Matrix Blog

Posts Tagged ‘Commercial Grade’

[Commercial Grade] Colorado AG Just Says No…To Appraiser Pressure

January 8, 2007 | 9:25 pm |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. John looks forward to the day when appraisers are not seen as a nuisance, and its sooner than you think.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays on Mondays, one of the smartest guys I know. …Jonathan Miller


The new year started on the right note. On Monday, the Attorney General of Colorado, which has had the highest foreclosure rate in the nation for eight consecutive months, proposed legislation [Denver Bus Jrn] that would:

  • Prohibit mortgage brokers from coercing or intimidating an appraiser in order to obtain an artificially inflated appraisal
  • Prohibit anyone else involved in the process from improperly attempting to influence the appraiser
  • Prohibit the appraiser from knowingly submitting a false appraisal

Of course state licensing and ethics rules have never permitted the appraiser from knowingly submitting a false appraisal, though in reality there is little “teeth” in the enforcement.

The first conviction for appraiser coercion would be a misdemeanor, while a second conviction would result in a felony. Though I have no idea the mechanism the state intends on using to “prohibit” such coercion and intimidation, it’s a start, and it brings the issue front and center.

It is truly dj vu all over again. Nearly 20 years ago appraiser fraud was accused of almost single-handedly bringing down the S & L industry in the US. With foreclosure rates on the rise again, I expect to see more attention paid to the role of the appraiser this coming year.

Then maybe just maybe appraisers will be hired for their professional expertise, and not solely on the basis of the lowest fee and quickest turn time.

Tags: , ,


[Commercial Grade] The Perfect Moment To Get

December 15, 2006 | 7:49 am |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. John gets that perfect moment, and now his life is complete, well kind of.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays on Fridays, one of the smartest guys I know. …Jonathan Miller


A requirement in the Real Estate Valuation and Analysis class that I teach at NYU is to write a complete, self-contained appraisal as part of a group project. Three or four bright, motivated graduate students writing one appraisal of a small income property over a ten-week period from start to finish, with all three approaches to value. The purpose is to let the class apply the theory they learn in class to the real world. At the end of the semester, the groups present their reports to the class, explaining their methodology and conclusions. I stress the development of good market dataspeak to brokersverify the sales.

One of my students, an account officer in the real estate group of a major lending institution, came up to me in the beginning of class on the day of the presentations and said that I will never complain about the appraisal fee or ask for a two-week turnaround time againthat was so much work! Yes it is! And we usually do it alone, not in groups, and in 2 weeks!

Finally, an account officer got it!!…It was a perfect moment!

And it dawned on me that that’s the answer to the dilemma that we’re inthe appraisal lobbyists in Washington must get enacted into law a requirement that all bank lenders spend three months actually going into the field to do research and write an appraisal. Perhaps then, they will get it.

Tags: , ,


[Commercial Grade] Looking Forward (To Not Being A Nuisance)

November 29, 2006 | 12:24 pm |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. John looks forward to the day when appraisers are not seen as a nuisance, and its sooner than you think.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays on Wednesdays, one of the smartest guys I know. …Jonathan Miller


Heading into the end of 2006, we find ourselves trying to gauge what 2007 will bring in the commercial real estate market, and by extension, what it means for the commercial appraisal profession. Will we be working at the same torrid pace that we did throughout the year, or will we be dusting cobwebs off the ceilings?

In his article Banks are Pulling the Plug on Loans [SA], Bill Cara provides some insight. He reminds us that it is the bankers who regulate the money supply for commercial real estate loans, and they are pulling back. In a Senior Loan Officer Opinion Survey, 36.5% of the bankers surveyed reported that loan quality is likely to deteriorate, and 41.8% reported that loan standards have tightened. This suggests lower commercial loan volume from the banks in the near future.

More restrained lending is not a bad thing. We “old timers” remember what happened in the late 80’s when banks couldn’t push money out the door fast enough. For borrowers it’s been a “buyer’s market” and they got to call the shots with the lenders (including, remarkably, which appraiser to use). I look forward to borrowers no longer taking their ability to finance for granted. Means that they’ll be a little more responsive to our requests for property data, and not treat the appraisal process like a nuisance.


