On this page, you will find past newsletters in which we discuss basic appraisal concepts. Be sure to check this page often for updates, or subscribe to our newsletter for other kinds of helpful articles.

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Stan Choate, Office Manager

May 2019

At Spurgeon Appraisals, we are occasionally faced with tense situations over the value of real estate. After being hired to appraise some particular property, we begin to see that the property is not worth what everyone else expects. We check and re-check our data, but our conclusion only conforms less and less to expectation. After we deliver our report, we wait for one of the interested parties to contact us—as we know they will—to contest our conclusion, sometimes with great emotion.  
In such tense situations, we always ask our customers, and other interested parties, to remember and consider a few basic appraisal concepts. One of those concepts is the unbiased nature of appraisal work—and that is the topic of this month’s newsletter.
In nearly all situations, people appreciate that unbiased opinions are less likely to be clouded by such obstacles as sentimentality or the hope of personal gain. The valuation of real estate also benefits from such unbiased opinions. Sellers are more likely to get what their property is worth; buyers are less likely to waste money; lenders avoid making bad loans; family members and business partners are more likely to divide assets evenly—if they have an unbiased opinion of that real estate’s value. Without a trustworthy opinion of value, these same people could only base their decisions on hearsay, guesswork, or maybe even lies.

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Of all existing professions related to real estate, only one is designed to provide that unbiased opinion of value: real-estate appraisal. Not only do appraisers have the training and the data, they also have something which no one else brings to the table: disinterest. The appraiser gets paid whether he agrees with one party or another (or with neither of them), and he has no personal stake in the property being appraised.
This sort of reasoning is unobjectionable when viewed from afar. But once someone joins the game as a buyer, seller, lender, or other interested party, the rules of the game make less sense. Somehow or other, interested parties develop an opinion of value for the subject property. And because they trust themselves, they expect the appraiser’s conclusion to agree with their own. If the appraiser happens to disagree, he is viewed, not as correcting a misunderstanding, but as “killing the deal”.

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No one likes having plans foiled, and no one likes the suggestion of being incorrect. For that reason, people often have a hard time seeing beyond the immediate trouble created by the appraiser’s unexpected conclusion. At such times, people can benefit from remembering what they already know about the benefits of unbiased opinions and the unique advantage of the appraiser in being unbiased. The appraiser might have killed a deal, but what’s so bad about killing a bad deal?
At Spurgeon Appraisals, we believe we make every effort to practice the unbiased, objective ethic which is supposed to characterize appraisal work. Call us today for a fair market value for your home, farm, or building.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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by Stan Choate, Sales Researcher

August 2018

Whether you’re trying to order fast-food or visiting the doctor’s office, the word “trainee” is the last word you want to see on a name tag or hear from the receptionist. Depending on the details, the word may be enough to make you take your business elsewhere. A person in training is often pre-judged as slow-moving, lacking necessary expertise, and awkward in his interactions with clients. And since trainees often do begin their training with limited experience, their reputation often seems fair.
The general leeriness toward trainees also finds its way into the appraisal business. Customers sometimes dislike being assigned a trainee appraiser, especially if they believe the business at hand requires great care, or if they have simply never ordered an appraisal before. This attitude has caused us to lose several bids when only a trainee was available for certain projects.

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This year, Spurgeon Appraisals finds itself with a total of three certified general real-estate appraisers, now that Jesse Lochman, head of our residential department, has completed his training. And since we are always eager to expand services to our clients, we plan to hire a new trainee appraiser soon, so we can provide better turnaround times for our clients. With one trainee moving up and another moving in, this seems like a good time for us to make a few observations about trainee appraisers.
If you feel hesitant to accept a trainee as your appraiser, remember that trainees always work under the supervision of a certified appraiser. When a trainee begins, he will be accompanied by the supervisory appraiser on inspections, so important information will not be missed when viewing the property. Even when the supervisor ceases to accompany the trainee on inspections, he will still be involved in the true work of the appraisal: finding and analyzing comparable sales. And when the trainee has enough experience to do most of that on his own too, the supervisory appraiser must still review and approve his work before the opinion of value is finalized. The supervisor must always sign his own name to the report, and he assumes full responsibility for its content, so that his reputation, license, and livelihood are at risk if he does not properly review his trainee's work. That vested interest will ensure that the supervisory appraiser guides his trainee properly in all projects.

