Field Notes May-June, 2004 Field Notes · 2006. 3. 25. · Field Notes May-June, 2004 President™s...
Field Notes May-June, 2004 Field Notes The Greater Oregon Chapter of the Appraisal Institute Official Newsletter Inside BY Kurt Mueller, MAI 2004 Chapter President Pr esident s Message Portland Subchapter Report..................................3 Summary of New Admin Rules Affecting Appraisers.....................................................4 Oregon Appraisers Score 15% Rate of Return........5 Playing Landlord.................................................7 Continued on page 2 Continued on page 2 Page 1 As professionals, it is basic to the na- ture of the real estate appraiser to make sense out of uncertainty. One must be constantly aware of the many cross- currents of events, and then be able to hone in on those which will have the greatest impact on the present and the fu- ture. Such skills have never been more impor- tant than they are today. Current times are as chaotic as theyve been in years. The days of 40- year low interest rates are nearing their twi- light, with mortgage rates certain to head higher in the face of renewed inflation. The ongoing war in Iraq and recent spike in oil prices threaten to derail our long-awaited economic recovery. The political direction of the country is far from decided between Bush and Kerry. The only point of certainty is the recent reappointment of Alan Greenspan as Fed Chairman, and as an ap- praiser, I am thankful for this one small favor. However, with change comes both challenges and opportunity. Present and future events are not only of great importance to the properties we appraise, but also have a direct impact on the source and nature of our busi- ness. We must recognize them quickly, and swiftly chart a new course. If your business has been centered on servicing the refi in- dustry over the last few years, obviously you are now in the process of charting a new direction as this business source dries up. The best direction to head is to associ- ate yourself with the Greater Oregon Chap- ter of the Appraisal Institute. The path is clear attend the chapter meet- ings, support our educational of- ferings, and vol- unteer even a modest amount of your time to the chapter, and the economic benefits will certainly follow. Probably the best source of referral work can be from your fellow ap- praisers, a source often overlooked by those who work by themselves. GOCAI is uniquely positioned to help you. Whether you are new to the profes- sion, a long-time SRA or MAI who has fallen Present and future events are not only of great importance to the properties we appraise, but also have a direct impact on the source and nature of our business. On May 15th, GOCAI hosted the Region 1 meeting in Portland. Alan Hummel (AI past president) provided a status report of several Appraisal Institute issues. Finance & Membership: Briefly, the Institute is again on solid financial ground and doubled its net operating income between 2002 and 2003 from $750,000 to $1,600,000. In terms of reserves, as of June 2004, National projects our account to be at $7.6 million, which is very near the 50% or 6- month operating reserve AI needs to be considered financially sound. He attributes this growth to member retention and an overall increase in membership to 17,363 members at the end of 2003 (2,200 new members each in 2002 and 2003, plus 908 new members nationally as of March 2004). Appraisal Institute Holds Regional Meeting This is despite a 2% net loss in SRA membership. While the decline in SRA members is troubling, the decline is not attributed to active appraisers turning in their designations, but rather the loss or retirement of SRAs. During the past five years, an average of only 10 new SRA designations has been awarded annually. However, to counter-act this, Hummel presented a strategic plan to reinvigorate the SRA designation which will be formally announced at the regional meeting this fall. Governance Structure: The long awaited governance restructure is finally approaching implementation. While the structure is still being finalized, the Institute intends to present a 60-day notice this fall. In a nutshell, the restructure is intended to enhance member services through more efficiency at the national level. By reducing the national board of directors (down to 16 members from the present 30), restructuring the national committee system, and implementing more project teams, AI hopes to encourage more member involvement and shorter time commitments for its member- volunteers. Check the AI website for details. Education: AI is increasing its course and seminar offerings and has witnessed Hummel presented a strategic plan to reinvigorate the SRA designation which will be formally announced at the regional meeting this fall.
Field Notes May-June, 2004 Field Notes · 2006. 3. 25. · Field Notes May-June, 2004 President™s Message Continued from page 1 The Field Notes is published bi-monthly by the Greater
Text of Field Notes May-June, 2004 Field Notes · 2006. 3. 25. · Field Notes May-June, 2004 President™s...
Field Notes May-June, 2004
Field NotesThe Greater Oregon Chapter of the Appraisal Institute Official Newsletter
BY Kurt Mueller, MAI2004 Chapter President
Portland Subchapter Report..................................3Summary of New Admin Rules Affecting Appraisers.....................................................4Oregon Appraisers Score 15% Rate of Return........5Playing Landlord.................................................7
Continued on page 2
Continued on page 2
As professionals, it is basic to the na-ture of the real estate appraiser to make senseout of uncertainty. Onemust be constantlyaware of the many cross-currents of events, andthen be able to hone inon those which will havethe greatest impact onthe present and the fu-ture. Such skills havenever been more impor-tant than they are today.
