Commercial Real Estate Finance

Posts Tagged ‘appraisal’

Today we’re excited to feature our first guest post from our friends at Integra Realty Resources! From their IRR on Real Estate blog, here is IRR Managing Director Jim Andrews to discuss the complex, ever-changing world of real estate valuation. Many thanks to the IRR Blog and Jim Andrews for the contribution!

Why Consistent International Valuation Standards Are Essential

There’s no shortage of valuation standards today, such as the Royal Institution of Chartered Surveyors (RICS) “Red Book,” the Uniform Standards of Professional Appraisal Practice (USPAP), and the International Valuation Standards (IVS), to name a few. Use of these standards varies by country and based on the clients’ needs. But the real property and business valuation community is increasingly boiling down these rules into a more consistent set of standards as the members of these organizations collaborate in defining the guidelines for appraisals.

I spoke about this topic [last November] at the RICS Summit of the Americas on a panel discussion I helped spearhead, titled “Comparison of Valuation Standards and Movement to Globalization.” Joining me were current and former committee members of the organizations that produce the various standards, such as RICS, the Appraisal Foundation, the Appraisal Institute of Canada, and the International Valuation Standards Committee (IVSC).

Everyone on the panel expressed interest in having a more consistent set of standards. We delved into the reasoning more deeply, and I wanted to share it with you.

1. Enhance the reputation of the profession and promote its usefulness around the world. 

Currently, the U.S. uses Generally Accepted Accounting Practices (GAAP) as its set accounting principles. Nearly every other significantly developed country has already adopted the International Financial Reporting Standards (IFRS). The U.S. still hasn’t moved toward total adoption of the IFRS measures, but it has begun integrating IFRS with GAAP. An established set of consistent standards would help in appraising assets and liabilities for financial reporting, especially for companies that control assets in various countries and work across national borders. For valuations for other purposes, the reputation of the profession would be enhanced if the clients could expect consistency in valuation reporting internationally.

2. Simplify the appraisal process.

USPAP is the accepted set of standards for valuation in the U.S. But if a member of RICS is performing the appraisal, it should also comply with RICS standards, which differ in subtle ways. In the Caribbean, I work across U.S. and British territories, which typically require different standards, as well as Dutch, French, and Latin American islands where there are generally no nationally accepted standards. A single set of standards and guidance notes would enable appraisers to produce a credible valuation with a similar report structure regardless of membership or the location of the asset to be valued. Read the rest of this entry »

In the world of commercial real estate, property appraisers are beginning to receive a great deal of attention for their work and accuracy, and the attention isn’t especially positive. Much like the credit-rating professionals before them, appraisers are being singled-out as potential culprits in the drastic devaluations that rocked the real estate world in 2008-2009.

A study by members of Collier’s International and law firm McKenna Long & Aldridge has brought to light some startling discrepancies between the valuations and eventual sale prices of many properties. The study focused on properties backed by securitized bonds that were foreclosed on and liquidated.  A New York Times article explains,

In general, appraisals overvalued the properties, the study found. Of the 2,076 properties it examined, 64 percent were appraised at values that exceeded the sale price, by a total of $1.4 billion, while 35.5 percent were appraised at less than the sale price, by a total of $661 million.

Read the rest of this entry »

It’s been over a month since Cost Cutting in 2011 launched, and I hope all of you avid cost cutters out there have enjoyed reading the series so far.  This week I’m going to take a break from your utility bill, and switch the focus to another significant cost: Property Taxes. Read the rest of this entry »

For years, tenant representation firms like Studley argued during their pitches to clients that by representing tenants and tenants only, they truly had their clients’ best interests at heart…there was no conflict of interests.  National giant firms like CBRE, Grubb & Ellis, and Cushman & Wakefield, who often represented both landlords and tenants, would always make the counterpoint that because they represented so many landlords, their data was better, and therefore they could provide their tenant clients with the most accurate and up to date information in the marketplace, and therefore provide the best deals in the marketplace.  This is a psychological battle that continues today, with no clear winner.  The victor usually is the one who can convince the client that their line of thinking is the logical one. Read the rest of this entry »