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Another thing to remember is that the supervisory appraiser cares about staying in business and so will not assign his trainee to projects beyond his competency. Poorly written, poorly researched appraisals will inevitably destroy the reputation of the appraisal firm writing them, whether done by fully trained appraisers or their trainees. At Spurgeon Appraisals, no trainee will be assigned to a project deemed beyond his ability—which means any trainee assigned to your project will be competent for the task.
For the above reasons, Spurgeon Appraisals was never reluctant to assign a project to Jesse, as a trainee, when we thought he was capable to handle it. Sometimes we even insisted on it, since we always had the confidence in what training he did possess, and we knew that any shortcomings could be overcome by oversight. Trainees who are assigned to a variety of projects, even difficult or unusual ones, receive the exact kind of training they should receive. After all, everyone begins as a trainee in his profession and will never excel if no one gives him the chance.
As Spurgeon Appraisals looks forward to bringing a new trainee into our company, we hope our customers will see it as a chance to help us grow as a company, so we can have a greater capacity to serve them for years to come.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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by Stan Choate, Appraisal Tech / Valuation Associate

May 2018

If you have ever discussed appraisal work with an appraiser, you know that the topic of “comparable sales” is mentioned early and often. Sometimes simply called “comparables” or “comps,” these sales are the basis for any truly objective fair-market value of real estate. The property which is the subject of the appraisal is rarely one-of-a-kind: other properties comparable to it have sold somewhere at some time. A sizeable amount of the appraiser’s labor is locating and researching these comparable sales for use in his appraisal reports. These sales are the evidence supporting his opinion of value for the subject.
Therefore, to understand an appraiser’s work well enough to approve or disapprove of it, we must first gain an understanding of how sales are judged to be comparable to a subject property. The reports of some appraisers can be easily discredited by exposing the atrocious differences between the subject and the comparable sales. Conversely, an appraiser may be fiercely criticized for his opinion of value, but such criticism is greatly undermined if his comparable sales truly are comparable to the subject. This is just an application of the old axiom about comparing apples to apples, rather than to oranges.

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This article is meant to help our valued clients better understand the selection of comparable sales for residential, agricultural, and commercial appraisals. With such knowledge, we certainly expect that our customers will see the integrity of our conclusions, but they will also be better able to suggest helpful corrections to our reports if such corrections are truly necessary. At Spurgeon Appraisals, we greatly value any information you can provide us regarding comparable sales, so this article could even help you to help us improve our services.
When selecting comparable sales, our appraisers keep four basic principles in mind:
(1) Comparable sales must be sales. In other words, the property being compared to the subject must have actually transferred to a new owner, who gave money for it. This is why some appraisers will not refer to "comparables" or "comps": it is not enough for a property to be comparable; that comparable property must have sold. The idea is simple enough, but not everyone appreciates that sales provide the most reliable data for appraising real estate. For example, people have occasionally disputed our opinions of value based on listings of similar properties. However, merely listing a property for sale at a certain price proves nothing about its fair-market value: listing prices and sale prices usually differ by hundreds or even thousands of dollars, making listings generally unreliable for developing a fair market value. Sometimes we are required to provide current listings of similar properties in our reports, but the true basis of our conclusions is the comparable sales.
(2) Comparable sales must be comparable. The foundational idea of a comparable sale is that market buyers pay a similar amount of money for properties which are similar. However, this common-sense notion is often forgotten when interested parties become involved in the appraisal process. If they want a subject to be valued lower, they propose “comparable” sales of lower-quality real estate. And if they want a subject to have a higher value, they do the opposite. But this is not the proper method for developing a fair-market value: comparable sales must involve properties truly comparable to the subject. This principle connects with the concept of Highest and Best Use. Properties are only comparable to one another if they have a similar Highest and Best Use. That is why the two properties in the map below should never be compared to each other: one has a Highest and Best Use of row crop farming while the other is recreational.