Current times are aschaotic as they�ve beenin years. The days of 40-year low interest rates are nearing their twi-light, with mortgage rates certain to headhigher in the face of renewed inflation. The
ongoing war in Iraq and recent spike in oilprices threaten to derail our long-awaitedeconomic recovery. The political directionof the country is far from decided betweenBush and Kerry. The only point of certaintyis the recent reappointment of Alan
Greenspan asFed Chairman,and as an ap-praiser, I amthankful for thisone small favor.However, withchange comesboth challenges and opportunity.
Present and future events arenot only of great importance tothe properties we appraise, butalso have a direct impact on thesource and nature of our busi-
ness. We must recognize them quickly, andswiftly chart a new course. If your businesshas been centered on servicing the refi in-
dustry over the last few years, obviouslyyou are now in the process of charting anew direction as this business source driesup. The best direction to head is to associ-ate yourself with the Greater Oregon Chap-ter of the Appraisal Institute. The path is
clear � attendthe chapter meet-ings, support oureducational of-ferings, and vol-unteer even amodest amountof your time to
the chapter, and the economic benefits willcertainly follow. Probably the best sourceof referral work can be from your fellow ap-praisers, a source often overlooked by thosewho work by themselves.
GOCAI is uniquely positioned to helpyou. Whether you are new to the profes-sion, a long-time SRA or MAI who has fallen
Present and future events are notonly of great importance to theproperties we appraise, but also
have a direct impact on the sourceand nature of our business.
On May 15th, GOCAI hosted the Region1 meeting in Portland. Alan Hummel (AI pastpresident) provided a status report of severalAppraisal Institute issues.
Finance & Membership:Briefly, the Institute is again on solid financialground and doubled itsnet operating incomebetween 2002 and 2003from $750,000 to$1,600,000. In terms ofreserves, as of June2004, National projectsour account to be at$7.6 million, which is very near the 50% or 6-month operating reserve AI needs to beconsidered financially sound. He attributesthis growth to member retention and anoverall increase in membership to 17,363members at the end of 2003 (2,200 newmembers each in 2002 and 2003, plus 908new members nationally as of March 2004).
Appraisal Institute Holds Regional MeetingThis is despite a 2% net loss in SRAmembership. While the decline in SRAmembers is troubling, the decline is notattributed to active appraisers turning in theirdesignations, but rather the loss or retirementof SRAs. During the past five years, an
average of only10 new SRAdesignationshas beena w a r d e da n n u a l l y .However, toc o u n t e r - a c t
this, Hummel presented a strategic plan toreinvigorate the SRA designation which willbe formally announced at the regionalmeeting this fall.
Governance Structure: The long awaitedgovernance restructure is finally approachingimplementation. While the structure is stillbeing finalized, the Institute intends to
present a 60-day notice this fall. In anutshell, the restructure is intended toenhance member services through moreefficiency at the national level. By reducingthe national board of directors (down to 16members from the present 30), restructuringthe national committee system, andimplementing more project teams, AI hopesto encourage more member involvement andshorter time commitments for its member-volunteers. Check the AI website for details.
Education: AI is increasing its courseand seminar offerings and has witnessed
Hummel presented a strategic plan toreinvigorate the SRA designation which
will be formally announced at theregional meeting this fall.
Field Notes May-June, 2004
President�s MessageContinued from page 1
The Field Notes is published bi-monthly by theGreater Oregon Chapter of the Appraisal Institute,PO Box 573, 3340 Commercial St. SE, Suite 210,
Salem, OR 97308ph: 503-316-1979 - Fax: 503-585-8547
off the chapter radar, or a seasoned appraiserwith no active link to the Appraisal Insti-tute, GOCAI�S members are there to supportyou. Our Portland sub-chapter meetings aretypically the last Thursday of each month,so make this a �must attend� event on yourcalendar. Unique GOCAI seminars and meet-ings this past spring have included a Resi-dential Review Appraisers Roundtable, aValuation for Financial Reporting (Mark-to-Market) seminar in conjunction with theASA�s, and a tour of The Edge Lofts / REIfacility in The Pearl District. All were excel-lent opportunities to extend your profes-sional knowledge and contacts, plus gaineasy continuing education credit that fitsyour schedule.
Coming this fall 2004, plan to attend ourFall Quarterly meeting in Bend on Septem-ber 23rd to 25th. The event will be at TheRiverhouse; so come and make a weekendout of it. Similar to last year�s event in Lin-coln City, the event will be held in conjunc-tion with the American Society of Apprais-ers, and Society of Farm Managers and Ru-ral Appraisers. Classes will begin withUSPAP on Thursday, followed by two Land
Valuation seminars on Friday and Saturday.Make sure to plan to attend the chapter din-ner at The Riverhouse on Friday; anothergreat opportunity to expand your profes-sional contacts.
