Commercial Valuation Division - www.OCcommercial.net

Provided on this page is cursury information on Pettifer & Associates, Inc's commercial and investment property capabilities.  Our commercial appraisal division can be accessed directly at www.OCcommercial.net.  A No Cost Fee Proposal on any type of  commercial property can be requested at our affliated commercial appraisal web location.  

 

OCappraiser.net and OCcommercial.net together provide almost an all-inclusive property  capability with a broad spectrum of  appraisal reporting formats that are all compliant with the Uniform Standards of  Professional Appraisal Practice (USPAP).  There is much discussion and disagreement amongst commercial appraisers  on the appropriate report format and  the development of  the appraisal for a specific assignment.  Some appraisers have misinterpreted USPAP guidelines and complete the same level of report on every assignment, resulting in an appraisal that sometimes contains excess cost  and  boilerplate not necessary or wanted for an  assignment.   On the other end,  many appraisals lack the detail and local market analysis narrative necessary so users can make accurate and intelligent decisions.  Even experienced appraisers have admitted to not understanding the  two types of appraisals than can be prepared by a licensed appraiser.  The confusion of some appraisers is heightened because there are also three reporting formats for each appraisal type.  Displayed below are the three types of appraisal reporting formats.  The three appraisal formats can be used in conjunction with a Limited Appraisal or a Complete Appraisal.   

  

USPAP defines two types of report development.  Technically speaking, a Complete appraisal is one that does not invoke the "Departure Rule" of USPAP.    Complete Appraisals are usually necessary for  mortgage loan transactions, IRS tax reporting and legal valuation services,  A Complete report contains all the approaches that are appropriate for the valuation of a specific property type.    An approach that is not applicable to a specific property type and not developed and would still be considered a Complete Appraisal.  For instance, the cost approach was not relevant in the valuation of a 50-year retail building and was not developed.  Not  developing the cost approach does not invoke the Departure Rule because  it was not a relevant approach for that specific  property. 

 

Limited use appraisals invoke one or more USPAP Departure Provisions.     Limited Appraisals can be a valuable tool for making quick buying /selling decisions and mortgage financing with low loan-to-value ratios.  Generally,  Limited Appraisals are appropriate reports for the internal use of the client and no other intended uses.  The level of reliability of a limited report can vary, but can be a valuable tool for specific clients real estate needs and used the right conditions.    If the client is familiar with the property, ordering a limited use appraisal will result in a more reasonable cost and shorter turnaround

 

Are you with us so far?   Don’t be anxious about understanding the connection to development, format, departure rule, limited, complete, restricted, summary and self-contained.  OCappraiser.net will honestly recommend the most appropriate appraisal and reporting format for the intended use and  potential users.  Please contact our office if you have any questions or need additional explanation on the most appropriate appraisal type and format.    