Tags: ,


[Commercial Grade] No Air Rights For Bad Businessmen

November 16, 2006 | 8:27 am |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John steals my thunder about being a terrible businessman and tackles air rights.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays, one of the smartest guys I know. …Jonathan Miller


I am a terrible businessmana good appraiser, mind you, but a terrible businessman. I have had dozens of phone calls these past few years from potential clients who wanted to hire me for an appraisal of their “air rights” and, one by one, I talk them out of it.

I explain to them that, in order for me to report a “market value” there needs to be a market. In New York City, air rights or excess development rights can only trade to an adjoining property owner. So in most cases there is a potential market of three: the site to the right, the site to the left and the site in back of you. Further, in most cases, one or more of those sites are already built to their maximum development potential and, therefore, would not be a suitable receiver site for the air rights. Therefore, in most cases, there is a market of one. Can’t estimate a market value for a market of oneby definition, that is an “investment value.”

I am usually called to appraise these air rights because someone has already made an offer to buy them and the caller wants to see if it’s a fair offer. I explain that with a market of one, fair is whatever they decide. It all comes down to how badly they want to sell and how badly the buyer wants to buy. Just because the person across the street sold his air rights for 50 cents on the dollar (i.e. 50% of the underlying land value), doesn’t mean that you should sell yours for that much. You may be able to get more, or you may get less. The circumstances of each air rights transaction is different.

I offer to help on a consulting basis but I tell them that I can’t write a market value appraisal. In order to help in their negotiations I tell them we would need to identify what their other options areand what the seller’s other options are. At this point they usually thank me for having spent 20 minutes on the phone with them. I hang up realizing that it would have been so much simpler and the caller would have been much happier if I just took on the projectwrong, but simpler. I am a terrible businessman.

[…but a good appraiser -ed]


Tags: ,


[Commercial Grade] Massey Knakal Income Property Market Report, prepared by Miller Cicero, LLC, released

November 6, 2006 | 12:01 am | Public |

Commercial Grade is a post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. John just created and completed a new study analyzing the income property investment market in New York City in a way thats never been done before. Its a very exciting new tool for investors.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Mondays, one of the smartest guys I know. …Jonathan Miller


This week the first Massey Knakal New York City Income Property Market Report [pdf] was released. This is a first of its kind study that I researched and authored on behalf of Massey Knakal, one of the most active investment sales brokerage firms in New York.

Appraisers are, by nature, data hounds, and this study culls data from a variety of sources: Massey Knakal’s sales transactions, Miller Cicero’s own database, and all publicly recorded transactions as reported by Property Shark. And while there were no real surprises in the results (values continued to increase in the first half of 2006 across property types and in all of the submarkets tracked), the trend lines are truly fascinating (or at least I think so).

This will be an ongoing study, to be released every six months. My hope is that it will be another tool for all to better understand the nuances of New York’s complex income property investment market.

Massey Knakal New York City Income Property Market Report [pdf]
Report Methodology [Miller Cicero]


Tags: , ,


[Commercial Grade] Its The Market, Stupid!

October 12, 2006 | 6:24 am |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John begs appraisers to get out from behind our computers and talk to commercial brokers about whats going on in the front lines.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays, one of the smartest guys I know. …Jonathan Miller


It’s all about the market. You’ve heard it beforewe appraisers don’t make the market. Rather, we are impartial observers of the marketplace. What I think about a particular property doesn’t really matter. My appraisal must reflect “the market’s” thinking. A very fine, but critical distinction.

It is important, therefore, that appraisers stay in tune with the market. If I find a comparable sale that was recorded yesterday, it most likely closed two months ago and went into contract two months before that. This sales price, therefore, likely reflects the market mentality at least four months ago. In most cases we don’t find a sale that was recorded yesterday, but rather one, two or three or more months ago and, in reality, it reflects a market a half year ago or more.

With rapidly changing market conditions the appraiser runs a real risk of missing the boat if he/she does not make broker interviews part of the normal appraisal process. Not always easy, and some don’t want to be bothered, but my experience with the brokerage community is that if you act as a professional and approach a broker as a professional, they’ll spend some time with you.

The broker interview tells you what’s happening in the market now, not six months ago. What kind of demand are you seeing? What kind of offers are being made? It puts a sales transaction in a meaningful context and gives additional insight into what’s really happening that you don’t get from staring at a computer screen.