Other events planned for September 2004include the Annual GOCAI Golf Tournament,plus our chapter will again participate in theOPB Pledge Drive. Later in the fall, anotherResidential Panel Seminar will be offered, partof a renewed effort to provide two home-grown residential seminars each year to ourresidential members. Make sure to supportthese offerings and our efforts by signingup as early as possible at our chapter website(www.oregonappraisers.org), or call VickiChamp at the Chapter Office (503.316.1979).Reacquaint yourself with old friends, meetnew ones, and capitalize on your member-ship with the Appraisal Institute.
Regarding our local membership, it is mypleasure to announce and congratulate Mat-thew Larrabee, MAI on his recent achieve-ment of his designation. He is a fine ap-praiser, a respected appraisal instructor, andwe are fortunate to have someone of his pro-fessional and personal caliber in our fold.
I would also like to extend a warm wel-come to the following new associate mem-bers in our chapter in 2004: Ronald Albano,Steven Beaman, Gregory Cox, Heather Droz,Rachel Feldman, Cheryl Ford, Olana Gwinn,Stephen Herring, Donald Leader, DavidTran, and Thomas Williams and Cole Irvine..I commend you on your decision to join ourmembership, and value your future partici-pation. However, it is up to you to make themost of this commitment. A good start is tobegin attending our membership meetings.
Finally, please join me in congratulatingCraig Zell, MAI, SRA on his recent appoint-ment as the Chair of the Appraisal Certifica-tion and License Board for the State of Or-egon. Craig was Chapter President in 1996,and this appointment (which starts July 1,2004) emphasizes his commitment to his pro-fession. He replaces Terry Bernhardt, SRAas current ACLB chair, who will be your Chap-ter President in 2005. The Appraisal Insti-tute has always been well represented at theACLB � just more examples of our member-ship at work on your behalf.
This newsletter began by referring to ourstatus as independent professionals chargedwith navigating on behalf of our clients thecomplex cross-currents that impact the realestate industry. So remember � your clientswill likely view you as you view yourself. Ifyou believe in your value as professional,your clients will respond accordingly. If youdo not, they will not. Your continued AImembership and participation with our chap-ter are important to maintaining and promot-ing this image.
Thus far in 2004, we are well on our wayto back to financial health as a chapter. Ourmembership numbers are strong, and our lead-ership is united in our efforts. If there isanything I can assist you with, I encourageyou to contact me directly([email protected]).
With warm regards,Kurt M. Mueller, MAI2004 President, Greater Oregon Chapterof the Appraisal Institute
increased attendance in local markets. Aword of caution: make sure that you takethe USPAP course from an AppraisalFoundation approved provider andinstructor. Many courses are being taughtnationally by non-approved providers/instructors and AI has been denying USPAPcourse credit for members taking classeswhich lack Foundation approval.
New Committee: The proposedformation of the national MembershipDiversity Committee created much
confusion at the regional meeting. It isunclear if this committee is being created asa member service or an outreach measurefor attracting new members. The Regionsuggested that the Institute clarify thelanguage surrounding the formation andpurpose of this committee.
Lastly, there is renewed interest inrequiring existing MAIs to pass the samecoursework as required of new MAIs. Moreto come after the fall regional meeting in SanFrancisco.
The Appraisal Institute has adopted thefollowing statements:
Vision Statement: To be the global au-thority providing real estate solutions.
Mission Statement: As America�s larg-est real estate appraisal organization, the mis-sion of the Appraisal Institute is to supportand advance its members as the choice for realestate solutions and maintain professional cre-dentials, standards of professional practiceand ethics consistent with the public good.
Region MeetingContinued from page 1
Field Notes May-June, 2004
Portland Subchapter Report CLASSIFIEDSWANTED
Wanted experienced eminent domain appraisers forlarge regional practice. Contact Darryl Kirkman [email protected] our web site at http://www.jmaappraisals.com. See also Greensboro,North Carolina at http://www.greensboronc.org.
WHOLESALE REVIEW APPRAISER
National residential mortgage lender seeks highly-experienced residential review appraiser to performfield review analysis of appraisal reports in a 4 Statemarket area. Portfolio is primarily high-end/non-conforming properties, and will be based in OrangeCounty. BS degree and SRA designation preferred;current California license required. Must have at least5 years experience with a regulated financial institution,and knowledge of FNMA/FHMLC/USPAP standards.Extremely attractive annual salary and productionbonuses will be offered, totaling approx. $120,000annually. An excellent relocation/benefits package willlikewise be available. Interested candidates shouldforward a detailed resume as a Word Document,including most recent compensation level, to:[email protected]. Christopher Group ExecutiveSearch
Residential AppraisalForum Features LenderPanel
The first biannual Residential AppraisalForum featured three local review appraisersand the ACLB administrator, Tuesday, April27th, 2004.
