Author Archives: Patrick M. Lamb, MAI

About Patrick M. Lamb, MAI

Patrick M. Lamb currently stands as President/CEO of Lamb Hanson Lamb Appraisal Associates, Inc. (LHL). This makes him the fourth consecutive generation of his family to operate a local appraisal firm, and the third consecutive generation of Appraisal Institute designated members. His father Michael B. Lamb, MAI/SRA and grandfather Berkley A. Lamb, SRA both served as past presidents of the local chapter. In addition, Patrick’s brother Ian M. Lamb achieved his SRA. Mr. Lamb is a Washington State General Certified appraiser and has been providing valuation services since 2001. He holds a bachelor’s degree from the University of Washington in Business Administration. He is involved in performing a full spectrum of commercial and residential appraisal services to clients located throughout Western Washington and the Greater Pacific Northwest. Specialties In addition to providing strategic direction and service to clients, Patrick also performs technical components of the firm’s valuation projects, conducts interviews, reviews appraiser’s work, composes appraisal reports and ensures compliance with latest guidelines. He manages and performs complex assignments involving multiple locations and/or financial interests. His education background and experience in valuation encompasses all major appraisal disciplines.

Examining Economic Curability of Condominium Construction Defects

In recent years, following the housing market collapse, there have been an increasing number of local condominium Home Owner Associations (HOA’s) discovering wide spread construction defects impacting the common areas of their complex, as well as unit interiors. This is reasonably the fallout of the unsustainable and unmanageable housing boom over the last decade.

The housing boom was a primary driver of growth in multi-family and condominium style ownership, especially for first time home buyers. Consequently, the organization and management of homeowner associations has become a big topic for all market participants, including buyers, sellers, banks, developers, and even politicians. Washington State passed a law in 2007 requiring associations to perform replacement reserve studies to ensure potential buyers have better information into whether there is a need for special assessments and/or other large capital projects that may impact their decision to buy. This was just one of many steps taken from a legal standpoint to add transparency and accountability to association management. In addition, the appraisal industry is beginning to recognize the importance of inquiring about reserve accounts and investigating the soundness of an association’s board.

In cases we’ve analyzed, construction defects have had a tremendous impact on a properties marketability and highest and best use, often resulting in a diminution in value. In one case, an entire high-rise apartment building in downtown Seattle was demolished as a result of physical defects being so great that they were beyond repair. In most cases, defects can be cured, yet associations are forced to act quickly to correct imminent problems at their own expense, and can end up in drawn-out litigation cases with the builders to collect damages. This is when the appraisers get involved.

The style of appraisal required to solve a construction defect problem is similar in nature to a partial taking in a condemnation case. The before, or as unimpaired, value of the property is estimated assuming the improvement was constructed in strict adherence to the building specifications and all applicable building codes. The after, or as impaired, value of the property is then estimated with the improvements in their “as is” condition. The difference between the before and after values is the damage suffered by the property owners.

In general practice, the loss of value caused by a construction deficiency is measured by the cost to cure the deficiency, as long as the cure is “economically feasible”. Determining the economic feasibility of a construction defect project that impacts a condominium association is more complex than projects that involve a single property held in traditional fee ownership. A condominium is a form of fee ownership of separate units in multi-unit buildings that provides for formal filing and recording of a divided interest in real property. The condominium owner possesses a three-dimensional space within the outer walls, roof or ceiling, and floors and, along with other owners, has an undivided interest in common areas; (e.g., the land, the public portions of the building, the foundation, the outer walls, and the spaces provided for parking and recreation). The owners of units in a condominium project usually form an association to manage commonly held real estate in accordance with adopted bylaws. The expenses of management and maintenance are divided pro rata among the owners, who pay a monthly fee.

Therefore, issues relating to common area elements are under the authority of the association board, and its members through voting rights. It is reasonable to assume a prudent HOA will require that any common area construction defects be cured to ensure the safety of the community and the durability of the association’s assets.

Through legal recourse, the association can attempt to recapture monetary damages to pay for the necessary replacement of deficient components. However, if litigation is not successful, or the property is under imminent physical duress, the association will be required to rely on reserve accounts or levy a special assessment against the homeowners. The cost of a large-scale renovation project is likely well beyond the cash held in a typical reserve account. As such, most associations will borrow money through conventional lending institutions, in turn, each unit will have a lien placed on the title until the assessment is paid in full.

