Appraisers swamped by requests to review commercial properties
Northern Nevada Business Weekly
Appraisers of commercial real estate in the Reno-Sparks area have seen an increase in business as banks keep a close eye on assets backed by real estate loans.
In many cases, land and property owners have had to renegotiate loan terms because of the lower values that appraisers establish.
John Wright, a vice president at Nevada State Bank and a commercial real estate appraiser in the area for more than 25 years, said Nevada State Bank has seen a 20-percent increase in the number of commercial appraisers it hires as the bank closely monitors its assets.
“We are feeling out more appraisal work now than we ever have,” Wright said.
With bank regulators nervous about how current economic conditions might affect the value of commercial real estate secured by loans, commercial appraisers are busy looking at values that were established before rents started falling and occupancy sank.
The demand for commercial reappraisal stems from regulatory reforms established in 1989 in the wake of the savings and loan crisis, said Roger Kadz, senior vice president of Plumas Bank and manager of real estate lending.
“Lenders are bound by that regulation to engage appraisals in conjunction with our loans at any time we see market conditions that have changed,” Kadz said.
Julie Ott of Carter-Ott Appraisal Associates in Reno said her firm has received a growing amount of work as banks take a hard look at property values relative to the loan on a given property.
“There has been an uptick in activity because a lot of banks have portfolios of properties that they have to monitor,” she said. “Often the properties were appraised during the peak, and they have to get a feel for where value stands relative to their loans. Retail sales are down, unemployment is up, job growth is down – all that impacts valuations.”
Wright said appraisal values depend on the type of property, its location and niche in the market. In some cases flat rents and lower occupancies have had minimal impact on the appraised value – maybe a 5-percent or 10-percent decrease. In other cases, though, the decline has been as much as 25 percent to 30 percent.
Wright cautiously points out that appraised value is not the actual value of a property but rather a representation of what the property might sell for on the market.
“Appraisers are charged with representing the market,” he said. “An appraiser’s job is not to place value on a property but to assess how a participant in the market would value a property. We investigate the market in an attempt to derive how the market would look at a piece of property.”
Lower values translate into lower sales prices – and lower sales prices on comparable properties influence the values that are established by appraisers.n