Andrea Yearsley, SRA, representingBank of America, Marlin Harker fromGreenpointe Mortgage, and Jeff Rapp, areviewer for several mortgage companiespresented apanel onunderstandingthe reviewprocess andt y p i c a lproblems. Bob Keith, ACLB Administrator,spoke of recurring residential problems andhow to stay USPAP-compliant.Approximately 50 residential appraisers fromaround the state attended and received 4hours of continuing education credit.
The Fall 2004 Forum is in the planningstages. Several topics will be coveredincluding:
• A tutorial on mortgage lending � theterms and processes explained;
• How the appraisal process fits in; and
• A comparative discussion of availableresidential form software � necessaryaddendums, support technology, costs, etc.
We encourage all residential members &associates to attend. Four hours of CE creditwill again be offered and refreshments andsnacks will be served at a social hourfollowing the class. Bring your co-workersand assistants. The GOCAI Board would liketo challenge all SRA�s to participate inplanning and presenting segments of theprogram to generate a continuing high qualityevent geared to the needs of residentialappraisal professionals.
Federal Court RulesFIRREA Trumps StateLaw
States cannot require the use of a certified appraiser fortransactions below the de minimis level. So ruled a federal districtcourt in a March 31, 2004, ruling that found that to the extent theFinancial Institutions Reform, Recovery and Enforcement Act conflictswith Pennsylvania state law, FIRREA supercedes. The court held thatFIRREA included transactions below the de minimis level in itsdefinition of federally related transactions. Federal regulations exempttransactions below the de minimis level from the certified appraiserrequirement. This ruling may mean that states cannot require whatfederal law specifically exempts, i.e., that appraisals for lendingpurposes under the de minimis level be prepared by certified appraisers,per the Uniform Standards and Professional Appraisal Practice.
The suit came about two years ago, when the Pennsylvania StateBoard of Certified Real Estate Appraisers attempted to stop FidelityNational Information Solutions (FNIS) from using brokers and othernoncertified people from collecting information that FNIS uses in itsAVM. FNIS responded by filing suit in federal court against the stateboard.
However, the case may not be shut. The Pennsylvania Board isconsulting with the state attorney general�s office about an appeal.
The Fall 2004Forum is in the
Field Notes May-June, 2004
In the spring 2004 edition of The OregonAppraiser newsletter and the March 2004Field Notes, we were informed that theOregon Appraiser Certification andLicensure Board proposed significantchanges to the administrative rules affectingsupervising appraisers and appraiserassistants. As the result of appraisers andassistants input at the rules hearing, two ofthe proposed rule changes were abandoned.
1. Requirement that a supervisingappraiser accompany theassistant during both subjectproperty and comparable saleinspection for the first six monthsor 1,000 hours of the assistanttraining.
2. Requirement that both assistantsand supervising appraisers attendan ACLB sponsored trainingclass specific to them.
Adopted Rules, Effective June 1, 2004�
The Board adopted changes to theadministrative rules concerning
Summary of New Administrative Rules AffectingOregon Appraisers
supervising appraisers and appraiserassistants. These rules are effective as ofJune 1, 2004 and can be accessed via theACLB website at http://www.oregonaclb.org/pdf/permanentrules.pdf. Please note that boldand underlined language is new andeffective as of June 1, 2004; any bracketedlanguage will be deleted soon. The newrules address the following issues:
• A revision to the definition of DirectSupervision that more specificallydescribes what a supervising appraiseris supposed to do to insure thatappraiser assistants are competent tobecome licensed and/or certified.
• A requirement to be licensed orcertified for at least 24 months prior tosupervising an appraiser assistant.
• A limitation on the number ofappraiser assistants that a supervisingappraiser can have. Supervisingappraisers who are licensed may haveonly one appraiser assistant, butcertified appraisers can have up tothree assistants. This requirement is
being phased in as provided in therules.
• A provision that an appraiser withtwo or more disciplinary actions afterJune 1, 2004 may not supervise anyappraiser assistants for a period of 24months.
• Also, supervising appraisers mustnow make a clear and prominentdisclosure of real estate appraisalactivity assistance in each appraisalreport by identifying each individualcategory of experience (i.e. the steps ofthe appraisal process), as outlined inOAR 161-025-0030 (9)(a)(A-H). Thisrule can be accessed by link to theACLB website provided above.