Appraisal Format Options
SELF-CONTAINED	SUMMARY	RESTRICTED
Identify and describe the real estate being appraised	Identify and provide a description of the real estate to be appraised	Identify the real estate being appraised
State the real property interest being appraised	Same as self-contained	Same as self-contained
State the purpose and intended use of the appraisal	Same as self-contained	Same as self-contained
Define the value to be estimated	Same as self-contained	State and reference a definition of the value to be estimated
State the effective date of the appraisal and the date of the report	Same as self-contained	Same as self-contained
State the extent of the process of collecting, confirming, and reporting data	Summarize the extent of the process of collecting, confirming, and reporting data	Describe the extent of the process of collecting, confirming, and reporting data
State all assumptions and limiting conditions that affect the analyses, opinions, and conclusions	Same as self-contained	Same as self-contained
Describe the information considered, the appraisal procedures followed, and the reasoning that supports the analyses, opinions, and conclusions	Summarize the information considered, the appraisal procedures followed, and the reasoning that supports the analyses, opinions, and conclusions	State the appraisal procedures followed; state the value conclusion and reference the existence of specific file information in support of the conclusion
Describe the appraiser's opinion of the highest and best use of the real estate, when such an opinion is necessary and appropriate.	Summarize the appraiser's opinion of the highest and best use of the real estate, when such an opinion is necessary and appropriate.	State the appraiser's opinion of the highest and best use of the real estate, when such an opinion is necessary and appropriate.
Explain and support the exclusion of any of the usual valuation approaches	Same as self-contained	State the exclusion of any of the usual valuation approaches
Describe any additional information that may be appropriate to show compliance with, or clearly identify and explain permitted departures from, the specific guidelines of [USPAP] Standard 1	Summarize any additional information that may be appropriate to show compliance with, or clearly identify and explain permitted departures from, the specific guidelines of [USPAP] Standard 1	Include a prominent use restriction that limits reliance on the report to the client and warns that the report cannot be understood properly without additional information in the work file of the appraiser, and clearly identify and explain any permitted departures from the requirements of Standard 1.
Include a signed certification in accordance with Standards Rule 2-3	Same as self-contained	Same as self-contained
Most detailed format usually completed for major investment properties or complex properties or assignments.  Requested more often for legal or property dispute assignments.  Can be “overkill”  and some appraisers include pages and pages of  marginally useful boilerplate or unnecessary text to increase narrative thickness.  The greater level of detail and analysis should provide superior comprehension to the reader.	Most Common Appraisal Format used in mortgage lending and for a variety of other Intended Uses and Users.   Common for SBA lending assignments.  The detail contained in our firms’ Summary Reports are equal to many of our competitors Self-Contained Formats.  Although we prefer a narrative format, this type of report can also be produced on the UCIAR Commercial Form.   Freddie Mac Apartment 71B & 71A Forms are usually completed as Complete, Summary Appraisals.	Only used for assignments for a single with well informed user and cannot be used for other purposes.  Can be completed at a significantly lower cost  if the user understands the limitations.  Most applicable for non-complex commercial properties or assignments requiring fast completion.  Rarely used for mortgage financing except for  bank internal use.
Most Costly Report	Most Cost Effective	Lowest Cost Report
Source: Appraisal Report Options by the Appraisal Institute.

 

The combinations of appraisal development and reporting options are displayed below.   The major difference between the Self-Contained, Summary, and Restricted Use appraisal formats is the level of data contained and reported to the client. 

 

1. Limited Appraisal, Self-Contained Format
2. Limited Appraisal, Summary Format
3. Limited Appraisal, Restricted Format

 

4. Complete Appraisal, Self-Contained Format
5. Complete Appraisal, Summary Format
6. Complete Appraisal, Restricted Format 

 

Of the appraisal report options above,  Format Three would represent the least detailed report, lowest price format and would only be appropriate for a limited number of users or for bank internal use only.  Format Four represents the most detailed narrative report option,  most costly report format,  comprehensive analysis is not necessary for most assignments with a limited number of  users willing to pay the costs for an appraiser to prepare a Complete, Self-Contained Appraisal. 

 

The most common type appraisals prepared by commercial appraisers is Format Five, a  Complete Appraisal in a Summary Format.  Approximately 75%  of  our appraisals are Summary  Narrative Reports.  A Summary  Report can cast a wide shadow amongst  appraisers.  Some appraisal firms define “Summary Appraisals”  as reports with very little detail to the point that the user is provided with the value opinion, sale comparables  and justification of the appraisal process.   Many summary appraisals OCcommercial.net has reviewed contain such brief commentary, diluted analysis and useless boilerplate that  there is the question if the report provides the user any insights other than the bottom line value.  For some assignments that might be acceptable.  However, www.OCcommercial.net's clear focus is to provide our clients with added value analysis and solutions to real estate problems, not just opinions of value. 

 

Our firm’s summary reports often contain the detail that would normally be contained in our competitor’s Self-Contained Appraisal Report.  OCappraiser.net  appraisers do not limit their  analysis due to the format type described in the engagement letter.  If the appraisal requires an expansion of  our analysis to provide the client with the information necessary for them to make intelligent and forward thinking real estate decisions.  Consequently,  our summary appraisals are closer in depth to self-contained appraisals in the sections of the report that are critical to market forces impacting value.     