Large special assessments and property liens may create a financial hardship on individual unit owners and/or interfere with sales of units. In distressed situations, special assessments can lead to increased foreclosure activity through the inability or unwillingness to pay. What is more, an association simply entering into a legal dispute is grounds for FHA (Federal Housing Administration) to withdraw financing options within the complex. FHA is the largest loan issuer in the country with federal government guarantees. By guaranteeing the loans, the government shares the risk that a private lender would normally shoulder alone. This makes it possible for private lenders to be able to offer loans to clients who may be considered “higher risk”. A borrower who may be considered “higher risk” does not necessarily have credit issues; it may just be someone with a lower income or a limited down payment. This form of financing is prevalent with lower-end housing product. Without this financing tool, a primary pool of potential buyers can be excluded, which is proven to have an adverse impact on value.

As supported by comparable data in the Greater Seattle market area, complexes under heightened distress (projects in litigation, projects that have lost FHA approval, or projects with an abundance of foreclosures) are experiencing value trends well below the market norms. This is substantiated when comparing aggregate sales price trends of units within distressed complexes to sales within unimpaired complexes. This event is based on adverse public perceptions (stigma), and exacts a penalty on the marketability of a property and hence value. This component of loss should be accounted for when determining the feasibility of performing the cure, and in some cases, is substantial relative to the cost to cure itself.

In sum, when examining the diminution in value resulting from construction defects in condominium complexes, it is necessary to analyze the economic feasibility of performing the cure. A property is economically curable, if spending money to fix the item will generate a value increment equal to or greater than the expenditure, or allow the property to maintain it’s value, the item is normally considered curable.

In light of recent laws affecting FHA approval for associations in litigation, coupled with changing public perception, the loss can be measured in two forms; the cost to cure the physical deficiencies; as well as the additional market reaction (stigma) resulting from a distressed complex. It is reasonable to conclude, if the physical condition is made whole, then the market stigma will begin to alleviate. Considering the alternative, of not curing the defects, may lead to escalated losses in value over an extended period that can far outweigh the cost to fix the problem today. Thus, as long as the cure is physically possible (i.e. demolition is not mandatory), fixing the defect is feasible, and reasonable damages “at a minimum” will equal the cost to cure.

Going Concern and Total Assets of a Business Valuation Topics

We have successfully completed the Appraisal Institute course “Fundamentals of Separating Real and Personal Property from Intangible Business Assets”, which makes us compliant with new Federal Interagency Evaluation Guidelines and the new SBA (Small Business Administration) requirement to be a ‘qualified source’ to perform real property valuation assignments that are inter-related with a going concern.

Topic: “Senior Appraiser Discussion Panel” - Conversation Outline Notes

Overview of Event:
We have three stellar senior designated members who will be discussing career topics, such as how to find success in the industry and how to avoid potential pitfalls. The panelists will share their journey to their current positions and discuss the lessons they learned along the way. Associates will have an opportunity to ask questions, if time allows, at the end of the panel discussion. Diane Hayes, SRA and Patrick M. Lamb, MAI will be moderating the discussion.

Event Timeline/Outline:

I. Opening Comment Section (7 – 16 minutes total)
• 1-2 minutes: Introduce Associate Committee Members & discussion moderators.
• 1-2 minutes: Update on Associates topics and events, Linked-in Group, Brave Horse tavern Summer social event.
• 1-2 minutes: Turn over to moderators (Pat and Diane)- discuss hope and goal of this event
o 2- 5 minutes per panelist (15 min. max): Introduce Panelist (Scott, Carol, & Mel), have them talk briefly about themselves.
 General background
 When did they get started?
 What was their focus?
 Evolution of their careers?
 Evolution of their involvement in the AI, Local and/or National.
• 2-5 minutes: Ask how the AI has enhanced each panelist careers?
o Networking, training, education, regulatory and policy guidelines, personal confidence, business opportunities, leadership, skill building, etc.

II. Moderated Question Section (30- 45 minutes)
o 10- 15 minutes per panelist: We would like to ask three open questions for all three panelist to answer as they wish.
 Question 1: What are some of the major decision (i.e. turning points, forks in the road) in your career that you had to make to get where you are today?
• Sub notes:
o How did you evaluate your options to make the right decision on how to progress?
o Did you have goals in mind? Did you need to write these goals down somewhere?
o How did you discipline, or challenge yourself to achieve your goals?
 Question 2: What principles and values have guided your career and personal life today, and as you were developing?
o What does mentorship mean to you?
 Question 3: How aggressive were you in pursuing your career development, and how did you do it?
o How did you develop your skill set?
o How did you become competent at what you do?
o What were your best attributes and contributions along the way?

