Book 2 - Appraisal Institute of Canada

taken, and the information you have received
and how it figures into your appraisal. There is
nothing unreasonable about using reasonable
sources, but you still should identify the source
of the information relied upon and the steps you
took to obtain that information.
Another appraiser I assisted recently
thought he was safe in relying upon the real
estate agent’s listing for the triplex he was
appraising. That would have been fine, if he
had made notation of the source in his report.
Instead, he simply credited the rates in his
report without any qualification. He had not
done any independent review of the figures
himself. They later proved to have been made
up and the realtor was part of a fraud. He could
not find solace in the limiting conditions of his
report, because he did not give the reader any
caution as to the source of this information. A
simple warning of the source and that he took
no responsibility for the accuracy of the numbers
would have been more helpful. Even better yet
would have been a quick word with the tenants
or a review of the leases, if the appraiser’s goal
was to protect their client/ lender.
3. Ignoring sales that do not fit
As someone who defends appraisers on a regular
basis, I can never understand why appraisers
ignore sales that occur on the same street as
property they are appraising. I always hear
excuses such as “But it was a different type of
house” or “I did not see that one in the MLS,”
which can never hold up under any scrutiny.
The whole point of being an appraiser is that
you have the ability to adjust prices to arrive at
a reasoned conclusion of value. If an appraiser
chooses to rely on his judgement and ignore the
obvious, it increases the likelihood that his future
judgements will be considered unreliable by
those who expect that the obvious should always
be taken into account.
I am always reminded of the appraiser who
ignored the sale two doors down because it did
not have a garage. Instead of allowing a $20,000
adjustment to make the properties similar (which
were otherwise relatively similar), he felt more
comfortable in assessing a value $100,000 in
excess of the neighbouring property. No excuses.
4. Special properties need special
attention
Office buildings often seem a dime-a-dozen, but
their specific uses and the specific markets that
they attract often mean special consideration
must be given to value to understand what
might motivate a willing purchaser or lender. I
recently saw office building comparables used
in a geographic area when, in fact, the use of
the buildings was so different that it skewed the
values involved. The first building was located
adjacent to a downtown hospital, in other
words, a perfect location for physician offices
and pharmacies. The second building was a mile
away, but next to a downtown night club. Both
buildings had similar attributes, but the value of
the near medical facilities building had a great
deal more utility and a great deal more value
overall, because of the rent levels being paid. In
the absence of some indication of the different
uses of these buildings, a client reviewing the
background facts would have no information,
and a comparison of one building against the
other would not be accurate. Reports should
provide some analysis of comparables to allow a
lay person to understand the logic.
5. Condition is important to note
These days, the most consistent feature in claims
for deficient recoveries in power of sales is the
condition of the property at the time of sale, as
opposed to condition at the time of appraisal.
Many appraisers do not take enough photos or
make enough notations of condition at appraisal.
When a loan goes bad, chances are the occupier
or renter will give up and house pride evaporates.
Homes are often left in poor condition, damaged
and uncared for. Power of sale sometimes takes
months and neglect becomes the most telling
feature of the property.
Appraisers must note condition – bad,
good or indifferent. Too often, appraisers do
not protect themselves by simply checking the
box ‘average.’ A notation such as “the property
was clean and cared for, no damage was noted”
would be helpful, if supported by photos that let
the appraiser’s report stand unchallenged when
faced with a $80,000 drop in value two years
later, when the property has suffered neglect and
damage, such as flooding, vandalism and other
problems.
These are a few of the many particular issues
that are causing appraisers to spend needless
time and effort in defending their work, and all
could have been circumvented. By following the
above suggestions, you may be able to avoid
being the target of lenders who seek to make you
their own insurance policy for uncertain times or
poor lending risks.
Newfoundland is calling
Join us in the Supreme Court of
Newfoundland before the former Chief
Justice of Newfoundland, the Hon. Mr.
Justice T. Alex Hickman, QC, as once again
the appraisal profession goes on trial in
FPLICL’s presentation of ‘You Be The Judge.’
Ably assisted by our insurance broker and
sponsors, our team of lawyers, adjusters
and appraisers has spared no effort to
present you with a court experience that
you will not forget. If you regularly go to
court, or if you want to know what you are
missing, our presentation will outline the
issues and the drama that such court cases
provide. Many of those who attended our
last Mock Trial in Charlottetown believed
this was one of the most entertaining
sessions of the conference. Our hope is
that you will be entertained and educated
and given the opportunity of determining
the outcome as you are invited to ‘BE THE
JUDGE.’
Canadian Property Valuation Volume 52 | book 2 | 2008 Évaluation Immobilière au Canada 27