Retrospective Date of Value Real Estate Appraisal?

[Account Closed]

Answers from an Experienced Real Estate Appraiser of Properties.

Regarding Commercial Real Estate Appraisal, also applying to Industrial Appraisal, I asked a State of California licensed Appraiser to explain important factors to consider for both Investors and Owner Occupiers with or without cash flow from the standpoints of either a user and also leased investment buildings, spaces or projects.

Question: Can you provide a basic explanation of a Retrospective Valuation as of a Prior Date of Value and the major items to look for in valuing Commercial Properties - When they are occupied by landlords or leased with tenants in place?

Response: From a designated MAI - Member of the Appraisal Institute Real Estate Advisor with 30+ years of Commercial and Industrial Appraisal practice in Los Angeles County and also throughout the 6 counties of Southern California.

Retrospective Real Estate Appraisals: Past Appraisal dates can be quite tricky as the Sale Price Value or Lease Rate Rent of a property is determined as of a particular prior day in the past or snapshot in time. Also known as a Historical date of value. If you go back far enough, say over 4-5 years, it becomes increasingly more difficult to have full details available, even about your subject property as the client has little or no summary Rent Roll information and Income & Expense Statement data to provide the
Appraiser for ideal accuracy.

Many times valuations are for purposes of real estate planning, trust planning, gift and inheritance purposes such as a partnership buy out or separation, death of a family member for establishing tax and accounting values.

To make things a little easier, Google Maps now have several different dates they take their photos, that’s often a great start because you can literally almost do a time machine scenario on your property and the local area as well. There are other avenues such as your own database of photos from years of past appraisal assignments. City, County, Building & Safety and Planning Public records information is another source, often not much background is known about rent or sale comparables. Another great Analysis & Research technique, is to ideally confirm or verify transaction details with principal market participants or experts to the transactions: Buyers, Sellers, Landlords, Tenants, Real Estate Brokers, Property Managers & Developers in addition to obtaining Opinion Surveys from these objective specialists that are neutral to support lease rates and sale prices.

It is important to work with an experienced Commercial Real Estate Appraiser or Real Estate Consultant that has been around quite some time, familiar with both the locational area and specific property type being appraised. It is preferred to work with someone who has already done work nearby as they will often already have confirmed data to utilize as well. It is key for a well concluded & reconciled Appraisal to have reliable information to glean from which is relied upon.

Types of Commercial Properties: Retail, Office, Medical, Multi-Family Apartments of 5 units or more & Vacant Land, including Industrial Property valuation are very different from and more involved relative to residential appraisal.

There are also varying types of buyer or owner motivation properties to consider: Full Owner User, Partial Owner User or Investor for Income Producing Investments.

In comparison, Residential Real Estate Appraisal of residential properties - 1 to 4 units, including SFR's or single family residence homes are typically, not as complex, the reason fees are relatively lower due to generally, much lower lesser level of scope of work, resulting in turnaround times that are shorter, typically 2 to 4 business days in comparison.

The client or authorized representative - owner, seller, buyer, landlord, tenant, attorney, CPA or accountant, lender, etc. with the company or business needs to first define which Estate is being appraised: Fee Simple, Leased Fee or Leasehold.

Conclusion: As seen above, experience is paramount in addition to a high level of Analysis and Research to ensure the best rent or value estimate.

Commercial real estate appraisals can initially seem simple and straightforward, however, many times extremely complex with complicated issues. Commercial real estate appraisers need time (typically 2 to 4 weeks) to properly analyze and digest a lot more critical information for accurate Fair Market Rent Lease Rate and Fair Market Value Sale Price reconciliation and conclusion.

Are you a Real Estate Expert or Skilled Real Estate Consultant that would like to share your Expertise or Knowledge with everyone?

Or do you have Specific Requests or Questions for Discussion or Needed Insight for any Real Estate Services related items that you would like to see posted?

Potential Suggestions for Feedback, Comments or Subjects for Real Property:

1) Locations in Los Angeles County or locales in 5 other Southern California counties: Ventura, Orange, San Bernardino, Riverside or San Diego?

2) General Property Types: Commercial Real Property or Industrial Real Estate?

3 )Specific Property Types: A) Retail B) Industrial C) Office D) Medical / Healthcare E) Multi-Family Apartments or F) Vacant Land?

Possible Topics: 

4) Fair Market Rent Lease Rate or Rents Comparables or Fair Market Value Price or Sale Comparables

5) General or Specific Market Trends & Conditions

6) Real Estate Consulting issues, Estate Planning for Real Estate, Trust Planning, Lease Up Marketing Periods or Sell Out Absorption Periods

7 )Vacancy Rates & Collection Loss, Operating Expenses, Capitalization Rates of Return or Investor Required Rates of Return 

8 Leasing Activity, Direct or Sublease or Sales Activity, Below or Above Market Level Negative or Positive Factors related to Deferred Maintenance, Distressed Buyer or Seller Sale Motivation such as REO Foreclosure or Short Sale

9) Highest & Best Use(s), Ideal Tenant Mix

10) Net Effective Rent Occupancy Cost Analysis for Major Cost Savings

11) Internal Underwriting, Asset Monitoring & Decision Making, etc.

I can post for All to Benefit based upon wanted information related to requested Location Advice:

1) Tenants or Occupants that are National Credit, Regional or Local

2) Landlords or Owners that are Full or Partial Owner User Occupiers

3) Buyers 4) Sellers 5) Investors of Income Producing Leased Investments

6) Developers of New Construction Developments or Contractors of Redevelopment or Renovation Projects

8) Private or Hard Money Lenders or Nationwide Banks for Purchase Money Loans or Refinance or 9) Mortgage Brokers

10) What to look for in a Real Estate Appraisal

11) What to look for in choosing a professional and credible Real Estate Appraiser

12) What to ask when retaining a Real Estate Consultant, Real Estate Advisor, Real Estate Agent or Real Estate Broker, etc.

Decision Making for Buildings or Projects:

A) Stay at Current Location & Reset New Fair Market Rent: Lease Rates, Concessions and Terms & Renegotiate prior or existing Lease Contracts in place for Upcoming or Soon to Expire Agreements for Options and Renewals to Stay or Renew Lease at existing location

B) Relocate to a Different Location: Move to a Replacement site

C) Expansion into Additional Submarkets: Open Other Multiple Locations for units or office suites