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(3) Comparable sales must be plural. At Spurgeon Appraisals, we often need to remind interested parties that “one sale does not make a market.” It is possible for one seller to sell one property on one occasion to one buyer for a bad price. Even if the property is similar to the subject, and the sale was successfully closed, one sale is not sufficient for creating an opinion of value, because one sale alone can be misleading. But multiple, unassociated parties are less likely to make the same exact mistake on multiple distinct occasions. Therefore, only a plurality of comparable sales, all involving similar properties and similar sale prices, can justify an opinion of fair market value.
(4) Comparable sales must be as close as possible in time and place. Since real estate values vary over time, the truly comparable sale will be as contemporaneous as possible to the effective date of the appraisal. The same principle holds true for geography: since land sales vary from place to place, comparables sales are best selected from the same market area as the subject. If we can imagine a contest between two appraisers to provide the most accurate opinion of value, the appraiser most likely to win is the appraiser with comparable sales closer to the subject in time and place.
At Spurgeon Appraisals, we care deeply about following these four principles for comparable sales. We even employ a full-time sales researcher who consistently checks multiple sources for such sales and researches them thoroughly. When our customers order an appraisal from us, they can rest assured that the finished report will be based on quality data correctly applied.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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by Stan Choate, Appraisal Tech / Valuation Associate

January 2018

When someone calls our office about an appraisal, one of the first questions we ask is, “What is the Effective Date for the report?” Many clients do not know how to answer this question, which is understandable, since it belongs to the arcane world of appraisal work. We are always willing to explain what the Effective Date is and why it matters. We hope this newsletter will help our readers to better understand it for their next appraisal.
The Effective Date is the date of the opinion of value given in the appraisal report. Remember that the value of property changes over time. The appraiser can only give an opinion of value with reference to a specific date…the Effective Date.This has the greatest effect on the appraisal process when the appraiser begins to select comparable sales. In a stable market, when data is available, sales that closed prior to the Effective Date are usually more comparable than sales which closed after the Effective Date.

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The Effective Date may be better understood when contrasted with two other dates: the Date of Report, and the Inspection Date. The Date of Report is the date when the report is transmitted to the client. Only in very rare cases will the Effective Date be the same as the Date of Report, and usually only when the property was not physically inspected. But that does not mean that the Effective Date is always the same as the Inspection Date, which is the date when the appraiser visited the property to do the inspection. Very often those dates are the same, but not always.
The Effective Date and the Inspection Date will often be the same when the client needs a current market value for the property. This is especially true for intended uses like refinancing, purchases, construction loans, estate planning, and divorce.  For those kinds of appraisals, the Effective Date will usually be the same as the Inspection Date. If no inspection was performed, the Effective Date will likely be the Date of Report.
However, some appraisals require a retrospective opinion of value rather than a current market value. In this case, the Effective Date is set at some point in the past, before the Inspection Date and the Date of Report. The most common occasion for this retrospective Effective Date is when a property must be appraised as of the date of someone’s death for purposes of settling an estate or dealing with taxes.  In most cases, the Effective Date will be the date of that person’s death. An appraisal can also give a prospective value, in which the Effective Date is set in the future, but these are rare.

retrospective appraisal

All this can be confusing to clients, and they very often won’t be able to tell us for sure what the effective date of their appraisal ought to be. While we can usually help our clients answer this question, we sometimes refer them to their own attorneys or accountants, who are able to state exactly what the Effective Date should be. People seeking an appraisal would do well to confer with their attorneys or accountants before calling the appraiser, and ask them about the necessary Effective Date.
Spurgeon Appraisals has done retrospective appraisals as well as reports for current market values, and we are accustomed to aiding our clients navigate the maze of appraisal terminology. You can expect us to be diligent and detailed in the preparation of your appraisal reports.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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by Matthew Roberts, Certified General Real Estate Appraiser

July 2017

Could this trusted real-estate adage be a myth?
It is true though, right? That’s what you must be asking.  We’ve all heard this old saying maybe hundreds of times.  I’ll admit, it sounds great.  It even seems to have common sense on its side…until you consider Dubai’s man-made islands…

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All literalism aside, the economics of the assertion are less than solid.  Real estate may be part of the Earth, but its value and exchange is just as vulnerable to the market forces of supply and demand as other commodities like gold, copper, beans, and bread.
While the supply of land may appear limited, it is infinitely divisible for all practical concerns.  Humans do not spread out to one person per square mile or anything.  Major cities in the east can support more than 4,500 people per square mile. Meanwhile, huge areas of land in the west sit vacant, and you could drive for hours without seeing another person. Not only is land infinitely divisible, but there is also much more of it left to divide.
But what about access?  They aren’t making any more access, are they? Well, yes.  What good would a developer’s new subdivision be if it didn’t have roads?  Private owners can build roads, and new public roads are regularly being built along with new exits, new streets, and new bridges.  The current secondary route could become a primary route, and today’s high-traffic roadway could become tomorrow’s old highway. With these changes come new supplies of land for new uses.
Speaking of which, the market value of land comes from its economic usefulness and productivity, in other words, from the things that can be done using the land.  And the things that can or should be done with land, can change all the time either having a positive or negative effect on value. Consider the effect on the value of farmland if the demand for grain doubled; or conversely, if technology allowed the amount of grain that could be produced per acre to double. Even if the amount of land remains the same, the demand for it will change, along with its value.