III. Last Words, Summary & Recap (5 minutes)
• Moderators recap key points and allow for any last words from panelist.

IV. Audience Questions (10 minutes, if time permits)
• Sample Question 1: what is it like working for different sized appraisal shops and organizations, i.e. Large Brokerage, Medium Fee Shop, One-man shops, Banks, and Private Investment Firms, etc.
• Sample Question s: What advice can you give emerging talent regarding moving from firm to firm? Benefits versus pitfalls.
o Lateral moves- private fee shop to other fee shops
o Horizontal moves- private fee shop to in-house, or institutional regional manager/coordinator
o Educational moves- specialty and niche work
o Government work vrs Private work

Based on the above timeline, we’ll need roughly 1 hour 15 minutes

AI Professional Associates LinkedIn Group

Please join us on linked-in to participate in the communication and organization of our group. Basic membership to Linked-in is free (linkedin.com). Once you have a profile, you can search for us under groups, “AI Professional Associates Group”. I’ve sent many of you invitations via linked-in already. We are currently discussing some presentation options for the upcoming season.

The professional associates group of the Appraisal Institute (AI), Seattle Chapter, include a full spectrum of emerging and seasoned appraisal and valuation specialist. This group is comprised primarily of individuals who are on the path to designation, MAI and SRA. We are interested in trainee and state certified professionals who have the ambition, intension, and aptitude to reach the top tier of this industry, via the designation.

The key attributes that best define our mission for 2012 are to Recruit, Return, Involve, and Designate, while our primarily goal is to enhance the “value proposition” of associate involvement and career-long membership.

We believe we can achieve our goal by 1. Providing quality speakers and presentations that address relevant and intriguing topics that affect us day-to-day, and expand beyond just appraising, 2. Engaging associate members in the decision making process of the group, such as setting the agenda, planning events, and establishing organizational structure, and 3. Creating comfortable social environments and events that allow us to get to know each other better, and build trust and relationships.

The professional associates group is an extension of the general AI chapter organizational structure. The groups leadership includes a comprehensive mix of four distinct appraisal professions with a diverse background covering nearly all aspects of the industry, and include;

Current Associate Chairs
Diane Hayes, SRA
Patrick Lamb, MAI

Previous Associates Chairs:
Justin Atwell, General Certified
Vince Healy, Residential Certified

The four of us are committed to being a resource for all associates, and we can’t wait to meet you!

 

Real Estate Appraisal during a Divorce

Real Estate Appraisal during a Divorce

You’re a spouse going through a divorce – friendly or hostile. One of you has probably moved out, and you’re both wondering what your share of the real estate will amount to. You’re going to have to deal with a division of property – usually, the family residence.

What’s the best way to find out the value of your property, so that you’ll know what you have coming?

Your attorney has probably already told you – you’ll need a professional real estate appraisal. You’ll have to have one to go through the divorce process. No mediator or judge can rule or determine how much your property is worth without one. So how does the process work?

Often, your attorney knows a reputable appraisal firm that will give an unbiased, arms-length, and stand-alone valuation of your property. He or she will arrange for the appraisal report on your behalf. Or, your attorneys may leave the choice of appraiser up to the two of you. This could be problematic. If you each have your own attorney, the best scenario may be for the two attorneys to agree to hire one appraiser.

The fee for the appraisal is paid for by the divorcing parties – usually split down the middle, unless each party orders a separate appraisal. Appraisers collect their fees in differing ways. Sometimes, it’s billed to the attorney that retains them on your behalf. Other times, it’s collected from the spouse that stayed in the home during the property visit. Ask your attorney or appraiser what to expect.

The appraisal process begins when the appraiser does a “property visit”. He or she will ask questions of the homeowner about the house. “Are there any problems or concerns with the property? “Any special circumstances I should know about?” He/she will take measurements, look into crawl spaces, check for updates to plumbing and electricity and any other amenities and do a visual inspection of the siding, roof and yard. She’s looking for features or conditions that may require a higher or lower value than is the norm for the neighborhood. Sometimes, features that the homeowner greatly values may not contribute to the home’s value in proportion to the price paid for them – such as a swimming pool or wine cellar.

