Appraisal Matters

As appraisers, we apply a market condition in our appraisals when property values go up and down. But does that mean the adjustments apply to an entire class of properties and that there are no exceptions?

T    Thinking back to Economics 101, price is set at the intersection of the supply and demand curves. But what happens when suddenly there is an available property in a market when there is no supply and far greater demand? Yes, this can happen even today and here are some examples: medical office condominiums are located attached to, next to or on the same campus as a major hospital. Especially when the number of units is limited, there may be nothing available for sale for many years. When one does come available, its price per square foot is often well above market. Not everyone suffers financially in a recession.

· S   Some specialized forms of real estate, such as commercial fisheries, are so integrated with the business enterprise that they are worth a small fortune to those companies, but to anyone else they’re worth very little (i.e. often reflecting a different highest and best use). Governmental requirements that prevent additional supply, superior access to resources or other aspects could make it so prized to a small subset of users that its value could be set independent of general market conditions.

John Simpson, MAI