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The same principle holds true outside of the agricultural realm.  What are some of the reasons that people want to buy land in first place?  Mainly, things can be put there, including yourself, homes, golf courses, factories, etc.  But the demand for any of these uses can change regardless of how much land is there.  New taxes, regulations, and crime can change property value nearly overnight.  For example, there is a limited amount of land in New York City, but the same is true of Detroit, where the demand is far less.
At Spurgeon Appraisals, we seek to understand the forces which drive the market value of real estate. The factors that affect market value are not constant, and the notion that they will be the same or better in your lifetime, or even in the next ten years, is not guaranteed.  Not even close. This applies even to perceived scarcity of land.  Market conditions can change and do not depend solely on the amount of land available.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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by Stan Choate, Appraisal Tech / Valuation Associate

August 2016

Our appraisers face a recurring situation: One of them arrives at a property to do the inspection and meets the owner, buyer, or some other interested party. The person shows the appraiser around the property, describing many things about it in great detail, complete with family history and plans for the future. As the appraiser is preparing to leave, the person asks, “So what’s it worth?”

This oft-repeated scenario represents one of the most enduring misunderstandings about appraisal work: that we can appraise the value of a property upon inspection. Many of our clients believe that the inspection is the appraisal. This can lead to frustration on the part of the client, who expects to have an appraised value on the day of inspection, and does not see the reason for waiting to get the final report.

When done correctly, an appraisal requires more than inspecting the property and giving a "ball park figure" of what the property might be worth. Following the inspection, there are usually three more tasks to perform before an opinion of value can be confidently given.

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First: We almost always need to visit the county courthouse. This allows us to do research into previous owners, dates of sale, past sale prices, assessed values, and taxes. While these details may seem like minutia, they do help us to estimate a value for the property. While the appraiser sometimes visits the courthouse before the inspection, we often wait until afterward, when we have a better understanding of the property.

Second: To determine the value of the subject, we must compare it to other, similar properties which have sold recently. Having done the inspection, we can then begin our research for truly comparable sales, and finding them is not always easy. Spurgeon Appraisals keeps a growing database of sales, but sometimes we must do additional research to find properties truly like the subject.

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Third: Finally, the appraiser begins work on the final report itself. And the appraisal report is no longer just a stack of paper where we record our data and results. These reports are written with appraisal software which assists our efforts to “crunch the numbers” from your property and the comparable sales. We can truly say that we have no firm opinion of value until we are finished with the report.

Spurgeon Appraisals is dedicated to providing customers with quality appraisals, worth the price you pay for them. It may take a few days, or even a week in some cases, to go from inspection to appraised value, but once we get there, you will have an opinion of value based on thorough research, reliable data, and genuine expertise.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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by Matthew Roberts, Certified General Real Estate Appraiser

March 2016

No matter your profession, your work and conduct is likely subject to compliance with a myriad of regulations.  For appraisers, those regulations are primarily rolled into one set of standards called USPAP. You’ve probably heard about it.  You’ve probably dealt with an appraiser who made a big deal about it, and for good reason.  It is an acronym for the Uniform Standards of Professional Appraisal Practice.

The Appraisal Standards Board (ASB) of the Appraisal Foundation, a non-government entity, was charged by Congress to establish and maintain standards for appraisers, and USPAP was the result.  It is basically a form of quality control for the profession.  Their goal is the development of high quality standards, based on principle, that could be used in cases where existing appraiser standards were not already required or did not apply. The Board believed that such standards should establish a high level of professional practice, ensure public trust, and enable users and the public to better understand credible valuation standards.  For appraisers, compliance is mandatory, whether appraising personal property, real estate, business value, for uses such as estate tax purposes, charitable contributions, or federally regulated uses (including lending).

