Good comparable information is required both prior to and after change in order to estimate trends.

Current overall poor economic conditions have hurt most types of real estate. The mortgage crisis and the continued decline of the stock market have had a devastating effect on the world economy and resulted in freezing credit markets, making it extremely difficult to obtain loans. Despite efforts from the federal government to bailout financial institutions, there is little evidence in the marketplace that these historic measures have had much impact on the stock market, credit markets or real estate markets in general. These economic times are historic, creating conditions not seen since the Great Depression.

Specifically for real property, market conditions have clearly changed. New construction is almost non-existent, vacancy rates are on the rise, leasing activity has slowed, foreclosures and delinquency rates are on the rise, property cash flows are down and the availability of money has lessened. Real property transactions in the commercial and industrial sectors have been minimal. Tightening credit and loan standards, increased supply and lower demand and other economic factors have all created a marketplace that is extremely challenging to buyers and sellers and, unfortunately, for appraisers too.

To estimate the trends in market condition, good comparable information is required both prior to and after the change in the marketplace. Sales and re-sales of the same property would provide the best data. With this type of data, the sales can be compared and analyzed to determine a measurement factor to identify a required adjustment for the change in market conditions. Unfortunately, good comparable information like this is not always readily available.

So, what does an appraiser do if it seems clear that an adjustment is necessary, but there is no data to support it? An appraiser should research the marketplace by talking with brokers, investors, property managers and buyers who may have recently completed a transaction to stay on top of current perceptions in the market. Based on the data accumulated, from these discussions the appraiser must arrive at a reasonable conclusion for the adjustment. In doing so, however, an appraiser needs to make it very clear in the written report the lack of market data, the research conducted and the reasons why the conclusion is reasonable. Due diligence, common sense and experience may be the only tools an appraiser has to make a subjective adjustment for a change in market conditions.

With an extensive database of firsthand-confirmed, comparable transactions, AccuVal considers local, regional and national demand for each property. AccuVal's clients can rely on our real property valuation conclusions documented in our reports. Read how the strength of our expert witness, in conjunction with our real property appraisal, helped a company to secure a win at the State Supreme Court level.