is to be taken, value of property
involved in litigation or divorce, value of
private property for estate planning purposes, value of property as it affects pending business mergers or dissolution, value
of a partial interest in real estate, and value
of real estate as a charitable contribution.
In addition, there is increasing demand
for consultative services offered by valuation professionals. In recent years, the real
estate industry has experienced significant
and ongoing changes as predicated by the
Sarbanes-Oxley Act. This legislation requires changes in accounting conventions
in the United States and Canada from depreciated historical cost to market value
reporting of assets and is important to public, domestic and international investors,
regulators and reporting entities. Today’s
professional appraisers are highly qualified
and able to fulfill this need and a wide
range of value-added real property advisory and consulting services.
How should one determine if an appraiser is
properly qualified?
An appraiser needs to be able to make
prudent judgments and independent decisions. He or she must be skilled in gathering and evaluating facts, and should understand how to access the variety of data
sources that are needed for comparisons
and analysis.
As a minimum requirement, an appraiser
should be state certified. Being state certified requires a commitment by the appraiser to complete specific education and testing requirements by the licensing state. A
better option is a designated appraiser. An
appraiser who has obtained a professional
designation, such as the MAI designation
from the Appraisal Institute, has exceeded
the minimum requirements set by the state
legislature. This distinction denotes a level
of competence attained only by the most
accomplished appraisers and is recognized
throughout the business community.
What are clients seeking from appraisal
service providers?
Today’s global economy has forced both
financial institutions and corporations to
seek more strategic real estate solutions,
increasing the need for valuation services.
Clients are looking for efficient delivery
systems from their service provider.
Whether it’s a single, local transaction or a
national portfolio, many institutions and
corporations require a single point of coordination, uniformity of product and local
expertise on a national platform.
STEVEN HODGE, MAI, is vice president and leads CB Richard
Ellis’ Valuation and Advisory Services in Cincinnati. Reach him at
[email protected] or (513) 369-1368.