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USPAP contains rules for both the development of an appraisal and the communication of the value opinion to the client.  The rules are primarily meant to guide the appraiser to be impartial and objective.  The document also provides definitions of terms one may encounter when engaging an appraiser for service, such as: client, intended use, scope of work, and report types.

These standards apply to appraisals and appraisal reviews as well.  Every appraisal we perform is in compliance with USPAP.  We have also provided appraisal review services for clients to determine whether or not the report in question was in compliance with applicable development standards.

If you or your business decisions rely on frequent appraisal services, it may be beneficial to have a basic understanding of the requirements appraisers are subject to and the profession itself.  If you have a particular question about USPAP, give us a call: we would be happy to help.  If you are in need of a complete understanding, the current official USPAP document can be found at the Appraisal Foundation’s website.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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by Matthew Roberts, Certified General Real Estate Appraiser

October 2015

What is the first step in the appraisal process?  Depending on who you ask, you may get a variety of answers, such as: inspecting the site and improvements, collecting public data about the subject property, searching for sales, or even – getting paid.  While all these steps are important, a process of analysis that primarily takes place outside of the appraisal report, and is considered the foundation upon which market value rests, may be the most important ‘first step’: developing an opinion of Highest and Best Use.

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Highest and Best Use is the most reasonably probable use of a property that is legally permissible, physically possible, financially feasible, and maximally productive.  These four criteria are the test of highest and best use and help determine the use of the property that results in the highest value.  Legally permissible means being in conformity with applicable regulations, zoning restrictions, deed restrictions, etc.  When determining if a use is physically possible, the appraiser must take into account the size, shape, accessibility, and topography of a site.  Tests of financial feasibility deal with the economics of supply and demand.  For instance, it may not be financially feasible to buy a lot surrounded by retail properties to build a single-family residence, you may pay more for the land than you would in residential subdivision.  Sometimes, knowing the uses of surrounding properties can help support decisions about financial feasibility.  Finally, the best use of a property must be maximally productive, or the most profitable.  Bottom line, this is the use that provides the greatest return on investment.

This process is used to identify the competitive position of a property in the minds of market participants.  The market makes decisions every day about real estate using these criteria.  So the highest and best use of a parcel is not determined through subjective analysis by the property owner, the developer, or the appraiser.  Rather, it is shaped by competitive forces in the subject market.  Identifying the highest and best use of a specific property often involves market research and analysis.  Sometimes the highest and best use of a property is not its current use.  Imagine an older single-family residence on a lot located on a major roadway within city limits with a high traffic count and being surrounded by commercial office uses.  The highest and best use of this property may be to raze the improvements and sell the land as vacant for office development…but not necessarily.  As long as the value of the property as improved is greater than the value of site as vacant, the highest and best use is still the existing use.  The cost to demolish those existing improvements must also be considered and may further support the current use as the highest and best.

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So, before you rent a dozer and tear down your house, give us a call.  Aside from appraisals, we can provide consultation, perform market studies, and help determine highest and best use before you break ground.  Is your farm suited for duck hunting? How high should the sidewalls be on your industrial shop space?  Are you charging enough rent for your office space?  These are all questions that we can answer with market analysis and highest and best use considerations.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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by Matthew Roberts, Certified General Real Estate Appraiser

June 2015

If you’re like me, you feel like you’ve heard the phrase “Location, Location, Location” too many times. And you might be onto something. The phrase is thought to be coined as early as 1926. Even then, I doubt it took much explaining. It is often used to convey that a property is thought to have a desirable location…and is therefore worth more.

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Location is an important factor, I’ll admit that. It is one of many factors that can be used to analyze a property’s value. But supply and demand are still the ultimate drivers of price. Supply is finite, and demand can come and go. For example, the quality of a particular location is not a constant factor. A desirable location today may be more or less desirable in the future. Changes in population, traffic, access, regulations, local economy, and market preferences can greatly influence the demand for that location.

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Don’t pay too much for the location you think is "the one." A certain location may be desirable to an individual, but is it as desirable to the market? The best way to determine the premium for your location is to compare it to similar properties with similar locations. This type of comparison and analysis is common practice at our office, and we often find how consistent the market can be. Many times we make adjustments and select sales from certain neighborhoods or areas with location in mind. The focus is not necessarily on whether a location is good or bad, but how demand for the location relates to price.