This summary is intended to be advisoryin nature and only provides an overview ofthe rule changes. Please go to the web siteand read the rules. After reading the rules,you may direct questions to the ACLB officeat (503) 485-2555.
In an April 30 decision, Judge ReggieWalton of the U.S. District Court for theDistrict of Columbia, ruled that the FederalTrade Commission�s decision to subjectattorneys to the privacy provisions of theGramm-Leach-Bliley Act was beyond itsstatutory authority and constituted arbitraryand capricious agency action. The decisioncame in a suit instituted by the AmericanBar Association against the FTC. Walton�sorder also applies to a similar suit filed bythe New York State Bar Association. Morethan 26 bar associations joined the suits asamici.
The FTC had sought to apply the writtenprivacy notice and the record keepingprovisions applicable to banks and financialinstitutions to attorneys engaged in the
Attorneys not Subject to Gramm-Leach-Bliley...Are Appraisers Next?
practice of law, despite complaints from theABA, the NYSBA and other state and localbar associations that state-level enforceablemandatory rules of professional conductprotected clientconf ident ia l i tybetter.
The FTC has60 days to decidewhether to appealthe decision, andCongress isc o n s i d e r i n gwhether to amend the Act as well. Until thattime, Walton�s order is in effect, and the FTCwill not enforce the Act against attorneysengaged in the practice of law; and attorneyswho in the course of their law practices
choose not to comply with the privacyprovisions of the Gramm-Leach-Bliley Actneed not fear enforcement actions orinvestigations by the FTC. This decision
does not directly impactreal estate appraisers,however, as appraisersare specifically definedas a �financialinstitution� by the FTCand federal bankregulators, unlikelawyers. Until the law
is amended or the rule is changed, appraisershave to abide by the confidentialityrequirements of the Gramm-Leach-Bliley Act.To view a copy of this decision, go towww.abanet.org/poladv/glbfactsheet.html.
The FTC has 60 days todecide whether to appeal the
decision, and Congress isconsidering whether toamend the Act as well.
Field Notes May-June, 2004
Oregon Apprais-ers Score 15%Rate of Return
The ACLB has made significant effortsto communicate with and to be a resourceto Oregon appraisers and assistants. Aspart of the latest full license renewal cycle,ACLB has obtained e-mail addresses foreach appraiser in the state and will be usinge-mail to inform and provide importantinformation regarding compliance withOregon Administrative Rules, OregonRevised Statutes, USPAP, and otherimportant information.
In a recent mass e-mail by Bob Keith,ACLB Administrator, over 250 e-mailaddresses came back as undeliverable out
of just over 1,600 appraisers and assistants� indicating an approximate 15% e-mailreturn rate. The ACLB would like to makeeach appraiser and assistant aware of therequirement to notify the Board of a changeof e-mail address.
OAR 161-050-0040 states that it is theresponsibility of each license or certificateholder, registered appraiser assistant orappraiser applicant to notify the Board of achange of mailing address and/or a changein their e-mail address. Change of addressnotification must be made in writing, within10 business days from the change ofaddress. Failure to comply with this rulecould result in disciplinary action of $250civil penalty.
Bob jokes that some appraisers havetheir e-mail filters set to filter out e-mail fromhim and the ACLB. However, while somemay not prefer not to hear from Bob Keith,it is very important (it�s the law!) for theACLB to be able to send e-mail messagesas it is becoming the primary means ofcommunicating important information.
By RAY A. SMITH, Staff Reporter of TheWall Street Journal, From The Wall StreetJournal Online
Is commercial real estate heading for acorrection? That�s the concern of a majorityof the 120 large investors surveyed byPricewaterhouseCoopers LLP as hugeamounts of money flowing into the sectorhave helped drive up prices. A survey for thefirst quarter of 2004, indicates that investorshave become more concerned about potentialprice drops for commercial buildings � officeproperties in particular � that could, in theworst-case scenario, ultimately approach thedeclines of the early 1990s.
Peter F. Korpacz, director ofPricewaterhouseCoopers� global strategicreal-estate research practice, characterized theresults as the highest level of concern surveyrespondents have shown about potentialvalue declines since the economic downturnbegan in 2001.
The respondents, who include real-estatedevelopers, real-estate company executives,institutional investors, bankers and real-estate insurance representatives, expressedconcerns that prices for commercial buildingshave risen too high too fast � not just forwell-leased properties with good tenants, buteven for properties that aren�t as well leasedor with less-than-stellar tenants. The concernis strong because the leasing market has beenso weak, especially for office buildings, andsignificant improvement doesn�t seem to bein the cards anytime soon.
