Rev. of Property Inspection: An Appraiser's Guide

Property Inspection: An Appraiser's Guide

by John A. Simpson, MAI
Published by Appraisal Institute, Chicago, 1997

Review by Stephen Traub, ASA

[Bookcover]

ALTHOUGH the author promises the book will be helpful to residential and commercial appraisers whose property inspection training, knowledge, and experience vary widely, I can't agree. If you are a residential appraiser, I agree: the book will provide many novel tips. If you are an experienced commercial appraiser, however, you will find little new information here. Moreover, only about 10% of the book is devoted to non-residential property inspection.

With this caveat in mind, the author presents inspection techniques, forms, and tools. Forms can be useful if they are relevant, not redundant, flexible and easy to fill out, preferably with multiple choice check boxes in an appropriate sequence.

Inspection Tools

Useful tools include a camera, clipboard, measuring wheel or tape, ultrasonic measuring device, engineering rule, architect's scale, screwdriver, compass, flashlight, dictation device, graph paper, and binoculars. The author prefers a tape to a wheel (the tape generally will be more accurate). The tape, however, should have a hook and a stake to allow greater flexibility of location when gathering measurements.

A screwdriver can be useful in removing outlet covers to check for wall insulation. A compass can be handy for checking the orientation of an improvement and a flashlight useful for inspecting unlighted basement and attic areas. Binoculars also can be useful for checking the condition of a pitched roof. The author discusses the growing use of digital cameras as well, but with rapid changes in technology, most of the information presented is already outdated.

One good tip presented, nonetheless, is that since it is common that neighbors or police will question an appraiser, it is a good idea to keep a wallet-sized copy of your appraisal license and some business cards accessible for identification.

Site Inspection

The inspection should include a check of topography, frontage, paving, availability of water, and lot drainage. Bringing maps along can be helpful. Map types include tax maps, flood plain maps, wetland inventory maps, US Geological Survey maps, utility maps, soil survey maps, and site plans. Soil survey maps can be used to check the water table and drainage especially if below grade space exists or is planned. Moreover, look for easements in the title report or deed: the use of the property may be limited by such easements.

If paving exists, it should be checked. Problems with paving have comical names: alligatoring, lunch breaks (cracks at paving intersections), and bird baths (concave areas holding water after rain).

Nearby property also should be viewed. Possible nuisances include landfills, incinerators, highway or rail traffic and noise, or airport flight paths. Covenants, deed restrictions, and views also should be considered. Each can have a significant influence on a property's value.

[A Magnified Building

The author states correctly that the appraiser is the eyes and ears of the client. Talkative neighbors, though sometimes distracting, may be useful in supplying additional information about the neighborhood and the property itself.

Improvement measurements should be checked on site. Graph paper is useful for making sketches of the exterior dimensions. If no angles exist, make sure opposite sides are equal. Also the location of an improvement on the site should be noted. It may become important when determining the feasibility of expansion.

Exterior roofing and wall covering should be observed for type, quality, and condition. Bulging, sagging, cracks, and other potential signs of settling should be noted as well as less serious deterioration such as blistering or paint peeling. The author suggests asking about the last time the roof was repaired or replaced.

If a basement exists, check for moisture. The author states that 60% of all basements suffer from wetness of one sort or another. A damp or musty smell is a tipoff.

If an attic exists, check for insulation, roof leaks, and proper ventilation. If the attic is finished, make note of the amount and quality of finish, clear ceiling heights, and usable floor area.

Inspect Units
That Have Been
Lived In

At older properties, particularly older commercial properties keep an eye out for asbestos. Asbestos might require mitigation if it is friable. Older boilers and pipes often are wrapped in asbestos.

A significant portion of the book discusses common mistakes made in determining electrical capacity. The author provides tips on calculating accurate capacity. With regard to air conditioning needs, he suggests dividing the amperage on the faceplate of the unit by seven. This will provide the tonnage. Each 550 SF requires one ton or 12,000 BTUs.

The Big Picture

Overall, look for the small details yet always keep the big picture in mind. Items such as functional obsolescence should not be applied merely on personal opinion. Often the penalty the market exacts on an item is not transferable from one market to another. An item that is not considered obsolete in one market may have a major negative impact on value in another. In some instances, no effect on value will exist, but just the marketing time for the property will increase.

Unfortunately, inspections of apartment buildings are the only investment property type discussed in detail. The author suggests that overall security, amenities, and proximity to support services should be considered. On the interior, the appraiser should inspect one unit of each type. At least one upper unit should be inspected so the appraiser can determine if water leakage is a problem. Moreover, inspect units that have been lived in, not just the model unit. Otherwise, a true picture of the condition cannot be made. The author suggests the quality of the landscaping is often a direct reflection of the degree of management and maintenance of the overall facility.

Not only should the heating fuel and type be noted, but also the setup. Ideally each unit should have an individual meter. If common systems exist in which the owner is responsible for expenses, often more hot water and heat will be consumed.

Other property type suggestions lacked depth. Shopping centers included only three pages and the discussion on parking, visibility, and the appeal of the facade became rambling and redundant.

The inspection of industrial property emphasized clear story height in warehousing, the desire for one-story properties in manufacturing, and the importance of adequate bay sizing.

ABCs of Appraising

The section on the inspection of office buildings again was limited. The author provided brief descriptions of classifications: Trophy, Class A, B, and C, as follows:

Class A - Excellent location, better than average tenants, superior construction quality, and the highest rents in the market area. Very efficient mechanicals, and upscale amenities such as on-site security and restaurants. Superior views and large floor plates.

Class B - Less quality of construction than Class A and older and more depreciated improvements. A less distinguished tenant mix and space with fewer frills than Class A. Floor plates are usually smaller than Class A.

Class C - Few or no amenities and the most depreciated of the three classes. The least desirable locations and tenants without synergy or prestige. Functionally obsolete components such as older and slower elevator systems etc.

He also recommended that the appraiser estimate the gross building area vs. net rentable area to get the efficiency ratio. Well-designed and efficient office buildings will have ratios of 85% or greater. Column spacing also can play a role. If the columns are too close, partitioned spaces will either be too small or obstructed by columns. Large users want extensive open areas for maximum flexibility of the division of the space.

In summary, little depth is displayed in the limited non-residential sections. By the time the author gets to these sections of the book, he has either run out of gas, paper, knowledge, or all three. Still, if, you are just getting started inspecting commercial property or focus on residential property, the book contains valuable tips. If, however, you've got a couple of years experience or more of commercial appraising, you might want to think about writing your own book.

The book above is available on-line at Amazon Books.

Stephen Traub, ASA, the reviewer, is chief commercial appraiser for Property Valuation Advisors, 63 Hill St., Newburyport, MA 01950. He is a certified general appraiser in NH, ME, and MA.

To contact the author of this review, e-mail to: straub@shore.net or contact him at the address above, or call 978-462-4347.