Following the property visit, the appraiser compares your property with at least three similar properties in the surrounding vicinity that have sold within the last six months. The sales prices of the homes that sold determine their value. Using a standardized template, s/ he makes an itemized comparison between your house and each of the “comps”. He compares the number of bedrooms and bathrooms, square footage, existence of a fireplace or view, the general condition and so forth, making dollar-based adjustments in each category between the subject house (your property) and comparison house #1, #2, and #3. He will also provide comments and clarifications in the report, if necessary.

Finally, using his or her professional expertise and judgment, the appraiser will make a definitive analysis, giving the most weight to the comparable home that most closely resembles the subject. Thus a market-based value is arrived at for your home. Often, this final analysis is explained in narrative form.

Professional appraisers are bound to the utmost practice of fairness and objectivity through USPAP (Uniform Standards of Professional Appraisal Practice), and for members of the Appraisal Institute, the Professional Code of Ethics. Confidentially is a major requirement, as well. In no circumstance is an appraiser allowed to divulge information to either divorcing party or their attorney before the final valuation is made.

In the case where two appraisers, each representing one of the divorcing parties, arrive at two different values, then testimony is taken in divorce court regarding the appraisals. The judge will hear the opinion of each appraiser and make a judgment. It has been known that a judge will add up the two differing values, and divide the sum by two. Something like Solomon’s law, it might be said.

Self education can only help divorcing people, as well as any other segment. At an often confusing and stressful time of life, knowing the steps involved in separating one’s property in a divorce can bring a measure of comfort.

For more information on obtaining an appraisal during divorce, call or write:

Lamb Hanson Lamb Appraisal Associates Incorporated, 206-903-1500, Ex 216.
Patrick Lamb, CEO, will gladly answer your questions. He can also be reached at [email protected].

Motivations of Young Professionals

What drives the recruitment and retention of talented young people to a professional association? Finding the answer has been a challenging and crucial task for the networking and social groups I belong to today. Having a better understanding of what motivates young professionals will help us attract and connect to the people we want to recruit.

A young professional is not exactly what you think- at least not in the way we interpret things in our YP group through the RMA. In our eyes, a young professional is more synonymous with being green, or novice at your trade. We do not operate under the assumption that you must be of a certain age to be young in your profession. However, in many cases, the members of our YP group tend to be young in age, as well. On the surface, this has created a bit of a misconception about our target market. The word ‘new’ could be substituted for ‘young’.

A young professional’s motivation to participate in a networking group might include the following:

-Recognition
-Generate leads (building business)
-Foster client relationships
-Size up competition
-Support system
-Sharing resources
-Opportunities for leadership roles
-Demonstrate skills
-Public Speaking opportunities
-Board and committee experience
-Satisfy work requirement
-Job search possibilities
-Troubleshooting ideas and issues
-Advice seeking
-Socializing
-Personal contact with clients
-Relating to like-kind peers with similar drive and aspirations

There is no doubt that the retention of talent is important for every organization’s long term planning strategy, strength, and overall stability. Moreover, the evolution and transition of leadership is the greatest reason why we need to engage talented young professionals today. I know first hand many organizations see this need, and actively pursue this mission. As promoters of these organizations, let’s recognize young professional motivations and create a platform for their success.

Here are a few associations and clubs that support YP groups: RMA (Risk Management Association), AI (Appraisal Institute), WSCPA (WA Certified Public Accountants), WSBA (WA Bar Association), Tower 39 Club (Social Club), CRPC (Certified Financial Planners), Rotary and Kiwanis (Philanthropy).

Appraisal Services to Attorneys and CPAs

Divorce Appraisals

Finalizing a divorce involves many decisions, including “Who gets the house”? There are generally two options regarding the house – it can be sold and the proceeds divided, or one party can “buy out” the other. In either case, one or both parties should order an appraisal of the residence. Divorce appraisals require a well supported, professional appraisal that is defensible in court. When you order an appraisal from us, you are assured that you will get the best in professional service, courtesy, and the highest quality appraisal. We also know how to handle the sensitive needs of a divorce situation.

Attorneys and Accountants rely on our values when calculating real property values for estates, divorces, or other disputes requiring a value being placed on real property. We understand their needs and are used to dealing with all parties involved. We provide appraisal reports that meet the requirements of the courts and various agencies.