Tags: ,


[Commercial Grade] Being a Good Citizen

October 2, 2006 | 12:01 am |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John talks gets annoyed with footing the bill for someone else’s cost.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Mondays on Thursdays, one of the smartest guys I know. …Jonathan Miller


Several weeks ago I received an email from Citizens Bank saying that in order for them to comply with the privacy act (the Gramm-Leach-Blilely Financial Services Modernization Act) they have contracted with an outside service for the secure online transmission of appraisal and environmental reports.

While they note that the cost of maintaining a web-based service to securely transmit customer and prospect information related to environmental and appraisal due diligence should ultimately be incurred by such customer or prospect, they are passing this cost to their “vendors” (i.e., us!). Since we are being asked to pay for their secure service, I am puzzled as to how this cost will be passed on to the customer.

The amount that I am being asked to pay is a function of the volume of work that I did for the bank last year. They note again that this cost will ultimately be absorbed by customers and prospects. Still not clear howwill they simply tack on the charge ($50) for the secure service to each agreed upon fee?

I need to return an executed form to the Bank with my payment, or I can refuse to make payment, and consequently acknowledge my future inability to continue to provide environmental/appraisal services directly to Citizens.

In other words, if I refuse to subsidize the cost of my client’s privacy act compliance, I am off the approved list. Something doesn’t sit right with this maybe I am over-reacting. Though none of my other clients have asked for such a subsidy, perhaps this is just the beginning, and I will soon be cutting dozens of checks to other banks, as well.

I would appreciate any feedback that Soapbox readers could give me because I am truly at a loss as to whether I should comply, or simply take them off my “approved client list.”

Tags: ,


[Commercial Grade] Appraisers Can Be Politically Correct

September 15, 2006 | 7:26 am |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John goes all political on us.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays on Fridays, one of the smartest guys I know. …Jonathan Miller


In an earlier post I noted how appraisers have historically used their skills to launch into other real estate fields, say investment banking or asset management. With election season upon us, it seems that a number of appraisers have also launched political careers. I’ve noticed a flurry of appraisers entering politics lately around the country. To name just a few:

  • [Douglas Gablinski, partner in AppraisalRI]((http://www.projo.com/eastbayandmass/content/projo_20060913_blga13.354d1d0.html), wins a house seat.

  • [Suzanne Evans, a real estate appraiser from Allentown, PA]((http://www.delmarvanow.com/deweybeach/stories/20060913/2327951.html), running for town council in Dewey, Delaware

  • Jenny Flanagan of Barrington, MA, a commercial real estate appraiser, just ran for state senator (don’t know if she won).

Hey, if we can reconcile landlords’ expense statements then we can certainly balance a budget and what better training to serve your constituency than to spend years learning how to make clients happy and often being the bearer of bad news?

None of these candidates are in my district, but anyone that can reconcile the three approaches to value gets my vote!

[What I about me? I ran for and held public office a few years ago in my town. 😉 – JM]


Tags: ,


[Commercial Grade] Appraiser SOS (In 2 Days)

August 24, 2006 | 12:01 am |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John says that valuation is an opinion and provides suggestions on what not to name your appraisal firm.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays, one of the smartest guys I know. …Jonathan Miller


In a recent article on Myrtle Beach Online, the Associated Press reports that Appraiser Overseer in Trouble. It turns out that an appraiser on the state appraiser licensing board is accused of overvaluing some vacant land. The land was valued by the overseer at $45k an acre and sold later for $21,300.

What’s interesting is that the board does not allege any fraud in thecase, only that the value was incorrect. As a result, his case will be tried by an arbitrator who will decide if any punishment is warranted.

I myself was recently involved in a consulting assignment with an investor who wanted to dispose of several assets. When they finally went to market by a large reputable brokerage firm, the bids were nearly 20% below my estimate. Not easy for me to admit, but the evidence suggests that I was wrong.

I am all for coming down hard on someone who has committed a standards or ethics violation; I’m just not sure if “getting it wrong” warrants punishment if best efforts are made to get it right.

I think the biggest thing that this appraiser will have going against him in his hearing is the name of his firmTwo Day Appraisals. Its kind of hard to make the case that you spent enough time doing your market research when your whole business model is based on quick turns!


