Adventures in Property Inspections
As a MAI designated commercial appraiser, over the past 10 years, I have conducted a couple of thousand commercial property inspections, and each inspection is as unique as the commercial property appraisal. During an inspection I am typically accompanied by the owner or the owner’s agent. Most times the inspections are uneventful, and the owner/agent is helpful in providing insightful property, neighborhood and market area information needed to complete a comprehensive appraisal of the subject property. However, there have been occasions when the inspection becomes eventful –
The Helpful Owner
I do occasionally encounter owners who want to point out all the subject property’s current or planned amenities that they believe will significantly impact the value. Earlier this year I appraised an office park complex located parallel to a major highway in central Ohio. I was advised by the lender that the complex was fully leased and thus the income approach would be required. During the inspection, the owner shared that he thought it was vital that I consider the fact that he could have a billboard on his property which would generate additional income. Further, the owner spent a considerable amount of time sharing his marketing brochures to clearly demonstrate the type of tenants he would soon have in the complex. At the time of the inspection, the owner was the only tenant in the office complex, while the lender thought the property was fully leased.
The Fearful Tenant
On another occasion I was engaged to complete an appraisal of a federally funded senior housing property in Pennsylvania. This was my second time inspecting the property, my first inspection was for the completion of a capital needs assessment and was approximately 120 days prior. Upon my arrival for the inspection I was notified by the property manager that one of the tenants (let’s call her Carol) was terribly concerned that I was there to take her dog. As another tenant (let’s call her Diane) stated that during my first inspection she saw me taking notes and overheard me saying Carol’s dog was too big to live in the complex and would need to be removed from the premises. Diane made sure she shared this erroneous information with Carol. And apparently for 120 days Carol lived in horror that her beloved pet would be taken away. I had to assure the property manager that the information Diane shared was not accurate and that was not the purpose of my inspection. During the inspection, I found out that Carol and Diane have an on-going feud which I assume is still going strong.
The Vital Inspection
Recently, I was engaged to complete a rent comparability study (RCS) for a multifamily housing property in Wisconsin. The property information provided stated the subject property consisted of 1, 2, 3, and 4-bedroom apartment unit types. Prior to the inspection, FRG’s research team armed with the subject property information began an online search for comparable 1, 2, 3, and 4-bedroom unit type apartment buildings. Having this information prior to the inspection would enable me to efficiently visit each of the potential comps after my inspection of the subject property. At the inspection, I uncovered that the subject property consisted of 1- and 2-bedroom apartments unit types and 3- and 4-bedroom townhouse unit types. This discovery essentially turned my one RCS assignment into two RCS assignments, thus requiring a return visit to Milwaukee after a 3- and 4-bedroom townhouse rental comp search was completed.
USPAP does not require an inspection of a subject property and if an inspection is requested by a lender, does not require that the appraiser complete the inspection, photograph the subject property or the comparable properties. For every commercial appraisal that I complete I personally conduct a comprehensive exterior and interior inspection. I have found that inspections can serve to confirm a subject’s condition, size, functionality and use as well identify repair or renovation needs. And let’s not forget that an inspection can turn an uneventful day into an eventful one.