As an attorney handling a divorce, your needs oftentimes include an appraisal to establish fair market value for the residential real estate involved. Often the divorce date differs from the date you order the appraisal. We are familiar with the procedures and requirements necessary to perform a retroactive appraisal with an effective date and Fair Market Value estimate matching the date of divorce. The ethics provision within the Uniform Standards of Professional Appraisal Practice (USPAP) binds us with confidentiality, ensuring the fullest degree of discretion.

Estate Appraisals

Settling an estate is an important and sometimes stressful job. As an executor you have been entrusted to carry out the wishes of the deceased as swiftly and exactly as possible. You can count on us to act quickly and with sensitivity to the feelings of everyone involved. Attorneys and Accountants rely on our values when calculating real property values for estates, divorces, or other disputes requiring a value being placed on real property. We understand their needs and are used to dealing with all parties involved. We provide appraisal reports that meet the requirements of the courts and various agencies.

Settling an estate usually requires an appraisal to establish Fair Market Value for the residential property involved. Often, the date of death differs from the date the appraisal is requested. We are familiar with the procedures and requirements necessary to perform a retroactive appraisal with an effective date and Fair Market Value estimate matching the date of death. The ethics provision within the Uniform Standards of Professional Appraisal Practice (USPAP) binds us with confidentiality, ensuring the fullest degree of discretion.

All too often, people do not fully appreciate the need to have a detailed real estate appraisal prepared in support of the numbers being used in documents filed with revenue authorities. Opinions of value used in documents filed with the revenue authorities should be supported by a detailed report as to how the appraiser arrived at his conclusions. Such a report will certainly demonstrate to the authorities that the numbers used are well founded and substantiated.

Having a professional appraisal gives the executor solid facts and figures to work with in meeting IRS and state agency requirements. It assures peace of mind to everyone concerned because we are there to stand behind the appraisal if it is challenged.

Date of death valuations

Estate tax liability. Disposition of assets under a will or in probate. There are many situations — none of them lacking stress and complexity — where you might need an appraisal of property that states an opinion of what the property was worth on a date some time ago, rather than when the appraisal is ordered. For estate tax purposes or disposition of the assets of a decedent, a “date of death” valuation is often required. (Sometimes, the executor of the estate may choose to have the date be six months after the date of death — but the same principles apply.)

Attorneys, accountants, executors and others rely on Lamb Hanson Lamb Appraisal Associate, Inc for “date of death” valuations because such appraisals require special expertise and training. They require a firm that’s been in the area for some time and can effectively research comparable contemporaneous sales.

Real property isn’t like publicly traded stock or other items which don’t fluctuate in value very much or for which historical public data is available. You need a professional real estate appraiser, bound by the Uniform Standards of Professional Appraisal Practice (USPAP) for a high degree of confidentiality and professionalism, and you need the kind of quality report and work product taxing authorities and courts need and expect. Please browse our website to learn more about our qualifications, expertise and services offered.

Assessment appeal services

Most localities determine your property tax burden based on an ad valorem assessment of the property’s value. Sometimes, as a property owner, you get an unwanted surprise in the mail telling you your taxes are going up, and sometimes it may seem as though your assessment is too high. Often, matters like this can be resolved with a phone call. However, if after discussing your assessment with your local taxing authority you still feel as though your property was overvalued, a professional, independent, third-party appraiser is often your best bet in proving your case. That’s where we come in. There are as many different procedures for appealing assessments as there are property taxing districts, so it’s important to enlist the help of a professional appraisal firm that’s experienced and trained in the ins and outs of your particular jurisdiction.

Please note: It makes sense to do your own research before determining whether to go forward with a property assessment appeal, especially before you make the decision to hire a professional appraiser. However, according to the Uniform Standards of Professional Appraisal Practice (USPAP), we are not allowed to take “shortcuts” — i.e., your research — and use it on its face as part of our independent evaluation. When you hire us for an assessment appeal, you’re commissioning an independent, third-party professional appraisal report. As such we do our own evaluation, beginning to end. If you’re right that your property has been overvalued, an independent report such as ours will be even more persuasive than any other evidence you can marshal on your own. But it depends on our ability to do the work independently.

Sometimes, you will have a hearing on your assessment appeal and will need for the appraiser you’ve hired to testify on your behalf. Be assured that at Lamb Hanson Lamb Appraisal Associate, Inc, we are able to professionally and persuasively testify at appeal hearings. Browse our website to learn more about our qualifications, expertise and services offered.