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Understanding quality of location and various market trends contributes to producing accurate appraisal results. At Spurgeon Appraisals, our customers are familiar with our professional level of detail and analysis in our reports. We are well qualified and equipped to meet your appraisal needs.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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by Staff Appraiser

May 2015

We are frequently asked to appraise properties that either have ongoing repairs, are not entirely finished, or have a significant and obvious deferred maintenance issue inconsistent with the condition of the rest of the structure. These types of properties present an obvious challenge to the appraiser, who must decide how a typical buyer would look at the property. Often times, especially in the case of rather small issues, a buyer will look at the property, determine a cost to fix, finish, or replace the item that is the problem, and deduct that amount from the price he or she is willing to pay for the property. Appraisers commonly mimic this method, calling it a “cost to cure.”

To illustrate, I recently appraised a home that was about twenty-years old and in good condition overall, except for the carpeting in three rooms, which was lightly colored and badly stained, and also holding pet odors.

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I could have simply said that the home was in average condition and moved on, but that would have meant comparing the home to other homes in average condition rather than those in good condition, which would have been more accurate. So instead, I calculated the costs associated with replacing the carpeting (labor, disposal, new carpet and pad, etc.), and deducted that amount from the value indicated by the sales of good-condition homes.

Costs to cure are also useful for commercial and agricultural appraisals. For example, old buildings in desirable locations often sell where the highest and best use of the parcel is as a commercial building site. In this case, the appraiser will deduct the costs to demolish and responsibly dispose of the current building from the value of the land itself. In agricultural appraisals, if a field which is otherwise suitable for cropland has become covered with shrubby tree growth, the appraiser will do a cost to cure for removing the tree growth.

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Cost to cure makes the appraiser think like the buyers and sellers of real estate. This is why it is the most accurate way to determine market value for many kinds of properties. But for the same reason, a cost to cure is not always the appropriate method, such as in situations where there are multiple problems with a home, or in a property type or market where buyers pay a premium for properties that are in perfect condition at the time of sale. But generally, the cost to cure can be a valuable tool for the appraiser when a property has issues of repair, maintenance, or incomplete construction. When properly applied, it produces results that are both credible and defendable.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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by Stan Choate, Appraisal Tech / Valuation Associate

April 2015

Last year, one of our newsletters was dedicated to explaining the value of legal descriptions in real estate appraisal. We would like to continue that theme by giving our clients and prospective customers advice for providing useful legal descriptions to appraisers. Having this knowledge will help us service your needs more quickly and efficiently, saving you time and money.

Most importantly, nothing can truly replace a full legal description in real estate appraisal. This is especially true of farms, where every acre, added or lost, affects value. If the property has a legal description, the appraiser will need it. Sending the appraiser maps of the subject is helpful, but still not as helpful as sending a legal description—only the legal description can tell the appraiser whether those maps are correct. Also, the abbreviated descriptions of land found on parcel records and tax documents (see image below) are not sufficiently detailed for appraisal work. Deeds, purchase agreements, and surveys are the best sources for good legal descriptions.

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Between those three sources for legal descriptions, land surveys are beyond all doubt the most useful: they are done with the greatest precision, and they make use of existing landmarks which are easily identified. If the subject property has not been surveyed, the client should seriously consider getting a survey as part of the appraisal process.

Deeds, on the other hand, can be more frustrating. Though easily obtained, deeds are sometimes unclear and may even have mistakes. Most of the problems result from the age of their legal descriptions: many of them were written decades ago. The legal description may therefore use landmarks which no longer exist (like trees or old rural roads), or they might use creeks and rivers which have changed course. They might even make reference to other tracts of land which are no longer intact or which were sold to new owners.

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Other problems with deeds can result from the common practice of splicing legal descriptions together whenever landholdings are expanded. The person doing the splicing is not always careful, resulting in the inclusion or excepting of land by accident. In some cases, a tract is excepted from the subject property only to be re-included later in the same legal description—or vice versa. The appraiser may need to spend hours just deciphering such a legal description. Appraisers would rather have a deed than nothing, but it may create additional difficulties.

The best legal descriptions display the following traits:

  • They were written after the most recent transfer of the property.

  • They were not composed by splicing together older descriptions.

  • They use landmarks which are not easily altered.

  • They specifically chart the course of boundary lines using directions and distances.

