Appraisal Matters

Too often, market participants rely on assessments as reflective of a commercial property’s market value. What could be easier than relying on the assessment as market value? The problem is too few market participants do not understand what is not included in the assessed value. Here are some of the most obvious and important omissions:

• Assessments usually do not reflect temporary or permanent external obsolescence.
• They do not accurately consider functional obsolescence and how the market reacts to it.
• The property record is inaccurate, although in most cases the inaccuracy is not material enough to significantly affect the assessment or market value.
• Additions and upgrades were considered at cost, yet they may contribute little or nothing to market value.
• If the assessment is 5 to 10 years old, the assessment may not accurately reflect physical depreciation.

John Simpson, MAI