Condemnation appraisal

It’s not just a good idea — and it’s not just the law — it’s your constitutional right that if the government wants to condemn your property, or take it from you by means of “eminent domain,” it must give you “just” compensation. That’s where we come in.

The government is likely to have its own idea of “just” compensation, maybe based on a professional appraisal. But an appraisal on your behalf, performed under the standards of the Uniform Standards of Professional Appraisal Practice (USPAP), is powerful — and useful — evidence of what you’re entitled to, and protects your rights.

It works the other way, too. We perform work for government clients needing to offer and provide “just” compensation in eminent domain cases. A USPAP-compliant appraisal is the best way to determine fair market value of any property.

If the above makes condemnation appraisals sound simple, that’s not the case. There are many legal and procedural issues involved in an accurate condemnation appraisal. A federal condemnation will require a different analysis and report format than a state or local taking. And in any event, the jurisdiction proposing to condemn the property is likely to have its own rules for appraisal that must be followed. It is important to hire an appraisal firm that has experience and training in these types of valuations.

An eminent domain action may reserve certain rights in the property to the current owner. The government may petition to take only part of, or a partial interest in, the property. This requires the appraiser to value the “larger parcel” — the currently undivided, contiguous property — and the “remainder” of the property, or rights to use the property, that will be held by the owner after condemnation and factor that into the overall value of the taken property. For an added wrinkle, it will often be necessary for the appraiser to determine his or her opinion of value on the “remainder” before the taking and after the development or use prompting the taking, because they are likely to be very different.

Likewise, appraisers always consider a property’s “highest and best use” when formulating an opinion of value. For many condemnation appraisals, it is necessary to consider the highest and best use of the property before taking and after the development or use resulting from the taking. Again, it is important to have a professional appraiser with experience and training.

Because an appraiser may often have to testify about his or her condemnation appraisal, it is important that certain steps in valuation methodology — such as selecting and analyzing comparable sales — be performed more thoroughly. You rely on your appraiser to know what’s necessary, so again, it’s important to select an appraiser/company that has experience and training.

Here at Lamb Hanson Lamb Appraisal Associate, Inc, we are ready and able to perform your condemnation/eminent domain appraisal. Browse our website to learn more about our qualifications, expertise and services offered.

Expert Witness Testimony

We offer a full range of Real Estate Appraisal services, with experience in many types of property. We are also experienced in litigation support and expert witness services. Clients who have used our expert testimony services include government agencies, tax entities, financial institutions, legal and accounting firms and many other businesses. In many cases, our independent, supportable analysis has allowed clients to settle cases without going to court.

An appraiser must remain unbiased in performing an appraisal of a property. But we can consult with you and advise you about the relative strength of an appraisal presented by opposing parties. We can also perform additional research and analysis to support or discredit assumptions or conclusions.

Some examples of issues we have experience with include:

• Valuation of “stigmatized” property
• Valuation as of a date in the past
• Valuation for condemnation and eminent domain cases
• Effect on value of properties with history of flood
• Estate settlement
• Valuation for divorce, partnership, taxation issues etc.

With our experience and proven track record we are ready to take on any type of appraisal assignment and our appraisal values stand up under the most severe scrutiny.

Tax Appeal Professionals: “Success is Appealing”

It feels pretty good coming off a large tax appeal victory with the King County Hearing Examiner that reduced our clients’ assessment by over $3,000,000 on large industrial manufacturing plant in the Georgetown neighborhood of Seattle. We figure our client had approximately $35,000 to $40,000 cut off his annual tax burden that year. He was very pleased with the outcome, as you can imagine.

Assessment appeals have become ever more prevalent since the fallout of the real estate market over the past two years. We have seen trends in the past, where the assessor valuations were considerably below market value, (some appraisers have claimed that 15% to 20% below market was the norm). The reason for this, however, was not due to some behind the scene political collusion.

Remember, the assessors’ task is to derive a market value for all real property in the county in order to distribute the tax obligation in a fair and consistent manner. They are not tasked with the responsibility of deriving tax levy rates- that is left up to the various taxing jurisdictions and their respective politicians.

As such, the reason for your tax assessment being generally low over the past eight years or so is largely attributable to the rapidly increasing market conditions. The assessors simply could not keep up with the rate of appreciation that was occurring. Alternatively, the recent rapid decline in the market did not warrant the assessor office enough time to reconcile their values in the other direction, and many properties are easily being over assessed by a comparable amount.

