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APPRAISAL INSTITUTE ANNUAL CONFERENCE PRESENTATION

DM2/5969808.1

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Presenters

INTRODUCTION

Stephen T. Crosson, MAI, SRADrew K. Kapur, Esquire

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Introduction

• What we’ll cover:– Basic considerations for valuation expert– Presentation of mock case, with both direct and

cross examination of expert Expert will provide both strong and intentionally

weak responses, which will be exploited and explained by Mr. Kapur during course of testimony

Alternative responses described and explained


Case

• Facts:– Eminent domain (2 scenarios)

Partial taking - 10,000 SF along frontage, including drive and 20 parking spaces; temporary construction easement (1,000 SF for 1 year)

Taking of the entirety State rule assumed (just compensation = taking +

damages to remainder)


Case

• Facts: (continued)– Property

200 unit apartment complex 150,000 SF NRA 120 units-1BR/1 B 80 units-2BR/2 B

300 parking spaces Built in 1985; estimated remaining economic life 10

years Site

8 acres (348,480 SF) Zoned for high-density commercial; improvements legally non-

conforming


Case

• Sales ComparisonSUBJECT

Sale Comparable Adjustment Grid

Comp No. Subject 1 2 3 4 5

Date of Sale - 11/14 2/15 5/15 1/15 04/15

Year Built 1985 1985 1984 1972 1987 1985

No. of Units 200 66 124 103 80 84

Avg. Unit Size 750 983 866 956 890 1,058

NOI/SF $4.40 $4.83 $3.80 $4.47 $4.71 $5.47

Sale Price per SF - $67.14 $57.45 $63.82 $66.88 $74.12

Market Conditions - Similar Similar Similar Slt Sup Slt Sup

Location - Similar Similar Similar Inferior Superior

Age - Slt Sup Slt Sup Similar Superior Superior

Overall Size - Similar Slt Inf Similar Similar Similar

Condition - Slt Sup Similar Similar Slt Sup Slt Sup

Economic - Similar Similar Similar Similar Similar

Indicated Value of Subject should be… - Slt Lower Slt Higher Similar Slt Lower Sig Lower

150,000 SF @ $64.00

= $9,600,000 (Rd.)


Case• Income Capitalization

Plan No. of UnitsAvg. Unit Size

(SF) Cumulative SFPotential Monthly

Rent / SF

Total / Avg. 200 750 150,000 $0.75 / SF

POTENTIAL GROSS MONTHLY RENTAL INCOME $112,500

$1,350,000 $9.00

Less: Physical Vacancy (10%) 135,000 0.90

Subtotal 1,215,000 8.10

Plus: Other Income 30,000 0.20

EFFECTIVE GROSS INCOME $1,245,000 $8.30

Less Expenses:

Taxes 241,000 1.61

Insurance 22,000 0.15

Management Fee 37,500 0.25

Administration / Salaries 69,000 0.46

Utilities 30,000 0.20

Repairs / Maintenance 120,000 0.80

Marketing 10,000 0.07

Replacement Reserves 40,000 0.27

TOTAL EXPENSES $569,500 $3.80

NET OPERATING INCOME $675,500 $4.50


Case

• Value conclusions (Whole property)– $9,625,000– Site-as if vacant ($7,650,000 ($22/SF)

Subject’s NOI $675,500 Overall Rate

Equals

7.00%

$9,642,857

Indicated Value by Income Capitalization $9,650,000 (Rd)


Case

• Value conclusions (Taking)– Site $220,000– Improvements (paving, ext. lighting,

and signage)25,000

– Temporary construction easement 1,320

– Value opinion of taking246,320

– Damages to remainder (15 units x $15/mo. x 12) ÷ 7%

38,571

Value opinion (taking + damages) $284,891


Testimony (Direct and Indirect)

• Questions and answers provided verbally


Essentials for Expert Witnesses

• Understand the case– Issues being tried– Motivations of parties– State rule or federal rule– Jury or bench trial



• Understand relationships– Expert-court

Role is to inform the trier(s) of the case– Expert-attorney for client

Attorney’s role is to assist expert in effectively communication various opinions re: the matter at hand

Expert’s role is to advocate his/her opinions in clear, convincing terms; not to advocate client’s position



• Understand relationships (continued)

– Expert-opposing attorney Expert’s role is to answer questions truthfully but

not to allow opinions to be miscast and misrepresented

Role requires composure and professionalism by expert in face of attempts to discredit testimony

In responding to questions, treat opposing attorney as slow-learning student rather than foe who must be defeated.



• Extensive preparation is imperative. Cannot overstate importance.– Rehearse direct testimony with counsel.– Anticipate questions on cross and develop

responses

• Communicate in terms that laymen (judge and jury) may understand; avoid highly technical explanations and terms



• Do not spar or invoke sarcasm with opposing attorney; will not be well received by judge/jury.

• Effective expert must be credible and likable to triers.

• Look at judge/jury, not attorney, in responding to questions.

• Take no materials to stand. Attorneys will provide. Any other material is discoverable.


Miscellaneous

• Learned Treatises– The Appraisal Institute, The Appraisal of Real

Estate (14th ed.)– The Appraisal Institute, Real Estate Valuation in

Litigation (Eaton)– Uniform Appraisal Standards for Federal Land

Acquisitions (Yellow Book)– The Appraisal Foundation, Uniform Standards of

Professional Appraisal Practice (“USPAP”)


Miscellaneous

• Learned Treatises (continued)– SEAK,The A-Z Guide to Expert Witnessing – SEAK, How to Become a Dangerous Expert

Witness – SEAK, Cross-Examination: The Comprehensive

Guide for Experts– SEAK, A Winning Case-How to Use Persuasive

Communication Techniques For Successful Trial Work

– SEAK, Writing and Defending Your Expert Report

Documents

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