 

Summary commercial reports can be both form reports and narrative appraisals.  Apartment building appraisals are prepared on the industry standard FHMLC  71A and 71B Apartment Forms.  Larger complexes and mixed use apartment / retail properties can be developed in a narrative format. 

 

We complete small commercial owner-user and investment property with several tenants on the UCIAR Commercial Form or a condensed narrative.  These appraisals are often non-complex properties for SBA financing.  Our preference for commercial property appraisals , other than the most non-complex properties, is to develop narrative  appraisals.    The majority of assignments can easily be developed in a Summary narrative format.  Complex properties or institutional quality buildings are usually developed  with the detail  as  Complete, Self-Contained Appraisals.  Large multi-tenant investment property can be developed as Summary or Self-Contained Appraisals depending on the intended use.   The remaining 25% of our commercial appraisals is a mix of  Self-Contained and Restricted Appraisals.    Restricted appraisals can be an option for assignments that have one well informed intended user.   A lower cost restricted appraisal is often a good option for sellers wanting to determine a reasonable listing price or for assisting buyers in sale price negotiation or buying decesions.  A Restricted Appraisals are often the best valuation product for clients needing a bottom line value opinion or range of value and they need it FAST.  

  

 

REPORT TYPES AND APPROXIMATE RANGE OF COSTS

 

Property Type	Limited / Complete plete  Restricted Appraisal	Limited / Complete Summary Appraisal	Limited / Complete Self-Self-Contained Appraisal
Industrial: *Owner Occupied or 1-3 Tenants   *Multi-Tenant or Industrial Park	Value under $1 million $1,500     Under $1 million, 3-10 Ten. Not Appropriate	Value $1-$2.5 million $2,500 to $3,500     $1-2.5 million, 2-10 Ten. $3,200 to $4,500	Value over $2.5 million $3,000 Plus     $2.5 million+, over 10 Ten. $4,500 Plus
Office/Retail *Owner-Occupied or 1-3 Tenants/Store or Commercial Building   Multi-Tenant Business Park or Shopping Center	Value under $1 million $1,500     Under $1 million, 3-10 Ten. Not Appropriate	Value $1-2.5 million $2,500 to $3,500     $1-2.5 million, 2-10 Ten. $3,500 to $4,500	Value over $2.5 million $3,500 Plus     $2.5 million+, over 10 Ten. $4,500 Plus
Special Purpose   Schools, Churches, Gas Stations, Motels,  Fast-Food Restaurants, Vacant Land, Ground Leases,  Partial Interests and Discounts.	Rarely Appropriate	$3,500 Plus	$4,000  Plus

 

 

Apartment Appraisals		4-Page 71B Form (Moderate Detail)	8-Page 71A Form (Most Detailed Form)
Apartments:   5-12 Units   13-25 Units   25-60 Units   Over 60 Units		.   $1,500-$2,200   $1,500 to $2,000   $2,000 to $2,500   Not Applicable	Not Applicable   $1,800-$2,500   $2,300-$2,500   Call for Quote on 71A or Narrative  Report

 

The above fees are general ranges and can vary greatly depending the geographical area and distance, property complexity, and the inclusion or exclusion of  any approaches to value (departure).  Mortgage loan appraisals will usually be at the lower fee range.  Please call for a quote on unusual properties, new construction and rush jobs.     More complex assignments and commercial properties can reflect higher fees. Simple commercial properties are sometimes quoted below the typical range.  Vacant commercial land and more difficult commercial assignments that may opposing parties, divorce settlemnt or possible litgiation necessitate higher fees than typical mortgage loan appraisals.    Please go to our affiliate site www.OCcommercial.net  for more information on commercial assingments.  

Scott Pettifer, MAI, SRA