Commercial and residential property owners across the board, consequently, are potentially faced with increasing tax burdens- poor timing in light of the looming economic downturn. This is coming as quite a shock to many of our clients who are just now coming to grips with the hard reality that anticipated gains in home equity and/or the durability of commercial income streams have dissipated.

Like property owners, assessors too are caught it the wash of this turbulent market that has just gone from bubble to burst. They rely on a combination of historic sales evidence and anticipated future income benefits to determine a property’s value. During a typical long term trend of inclining or declining market conditions, it is relatively easy to find supporting data to derive credible valuations. However, when the direction of a market changes drastically, an information lag often exists that limits ones ability to perform a valid analysis.

This has contributed to one of the biggest valuation crises in decades, and will likely continue to occur until the market stabilizes in late 2010 and into 2011. Subsequently, your local assessors will potentially be missing their mark for some time to come.

The good news is that this uncertainty of information provides a great opportunity for debate. A seasoned real estate appraiser or consultant can be very effective in guiding an examiner to figure out the true market value of your property.

Sharing this experience

The typical experience begins when a potential client calls us to talk about the appeal process. In most cases, there has been a drastic change in their assessment and they want to talk to a professional about how best to proceed.

On an aside, we often hear of cases where the assessor has reduced the “improvement” value to essentially nothing, while sky-rocketing the “land” value. This can be a confusing and startling event for many property owners. Especially, when there is plenty of economic life remaining in their property. Yet, please be aware that this is a common practice in dense urban settings. It is the result of a highest and best use analysis performed by the assessor whereas they find the value of the underlying land as a redevelopment site outweighs the value contribution of the improvements.

When such circumstances are true, it is common practice of appraisers to value the property by taking the land value, plus the net present value of any income stream, less the future demolition costs. This is a typical thought process employed by the most probable purchaser- a developer or speculator. The assessor, to some extent, follows a similar methodology. If this happens to you, my advice is to ignore the value of the property, as improved, and focus all of you attention on arguing the land value. You may result in better outcomes by simplifying your attack on the comparable sales, versus trying to convince the assessor that their methodology is wrong.

On first conversation, we typically engage with the client to perform a preliminary data collection for the subject property, which includes a comparable property search. Following, we advise the client on whether we feel they have any significant claim for appeal. If substantial evidence is available, we would advise the client to engage me to perform an appraisal that will be used as evidence in the hearing. Simultaneously, the client would submit the appeal petition to begin the legal process with the Board of Equalization. Upon confirmation of a hearing date, the client can either present the appraisal findings him or herself, or hire us to present the findings.

One important aspect of the presentation, especially when working with commercial property, is that the details of each comparable can be very complex. For instance, the petitioner would benefit from understanding the nuances of ingress/egress, corner influences, traffic signals, access to transportation linkages, and overall property productivity analysis that includes dozens of other site and structural characteristics. Many of these items are often misunderstood by property owners, and the assessors themselves. Alternatively, presenting a clear understanding of these items and how they impact value can be very persuasive in front of an examiner.

The process for appeal

For a detailed discussion of how the appeal process works, please read the blog on our website titled How’s My Tax Assessed Value High in THIS Market?. The links may be expired, yet the overall discussion is still relevant today.

General outline of the process

1. Preliminary consultation to examine subject and market comparables
2. Submit appeal petition to the BOE
3. Prepare appraisal
4. Establish hearing date
5. Prepare for the hearing
6. Hearing
a. Location is typically in the county administrative building
b. Actual hearing protocol
i. Present opinion of value to examiner
1. Focus on sales comps and income characteristics
ii Assessors’ presentation of value
1.Not an appraisal, mostly statistical analysis and charts.
iii Rebuttal and closing

Historical Property Preservation

The “Historic Properties” Preservation and the Valuation Process by Judith Reynolds, MAI and published by the American Institute is an absolute masterpiece of American history that follows the preservation movement up to today.

The Historic Preservation Program started in the US with the passage of the National Historic Preservation act of 1966. To date, there are over 79,000 listed properties covered under the Act. The purpose of this Act was to create a means for the documentation, designation, and financial assistance necessary to save landmark properties from total extinction or destruction.

