Commercial real estate appraisers Featured

8:00pm EDT April 25, 2007
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 steven.hodge@cbre.com or (513) 369-1368.