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A legal description with those qualities will allow the appraiser to identify the property and its acreage quickly and confidently. Otherwise, he will need time and assistance to determine the precise borders of the property. If the appraiser has a high-quality legal description from the beginning of the process, the appraisal will be finished more quickly and with less trouble.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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by Staff Appraisal

March 2015

These two long-winded, tongue-twisting, and often misunderstood terms are responsible for many debates among appraisers and even more questions from the general public. The most common questions are probably, “why did you use an extraordinary assumption here?” or “how can accurate results come from an appraisal assignment where a hypothetical condition was used?” To best answer those questions, we must first examine each concept briefly.

An extraordinary assumption can be best explained as an assumption that is taken to the next level. A normal, or general assumption that I use regularly would be that there is not any nuclear waste buried in the backyard of the home that I am appraising. While there might be nuclear waste buried there, it is not likely, as most people don’t bury toxic substances in their backyard.

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The difference between general and extraordinary assumptions is that, with extraordinary assumptions, the appraiser is assuming that a statement is true, but whether or not it is actually true is unknown. These are often used in complex commercial appraisals, such as convenience stores that have underground fuel storage tanks. Since it would be impractical (and perhaps even impossible) for the appraiser to inspect each tank for leaks, the appraiser makes an extraordinary assumption that none of the tanks are leaking. It should be noted that if this type of assumption is found to be wrong, it can affect the appraised value.

On the other hand, a hypothetical condition assumes that a condition is true which is known to be untrue. An example of the hypothetical condition would be a businesswoman who purchases an old convenience store with plans to convert it into a used car dealership. As part of that process, the fuel tanks would naturally be removed. In this case, an appraisal will be completed subject to the hypothetical condition that the tanks are gone, even though the appraiser knows that they are still there.

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Individuals planning either to remodel or build a new home often have an appraisal performed subject to a hypothetical condition, so that they know the market value after the renovation or construction is complete. Values derived through the use of hypothetical conditions are often called “as complete” appraisals. The accuracy of an appraisal report completed subject to a hypothetical condition is as accurate as the plans that are provided to the appraiser, since the appraiser will use comparable sales that are similar to the planned building.

Both extraordinary assumptions and hypothetical conditions are useful for determining value of real estate in instances where a variety of factors are at play. When used correctly, they can provide accurate assignment results in accordance with the Uniform Standards of Professional Appraisal Practice.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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by Stan Choate, Appraisal Tech / Valuation Associate

November 2014

Nothing is more important for appraising land than knowing what land to appraise. Inspecting the property, determining the acreage, valuing buildings on the subject—the appraiser can do none of these things without first knowing the boundaries of the subject. This underscores how necessary it is that the appraiser have a good legal description of the property, such as the following:

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Without a well-written legal description, the appraisal process will suffer delays. Anyone who has contracted our services knows that, from the time we are hired, we are eager to obtain a truly helpful legal description. We do this because the client will receive a more competent appraisal, more quickly, if we have a legal description from the beginning. Otherwise, the client may have difficulty communicating to the appraiser exactly what real estate should be appraised, preventing the appraiser from completing his report in a timely fashion. The same problem could arise if the legal description is poorly worded or inaccurate. But with a well-written legal description, the position and boundaries of the subject property can be plotted accurately. When plotted, the above legal description looks like this:

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With a plotted legal description, mapping the subject property with confidence is very quickly done. The map below is a result of this process. We can plainly see that the buildings are not part of the subject, while the pond and unmaintained county road are.

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In contrast, the lack of a decent legal description can cause hours or even days of wasted time on an appraisal. For example, our firm was contracted last year to appraise a property in Adams County for a divorce settlement. Our client provided us with enough deeds to construct a good legal description of her property. Her husband, on the other hand, had only a survey which partially described the subject. We spent several additional hours on the phone, both with our client and with her husband’s attorney, trying to explain why the survey was not a sufficient legal description. If our client and her husband had been using an accurate legal description from the beginning, the whole dispute could have been resolved more quickly and with less conflict.

The client’s own interests are best served by providing the appraiser with a legal description. Landowners, loan officers, and others who frequently enlist the services of appraisers would greatly benefit from gaining a working knowledge of legal descriptions. This would allow for a smoother, speedier appraisal process—which is the goal of both the appraiser and the client.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.

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