According to Florida Statute 475.25(t) applied to FS475.611 a real Florida real estate broker or sales associate who in the ordinary course of business, performs a comparative market analysis, gives a brokers price opinion or gives an opinion of value of real estate is exempt for the requirement of being a licensed real estate appraiser so long as the analysis is not referred to as an appraisal as defined in FS475.611.
This statute allows for real licensed real estate professionals to help mark a property value.
An appraisal is a professional appraiser’s opinion of value according to the Appraisal Institute’s web site. Appraisers examine historical data such as comparable sales to predict values today. Today’s volatile market creates the situation that makes it hard for appraisers to estimate a property’s value.
This point was driven home at a luncheon I attended recently. The presenter was a senior loan officer at a bank. His topic was what to expect in today’s market if you are seeking a loan on commercial real estate. During his presentation the lender mentioned that he would order an appraisal of the property but the borrower should have his own understanding of a property’s value. When pressed, the lender admitted that his appraised value was certainly different than the actual value of the property today. He agreed that in today’s turbulent market the past is NOT an indicator of values.
So how do we estimate today’s property values? We ask active, well capitalized buyers what they would pay. This is the true current value of the property.
So is this the value a “vulture” would pay. NO. This is the value that well informed professionals will pay given today’s market conditions. In fact, an appraisal may be biased towards”vultures” if they are the only active trades in the market.
Tight credit, low loan to value ratios, significant reserves for shortfalls and other economic factors are converging to put significant downward pressure on values.
The Brokers Opinion of Value (“BOV”) is a fast, credible, reliable approach to getting to a property’s value. It is useful when a property’s value is in question. It brings the businessperson’s approach to valuation into the discussion. It is an excellent tool for today’s real estate disputes between lenders, developers, investors, creditors and other stakeholders.
I have been involved in situations when a BOV has been used to settle a dispute in the pre-foreclosure phase of a dispute. This keeps the property from being listed as a special asset. Today – the kiss of death to a property’s value in the market place.