Southland Valuation Inc. provides commercial real estate appraisals and consultations with a focus on the Southern California region including Los Angeles, Orange, Riverside, San Bernardino, San Diego, Ventura, Kern, San Luis Obispo, and San Diego counties. We also offer reviews and consultations throughout California and several other states.
As an appraisal firm specializing in commercial (retail, industrial, office, hospitality, gas stations) and multi-family residential properties, we recognize the time and effort required for in-depth research of specific product types and the dynamics impacting neighborhood and boutique markets. To understand the nuances affecting the subject property we examine regional, city and neighborhood market data coupled with interviews of real estate brokers and a direct look at comparable properties. This is especially important in the current market environment as more due diligence in the appraisal process is required. We service a broad range of property types and appraisal expertise including:
► Leased Fee & Leasehold Analysis
► Prospective Value Analysis
► Market Feasibility Studies
► Date of Death Analysis (Retrospective Value)
► Fractional Interest Analysis
Fees – Our fees vary from $1,500 to $7,500, depending on the report type and complexity of the property.
Preliminary Value or Value Check – Due to the complexities of commercial properties, we are not able to provide “preliminary value” or “value check”; however, for a nominal fee, we can provide consulting services that will give you an understanding of property values.
Turnaround Time The typical time required to complete a commercial appraisal is 2 to 3 weeks. Shorter turnaround times can be accommodated in time-sensitive situations.
Importance of appraisal as function of due diligence – In these uncertain economic times, it is our deepest belief that appraisals should be just one part of the party’s due diligence for every transaction and that the client determines if the appraiser’s qualifications meet the needs of their property. There are countless examples of problems investors face relying solely on a single or unqualified entity to protect their interest. A recent example is as follows:
In a recent appraisal, a foreign investor paid over $10 million, all cash, for a retail project in Southern California. Immediately after the acquisition, Southland Valuation was hired by a regional bank to appraise the property for financing purposes. Utilizing market data, supported by interviews with brokers familiar with the property, the market value was 30% less than the purchase price.
Additional due diligence prior to the acquisition would have greatly benefited the foreign investor. Our job is to understand the market dynamics in order to reflect the actual market value, without consideration to the advocated purchase/contract price or loan.
Research – Southland Valuation takes great pride in quantitative and qualitative research. Critical appraisal skills require sound market data research and surveys of market participants. Some of our resources are, but not limited to the following:
► California Retail Survey
► Construction Industry Research Board
► Commerical Real Estate Company
► First American Title
► Korpacz Investor Survey (Published by PriceWaterCooper)
► IREM Expenses for Apartments, Shopping Center and Offices
► Marshall Valuation Cost Guide
► Published Research from Real Estate Firms and Research Institutes
The preceding resources are utilized as a basis of our analysis. The resulting data is verified with the respective brokers/buyers/sellers. This is probably the most important step of the appraisal process and is often overlooked by less experienced appraisers. Additional steps include reviewing market research reports and surveying brokers/market participants to better understand the subject property’s market. Southland Valuation’s market data research is unparalleled in the appraisal industry. Before engaging any appraiser, it is advised that the client determines the extent of research performed by the company.
Importance of Research – It is our opinion that an appraisal is as good as the data; however, the general trend of simply relying on public records or on information purchased from a secondary source as being credible is alarming. It is difficult to properly understand the market area without thoroughly interviewing market participants and the circumstances under which the property was sold. Southland Valuation is also hired to review other appraisal work. The following describes shortcomings that were discovered during the review process of two separate appraisals.
Proeprty A: Gas station on Nellis Boulevard in Las Vegas, Nevada: The summary appraisal was conducted by a national firm with global presence. The purpose was to determine its as-is market value and upon stabilized market value of the total assets of the business. The net effect of the preceding errors is a misleading appraisal by undervaluing the going concern and business value. The following issues were addressed in the review.
- The original appraiser assumed the square footage published in public records of 4,300 square feet to be correct; however, the actual building area is 3,227 square foot.
- The verification sources for the sales comparables were public records. No independent investigation of the comparables was conducted. Our verification/investigation suggests that one of the sales used in the sales comparison (market) approach was purchased for land value with no value given to the improvements.
- The sale price for the second comparable used was based on public records an incorrect sales price, as it did not include the business enterprise value which is an integral part of gas station valuation.
- The third comparable used was reported to have been verified with parties involved; however, the appraisal did not discuss or address the fact that the station was closed (with no going concern or business value) at the time of sale.
Proeprty B: An apartment on Pacific Avenue in Baldwin Park, California: The summary appraisal was conducted by a local “Certified General Appraiser” to determine its “as-is” market value. The data source was listed as Comps Inc/Title/County Records and the Multiple Listing Service. The following issues were addressed in the review.
- The pending sale price for one of the comparables used was in fact its asking/listing price, not the actual pending sale price, resulting in a distorted value. The consequential effect of the listing price and the indicated listing OAR (capitalization rate) as a basis of comparison is a disservice to the client as well as the general public as it overstated the valuation by 20%.
- A generalized tax rate of 1.2% was applied to the market value conclusion, while the actual tax rate should be 1.5397%, thereby overstating the net operating income.
As a reviewer and an appraiser since the early 1990s, this is a major problem as appraisers with limited commercial experience or fee constraints would rely on public records from the county assessor’s office or information purchased from a secondary source as being credible.
Since our inception, we recognize the benefit of our services to our clients and are committed to spend whatever time necessary to provide our clients with a credible appraisal using the best available data, coupled with our primary data research.
Certified General Appraiser & MAI – Real estate licensing has evolved since the S&L crisis of the early 1990s. It has helped our profession with increased educational requirements; however, there is an unforeseen detriment to the general public as not all appraisers with similar “Certified General Appraiser” licenses have the same qualifications or diligence.
Certified General Appraiser is permitted to provide all real estate appraisal services without regard to real property type, or complexity provided that they have the experience required for any specific assignment they undertake, or the requisite knowledge to perform the assignment competently, or associate themselves with another appraiser who has the necessary experience for a particular assignment.
Thomas H. Lim, Southland Valuation’s chief appraiser, is a designated MAI, Member of the Appraisal Institute. The MAI stands for Member of the Appraisal Institute, which is the highest achievement that is available to an appraiser. The requirements to become an MAI essentially double the requirements set forth for a certified general appraiser. Bear in mind that an MAI Appraiser is also a Certified General Appraiser capable of doing any assignments in the appraisal spectrum.