In addition to thinking that these pricingconditions have made it tougher to find deals�that make sense� in terms of returns oninvestment, Mr. Korpacz says, the investorswere particularly concerned about buyerspriced out of purchasing well-leasedproperties bidding upprices for propertiesthat are only partiallyleased. They believebuyers of those not-sowell-leased propertiesare making unrealisticassumptions aboutfuture job growth andpotential to find andkeep tenants and jackup rents.
The problem is thatmany had predictedthat job growth would
Investors Fear Decline InCommercial Values
have been stronger by now. And higherworker productivity (companies doing morewith less people) coupled with the move ofjobs overseas make it harder to bank onstrong U.S. job growth � and the resultingdemand for space � in the near term.
Susan Smith, the survey�s associateeditor and a senior associate atPricewaterhouseCoopers, says �a fewrespondents said they don�t expect rentappreciation anytime soon and they areconcerned about buyers using aggressiverent spikes� in their assumptions. �They justwonder what�s going to happen,� she says,�especially with buyers of nonstableproperties� if those assumptions don�t panout.
While respondents still fear a decline invalues, they plan to continue investing incommercial properties. In particular, investorssaid they liked warehouses, especially inCalifornia�s Inland Empire, Chicago andnorthern New Jersey, where leasing demandhas remained robust. The fact that inventorylevels have reached critically low points,prompting a rise in manufacturing activityover the past several months, has made themoptimistic.
Investors said they liked malls, centershousing big-box retailers such as Wal-Martand Target, and strip shopping centers,particularly those anchored by leadinggrocery stores. That sentiment is due, in part,to steady consumer spending.
They also believed hotels, which havebeen hurt by the recession, the Sept. 11, 2001terror attacks and SARS, are rebounding.Their opinion on apartments was thatconditions are still soft but won�t get worse.
Hey Folks!Take the initiative to verifythat the Board and theChapter Office have yourcorrect e-mailaddress.
Joel Jorgensen Field Notes Editor
Field Notes May-June, 2004
By PATRICK BARTA Special to RealEstate Journal
Question: Why do real-estate agents andappraisers set prices for homes based oncomparable sales in a neighborhood? I thinkthis practice can only reduce the value of ahome. I�ve put $350,000 into my home, butnow I�m told it�s worth only $200,000.� Vito, location not provided
Vito: There�s a good reason why real-estate agents and appraisers use data fromrecent �comparable� home sales to calculatehouse prices. Buyers ultimately determinethe prices in any real-estate market, notsellers, and comparable- sales numbersprovide the most up-to-date way ofdetermining what buyers are paying forsimilar properties.
That doesn�t mean the comparable salesapproach is always spot-on. Typically, real-estate agents and appraisers pore throughlists of recent, similar transactions in a givenneighborhood and then use those prices asa basis for determining what the latest homewill sell for. But sometimes, the other recentsales aren�t all that comparable. For example,if your house is a modernist masterpiece in aneighborhood filled with 1930s bungalows,it could be a little harder for all partiesinvolved to accurately assess the value ofthat property.
If you suspect the real-estate agents orappraisers you�re working with didn�taccurately determine the value of yourproperty, you do have some options. First,you should ask for a full recounting of theagent�s or appraiser�s work to make sure heor she didn�t make any obvious mistakes. Ifthat doesn�t work, you can always hunt foranother opinion, though doing so couldrequire hiring an appraiser at your own cost.If all of that doesn�t help, you coulddisregard the advice of your agent and tryto sell the house on your own, at your ownestimated price. If you were right, you mightwind up selling the house for a lot moremoney than you would have gotten
Comparable-Comparable-Comparable-Comparable-Comparable-Sales DataSales DataSales DataSales DataSales DataHold SwayHold SwayHold SwayHold SwayHold SwayWWWWWith Rith Rith Rith Rith Realtorealtorealtorealtorealtorsssss
By BRAD REAGAN - The Wall Street Journal
You want to cash checks instead of write them at the end of the month? A look at fourmulti-family rental properties that don�t require The Donald�s bankroll:
LOCATION/PRICE: Portland, OR. $850,000ANNUAL PROPERTY TAXES: $12,390ESTIMATED ANNUAL RENTAL INCOME:$78,960THE PROPERTY: Eight three-bedroom, 2.5-bathapartments in two connected units, with indoorparking.NOTABLE: The complex is located near manyhigh-tech employers and shopping.
LOCATION/PRICE: West Danville, VT.: $165,000ANNUAL PROPERTY TAXES: $1,803ESTIMATED ANNUAL RENTAL INCOME:$18,000THE PROPERTY: Three one-bedroom units in aretro-fitted 1840s farmhouse in this quaint NewEngland village near Joe�s Pond.NOTABLE: The two-acre plot has plenty of extraroom for development, plus a barn that could berenovated for other uses.