As time went on, the Federal government empowered local municipalities and authorities to create ordinances with standards and guidelines for incentives and the control of historic places and properties.

Thanks to the Advisory Council on Historic Preservation federal support was gained that resulted in the above named Tax Reform Act of 1966. This Act created economic incentives and disincentives, benefits, and penalties that included the beginning of investment tax credits.

Further incentive efforts resulted in the Economic Recovery act of 1981 which accelerated property depreciation and attracted large scale developers.

However, 1982 saw the tax credits base change from a 3 tier savings to only 2 tiers. One, the 25% investment tax credit for historic rehabilitation was reduced to 20% while the 15% and 20% credits for 30 and 40 year old non-historic buildings were combined into a single 10% credit for buildings built before 1936. The one year passive loss rule set at $7,000 to be used up annually now could only be applied against the tax on income generated by the projects themselves. (High-income taxpayers could not use the tax credit at all).

The overall savings and write offs on investment tax credits were forever changing and more and more individual funding again was being relied on.

The 1978 Urban Development Action Grant (UDAGS) allowed grants up to 50% of rehab costs. This changed and ITC’s now were only being applied at the local and state levels and allowed for economically feasible projects only.

The 1995 Historic Home Ownership Assistance act capped the housing tax credits from 20% of costs to $50,000 maximum. These credits however, could be transferred and could reduce interest on mortgages.

Other issues began to rise such as actual uses vs. economic uses, Eminent Domain, and Condemnation Authority conflicts, exemptions and/or tax freeze actions. Also, many properties became subject to the ability to achieve competitive market sales, a reasonable return on investment and a proportion of rent allocation to business income in order to meet eligibility requirements. More and more local, state, and federal authorities are requiring appraisals as the means for establishing eligibility, benefits and analysis of Investment Tax Credits and values for these Historic Properties.

One or all of the common approaches to value are typically used to identify value benefits to individual corporations or agencies who participate in these projects. The appeal, besides third party oversight, is that the appraisal or valuation process is an orderly program by which the problem is defined; the work necessary to solve the problem is planned, and the data involved is acquired, classified, analyzed, interpreted, and translated into an estimate of value.

Some of the available benefits and incentives are as follows:

  1. Subsidized interest loans
  2. Tax exempt bond financing
  3. Mortgage guarantees
  4. Relief from local sales tax, tax moratoriums, freezes and abatements
  5. Assessment tax relief
  6. Zoning and building code relief
  7. Public purchase and private resale at low prices
  8. Public/private joint ventures
  9. Sale of Development Rights (Transferable Tax Credits)
  10. Accelerated depreciation
  11. Charitable Donations and Grants

Appraisers must thoroughly document what they are appraising and sometimes must be creative in their approaches. Incentives are created to benefit participants and can create added value. A $50,000 rehab grant in the Cost Approach may create additional return in the Income Approach. Restricting the building height of a historic property may mean analyzing land value by dividing the floor area by the existing building and comparing it to the potential floor area to find the difference in lost density dollars per square foot of land area. Relief from real estate taxes may well mean lower expenses and a higher NOI (net operating income) and a higher market value. Many times historic properties are tourist attractions and create substantial income advantages; all must be measured properly.

Of the 37 listed historic places in Seattle including properties in the Ballard District, Georgetown, Columbia City, Harvard-Belmont Capital Hill, Pike Place Market, the Stimson-Green house, the Arctic, Lyon and Hoge Buildings, Pioneer Square, The International District, and so on, listing them all, Lamb Hanson Lamb has appraised 14 properties.

Those who would like additional information on Historic Properties in Seattle may view the Preservation Advocate website at www.historicseattle.org, or call Christine Palmer at 206-622-5444 ext.226.

Reliable, Knowledgeable, Current, Collaborative

Lamb Hanson Lamb’s reliability in providing a high degree of professional service to its clients is a key attribute of the firm’s long standing goodwill in the Greater Seattle Region. The firm’s knowledge base is established by four consecutive generations of real estate appraisal and consulting providers who honor a deep commitment to professional ethics and maintaining public trust. Understanding patterns of ever changing real estate markets, while staying current with developing trends puts Lamb Hanson Lamb at the frontline of appraisal reporting. Lastly, the firm’s collaborative approach to problem solving ensures greater credibility in the appraisal services provided. The depth and breadth of this team’s experience allows them to meet any of your appraisal needs with the utmost attention to quality, timeliness, and communication.

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