Tags: ,


[Commercial Grade] Minimum Wage: Scope of Work Revisited

August 15, 2006 | 2:08 pm |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John revisits everyone’s favorite topic: Scope Of Work.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays Tuesdays, one of the smartest guys I know. …Jonathan Miller


I recently bid on a large assignment for a major lender. Lets say the collateral for the loan is mixed use bldg with 150+ tenants. Although the solicitation for a “bid” (sorrycan’t use that word in this context without cringing) was via a simple email, being mindful of our new scope of work rules, I asked my client the nature of the leases in order to determine whether a direct cap analysis would be appropriate or whether a discounted cash flow model was warranted. He hadn’t seen the leases but indicated that a DCF analysis should be included. Also, an accelerated delivery was being requested.

The results: there was a 300% range in bids, with the low fee being more like what you might expect for a walk-up apartment building. This to me is a glaring example of how these new USPAP “scope of work” rules are going unheeded, and the need for more communication upfront. With such a range, isn’t it clear that these appraisers are contemplating a very different scope of work. Or is the appraiser with the low bid just pricing out appraisal services based on the minimum wage?


Tags: ,


[Commercial Grade] If It’s Thursday, This Must BeCanarsie?

July 27, 2006 | 10:51 am |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today John talks about the misuse of the word “expert”.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays, one of the smartest guys I know. …Jonathan Miller


I remember going on a job interview many years ago, where the interviewer, the owner of a small fee shop, chewed me out for calling myself “an appraiser” with only two years experience. He snarled that an appraiser is one who gives an “expert opinion” on property value. He scared meI didn’t want to work for him!

Some 20 years later I still vividly recall this interview though, because it recently dawned on me that he was absolutely correct. This business (profession?) is full of state licensed young bucks that appraise a shopping center in one state on Monday, then head hundred of miles away on a Thursday to appraise an office building in a totally different market. Getting paid on a “fee split” basis (time is money!) they race through the market snapping photos of comps that they may have begged off of a local appraiser, then run to town hall to look up the assessments and zoning data.

Experts? Hardly. They are going through the motions of “the appraisal process”, but the majority of these appraisers have neither the experience or market knowledge to render a truly “expert” opinion. I know..I used to be one of themand I can tell you at the end of every assignment I would pray that I didn’t miss anything critical in my market blitz.

The internet has put market data in easy reach of all appraisers..even if they are thousands of miles away. However, there is no substitute for being a real local expert, having the years of experience and intimate knowledge of the local market.


Tags: , , ,


[Commercial Grade] Form Fillers We’re Not

July 20, 2006 | 3:39 pm |

Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. Today he gets a few forms off his chest.

Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is, on Thursdays, one of the smartest guys I know. …Jonathan Miller


The residential appraisers are used to form-filling (no, I am not calling you a bunch of form-fillers!) [but most residential appraisers really are -ed]. But you spend your days with the 1050’s, 1040’s, or whatever they’re called. We commercial guys, however are more abstract thinkersthat’s probably why we get so bent out of shape when, after completing a 90 page written report, we then need to complete the client’s form.

One major lender (one of the most “fee sensitive I might add”) requires three forms: one summary of the entire appraisal, another to forewarn of “environmental” issues (“did we observe any paints or solvents at the time of inspection?”) and then lastly to “risk rate” the property (e.g., give a score for “tenant appeal within the local market”). I honestly have no idea what kind of liability I’m accepting when I fill out these formsdoes the lender use the appraiser’s inspection in lieu of a phase 1 environmental audit?

My favorite form is the most common among lenders…the one that requires the appraiser to check off and identify by page number such things as:

  • “Interest appraised is identified” (yes___ no___ page no. ____).
  • Appropriate support for value via income approach (yes___ no___ page no.____).

I’ve always wanted to knowDoes anyone really check off “NO” for that?

The forms are, in my opinion, one of the feeblest and most futile attempts to improve appraiser quality. To me, and of course I am biased, they are a colossal waste of timeand not just a little demeaning.

Heyyou knowit feels really good to get this stuff off my chest!


Tags: ,

Get Weekly Insights and Research

Housing Notes by Jonathan Miller

Receive Jonathan Miller's 'Housing Notes' and get regular market insights, the market report series for Douglas Elliman Real Estate as well as interviews, columns, blog posts and other content.

Follow Jonathan on Twitter

#Housing analyst, #realestate, #appraiser, podcaster/blogger, non-economist, Miller Samuel CEO, family man, maker of snow and lobster fisherman (order varies)
NYC CT Hamptons DC Miami LA Aspen
millersamuel.com/housing-notes
Joined October 2007