LOCATION/PRICE: Lincoln, NE.: $460,000ANNUAL PROPERTY TAXES: $6,699ESTIMATED ANNUAL RENTAL INCOME:$63,900THE PROPERTY: 12 apartments � a mix of one- tothree-bedroom units � in two connectedbuildings, blocks from the �27th & O� shoppingdistrict.NOTABLE: Most units have individual deckswhere Cornhusker fans can cook out then walk themile-plus to Memorial Stadium.
LOCATION/PRICE: Clayton, MO.: $950,000ANNUAL PROPERTY TAXES: $4,949ESTIMATED ANNUAL RENTAL INCOME:$63,000THE PROPERTY: A 1935 brick apartment buildingwith three spacious three-bedroom full-floor units,in a ritzy St. Louis suburb.NOTABLE: They�re �just� rentals, but the vaultedceilings, stained-glass windows and fireplacesmay help tenants feel like staying put.
Sources: NAI Norris, Beggs and Simpson
Continued on page 6
Field Notes May-June, 2004
Establishing the value of property beingdonated for conservation or preservationpurposes has come under fire, particularlywhen non-arm�s length sales or inflatedcontract prices have been used. TheAppraisal Institute, along with the AmericanSociety of Appraisers and American Societyof Farm Managers and Rural Appraisers,addressed issues surrounding the donationof land for such easements in a May 24 letterto the Senate Committee on Financing.
Engaging a competent appraiser andensuring appraisal review and appraiserindependence were among the topicshighlighted in the letter, which stated: �Areliable appraisal is crucial to the entireconservation easement and land donationprocess. It is therefore extremely importantto have this service performed by anappraiser who is competent to do this typeof assignment.�
The letter goes on to point out that �anumber of controversies have arisen as aresult of current conditions. For example,inflated contract prices, such as those basedon transfers that are not normal arms lengthsales, have been used to establish inflatedvalue estimates for tax write-off purposes.By contrast, a credible, professionallyprepared appraisal presents accurate data ina manner [that] ensures both public trust and
Appraisal Groups Highlight Valuation Issues of Easementscompliance with IRS guidelines.�
The appraisal groups contend that sincethere are no requirements for state certifiedappraisers to be trained in �before and after�easement valuation, �relying solely on statecertification as a means to test an appraiser�sability to perform a conservation easementappraisal is inappropriate and could lead towidespread problems in these types ofassignments.�
Also integral to the integrity of theappraisal is the review process, which thegroups called �a complex procedure thatrequires a full understanding of the appraisalprocess and related issues.� Thus, theyurged that reviews be performed by someonewho is �properly trained and experienced toperform such tasks� and in accordance withthe Uniform Standards of ProfessionalAppraisal Practice.
The groups also used the letter toreiterate their position that USPAP beadopted as the �cornerstone of valuationsprepared for the IRS and by IRS reviewers.�Currently, the IRS requires contractappraisers and IRS staff reviewers to abideby its Real Property Valuation Guidelineswhen conducting an appraisal for taxpurposes. Also, the agency�s currentdefinition of �qualified appraiser� allowsindividuals to decide for themselves whether
they are competent to provide tax-relatedvaluations for specific types of property. �Itis feasible for the IRS to adopt USPAP andadd Supplemental Standards that the agencybelieves to be necessary. Many other federalagencies such as the Department of Justiceor the Department of Veterans� Affairs havetaken this approach. This way, the taxpayer�sappraiser and the IRS appraiser would bevaluing the property subject to the same setof standards,� the letter asserted.
The groups also summarized the issuesof data access and the pitfalls of not ensuringappraiser independence. �Appraiserindependence is crucial to an objectivevaluation of land [including] land donationsand conservation easements, as appraisersmust be allowed to perform their assignmentsindependent from the influence of interestedparties, such as the donor,� the groupsemphasized.
The letter was sent to Sen. CharlesGrassley, R-Iowa, Chairman, SenateCommittee on Finance, and Ranking MemberSen. Max Baucus, D-Mont. The Committeeis currently researching the issue.
For the entire letter, visitwww.appraisalinstitute.org/govtaffairs/letrs_tstimny.asp.
Comparable-SalesContinued from page 6
otherwise. But be forewarned: If you�rewrong, your house could sit on the marketfor a long time, and that could make it harderto sell the house later � even after you lowerthe price � since some buyers are wary of aproperty that has been on the market toolong.
