Exploring and Inspecting Properties

To effectively complete a commercial appraisal or multifamily housing rent comparability study we are required to conduct a thorough exterior and interior inspection of subject properties.  COVID-19 has presented challenges but has not stopped the FRG team from completing comprehensive site inspections.

In the late Spring, as the country began to slowly re-open our client requests increased.  FRG team members often take multi-day trips many times via air travel to complete site inspections.  In early June, FRG had a client commitment requiring an inspection of a property on the border of the states of Wisconsin and Michigan.  Having previously completed projects in the same area, I knew the fastest route to the site was via a one-hour direct flight from Cleveland to Milwaukee and 2.5-hour car drive north of Mitchell Airport to the site.

As I explored this travel option, I found direct flights were no longer available.  As well, my preferred airline only had two flights leaving each day with Milwaukee as the destination.  And the available flights had a total travel time of almost six hours.  Further, both flights would require an overnight stay in Milwaukee.

I needed to find another travel option.

I considered driving and discovered a one-way trip to the site from Cleveland would be a ten-hour drive.  Further, this option would require an overnight hotel stay.  At that time, many hotels, especially those in rural areas were struggling with remaining open and offered few amenities.  Thus, I did not see a hotel stay as a viable option.

I still needed to find another travel option.

I needed an option which would allow me to drive to the location, as well provide lodging and a meal prep solution.  I decided my best option was to rent a recreation vehicle or RV.   I found the airbnb for RVs – something I never knew existed.  I promptly booked a Class B Airstream for the trip.

The day before the scheduled inspection, I headed out on the open road.  After driving seven hours and crossing the Mackinaw Bridge I found myself in Ignace, Michigan, a town of less than 2,500.  And it was time to find a place to retire for the night, which presented a challenge.  At the time of my travel, COVID-19 state restrictions did not allow reservations or stays at RV campgrounds, thus I could either boondock – park on public land or dry camp – stay in a parking lot.  I decided to dry camp, with the options of staying overnight in the local police station, fire department or hospital parking lot.  I chose the hospital.  After dinner, a restful sleep, shower, and breakfast I was on the road again for 3.5 hours to the subject property to complete the scheduled inspection.

The RV turned out to be a great travel solution.  I was able to complete the site inspection as well as the comparable property inspections in relative comfort.  And as a bonus on my return I had time and diesel fuel, so I stopped along the way and explored – Hiawatha National Forest, Great Lakes Memorial Marina, Mackinaw City, and a sand dune.

I highly recommend RV travel as an affordable, comfortable, and safe travel option.

COVID-19

Feasibility Research Group (FRG) is a privately-owned real estate services company specializing in commercial real estate appraisal, inspection, and research.  Like many small businesses, FRG has been impacted by COVID-19.

However, the services that we provide are deemed essential by most states and thus we remain willing and able to assist you with your appraisal services and market research needs.

FRG practices social distancing.  Currently, all employees are working from remote locations.  Further, if an FRG appraiser is conducting an on-site inspection he/she will practice social distancing during the subject property inspection.

The FRG appraiser conducting the inspection will:

  • Maintain six feet distance from all property contacts
  • Request that only one person accompany the appraiser on the inspection
  • Not touch any fixtures, door handles, light switches, etc in the facility
  • Require unobstructed access and views of the interior of the building
  • Wear protective covering including but not limited to gloves and face masks

Further, as much as possible FRG appraisers will seek to conduct virtual interior inspections leveraging technology such as Skype and/or FaceTime*.

FRG will continue to monitor the coronavirus and its impact very carefully and provide updates as needed.

 

*NOTE: USPAP does not require a physical inspection. Appraisal Foundation Statement

The Appraisal Foundation, Fannie Mae, Freddie Mac and the Appraisal Institute have deemed virtual inspections to be acceptable.

 

Supporting Adjustments with Market Data

Appraisers are analysts, problem solvers, and decision makers who need to make a professional and informed opinion of the value of a property as well be able to communicate their decision-making process. One of the most important aspects of an appraisal is the integrity of the data and decision-making used.  Appraisals must explain clearly why adjustments are being made and clearly state the reasoning for how the adjustments are being made.

Here’s a look at the process FRG requires to validate adjustments when comparing properties in a residential appraisal:

Why?

An adjustment is needed when there is a difference between the property being appraised and a comparable property that would impact the sale or rent price

  • Differences that require adjustments to value include building size, number of rooms, condition, parking, or amenities like pools or fireplaces

How?

An adjustment provides an estimated dollar value of the difference

  • Appraisers must explain the reasoning behind that specific dollar value; what makes an adjustment worth a specific amount in that market?

Simply stating that an appraiser is experienced and therefore knows how much things would sell for is not an accepted justification for adjustments in sale price. Every appraiser has their own unique perspective and bias, and it is the responsibility of that appraiser to create as objective and informed an opinion as possible.

How can appraisers remove themselves from the process and create a reasoned explanation for differences in sale prices? Here is an example:

A single-family home with 1 bathroom in a suburb is being appraised, and a sale comparable has 1.5 bathrooms. The appraiser believes buyers in this market recognize the value of an additional half-bathroom. An adjustment will need to be made, but for how much?

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