It�s also possible you could run intotrouble even if you find someone who�swilling to pay a higher price for your house.If the buyer needs a mortgage, his or herlender will likely require an appraisal to makesure the property is worth what the buyer ispaying. If that appraisal comes outsignificantly lower than the price you andthe buyer agreed upon, the lender mightrefuse to make a loan for the full amount.That will, in turn, jeopardize the sale.
Indeed, you do have to remember to berealistic about the situation if there�s adispute over your house�s value. If a host of
other experts are telling you your house isn�tworth as much as you thought, they verywell could be right. The job of appraisersand real-estate agents �is to be objectiveand provide realistic market value,� saysDavid Barca, a broker at zipRealty Inc., alow-cost real-estate brokerage based inEmeryville, Calif. �Sometimes, ashomeowners, we can overstate ourperception of market value because someof the things we appreciate about ourproperty have little or no value to aprospective buyer,� he says.
It�s also worth remembering that manybig-ticket improvements you make to a homedon�t recoup their full cost. In other words,if you�ve done a lot of work on your house,you shouldn�t be surprised if the totalexpense of that work doesn�t show up inthe list price when you decide to sell. That�snot the fault of appraisers and real-estateagents. Buyers simply aren�t willing toreward a homeowner for the total cost of an
upgrade. As noted in a past House Talkcolumn (�Should You Remodel Or Move Toa New House?�), homeowners can in manycases expect to recoup only between 60%and 80% of the money they spend on home-improvement projects. You might want toconsult with a real-estate agent before makingany major upgrades to a home if you�reworried about not being able to recoup theexpense later on.
Using recent comparable-sales results asa basis for determining a home�s value is nota precise science, and it can at times lead tosome disappointments for sellers. But it�s stillthe best system for estimating values forassets whose prices are dictated by themarketplace. If you think your home is beingundervalued, get a second opinion. But ifmultiple parties agree that the appraisedvalue is close to accurate, you might want totake that into consideration before opting toput the house up for sale at your own,preferred price.
Field Notes May-June, 2004
2004 Greater Oregon ChapterGovernancePRESIDENTKurt M. Mueller, MAI
VICE PRESIDENTTerry O. Bernhardt, SRA
TREASURERDavid W. Groth, MAI
SECRETARYJames D. Brown, MAI
Past PresidentErick P. Landeen, MAI
2004 DIRECTORS,David J. Goggin, MAI, SRAMark H. Hepner, SRABeth Boltz, SRA
DIRECTORS, SUBCHAPTERSPORTLAND: Mike Bernatz
2004 COMMITTEE CHAIRSGOV. AFFAIRS: Darr L. Goss, MAIPUBLIC REL.: Steve Hotaling, MAIPROGRAMS: Scott A. Henningsen, MAIED. COURSES: Kathleen BuonoSEMINARS: Matthew Larrabee, MAIFINANCE: David W. Groth, MAINEWSLETTER EDITOR: Joel JorgensenCHALLENGE EXAMS: Paul H. Schaffner, MAISCHOLARSHIPS: John H. Brown, MAIADMISSIONS, GEN.: Brian L. Hood, MAIADMISSIONS, RES.: OpenDEVELOPMENT& RETENTION: Aaron Brown,Sebastian BrownASSOC. GUIDANCE, RES.: Sara A. Fraser, SRAAFFILIATES: Bill Hettick, AffiliateEXTERNAL AFFAIRS: Sara A. Fraser, SRANOMINATIONS: Erick P. Landeen, MAIBYLAWS: Kirk Kraschel
EXECUTIVE SECRETARYVanNatta Public Relations & Association Mgmt.G. Harvey Gail, Communications, FinancesVicki Champ, Education & Events
The Greater Oregon Chapter of theAppraisal Institute
PO Box 573, 3340 Commercial St SE, Su. 210Salem, OR 97308-0573
Greater Oregon ChapterPO Box 573Salem, OR 97308-0573
Return Service Requested
Field NotesMay-June, 2004
Calendar of Events 2004July 16 Course 400 - USPAP Update, Phoenix Inn, Eugene (7 hrs)Sept. 13-18 Course 530, Marylhurst University, Lake Oswego, OR (40 hrs)September 23 Course 400 - National USPAP Update, The Riverhouse, Bend, OR (7hrs)September 24 Land Valuation Adjustment Procedures, The Riverhouse, Bend, OR (7 hrs.)September 25 Land Valuation Assignments, The Riverhouse, Bend, OR (7 hrs.)October 28 Portland Subchapter Meeting, MAC ClubOctober 18-19 Course 410, Marylhurst University, Lake Oswego, OR (16 hrs)October 20 Course 420, Marylhurst University, Lake Oswego, OR (8 hrs)November 1-6 Course 310, Marylhurst University, Lake Oswego, OR (40 hrs)November 18 Portland Subchapter Meeting, MAC Club