Southland Valuation Incorporated - Services

By: Southland Valuation  06-Dec-2011
Keywords: Real Estate, Commercial Real Estate, Real Estate Appraisals


Southland Valuation Inc. provides commercial real estate appraisals and consultations with services primarily covering the Southern California region including Los Angeles, Orange, Riverside, San Bernardino, Kern, San Luis Obispo, and San Diego Counties. We have also completed reviews and assignements in Nevada and Utah. We service a broad range of property types and appraisal expertise including:

Market Value Appraisals

Leased Fee & Leasehold Analysis

Prospective Value Analysis

Market Feasibility Studies

Mark to Market Valuation

Date of Death Analysis (Retrospective Value)

Fractional Interest Analysis

Our fees vary from $1,500 to $7,500, depending on the report type and complexity of the properties.  As an appraisal firm specializing only in commercial and industrial properties, we recognize the time and effort required to properly understand the product type and various dynamics within the specific market area.  This is especially important in the current market environment as more due diligence is required.  Before engaging any appraiser, it is advised that more delinquent is required to determine the appraiser’s qualifications. 

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.

The typical amount of time required to complete a commercial appraisal is 2.0 to 3 weeks.  Shorter turn around times can be accommodated by allocating more resources to the market research. 

Importance of appraisal as function of due diligence In these uncertain economic times, it our deepest belief that appraisals should be just one part of the party’s due diligence for every transaction.  There are countless examples of problems investors face relying solely on a single entity to protect their interest.  A recent is as follows:

In a job assigned in December of 2008, a foreign investor paid in excess of $10 million, all cash, for a retail project in Southern California.  Immediately after the acquisition, we were 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.  To this end, additional due diligence prior to the acquisition would have greatly benefited the foreign investor.  Our job is to understand the market dynamic and to reflect the market value, not as advocate for the purchase/contract price. 

Internet Search Engine The internet is a great resource for the general public.  As evident by the results from various search engines, there is an abundant number of appraisal companies offering similar services; however, most appear to be specialists in residential properties with commercial-family appraisals as secondary income sources.  At Southland Valuation Inc, commercial property appraisals in our core business.  Some of our resources are, but not limited to, the following:

  • AIR Commercial Real Estate Association
  • California Retail Survey
  • Construction Industry Research Board
  • Costar
  • ESRI
  • First American Title
  • Loopnet
  • NDCdata
  • Korpacz Investor Survey (published by PriceWaterCooper)
  • IREM expenses for apartments, shopping center and offices
  • Marshall Valuation Cost Guide

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 survey of brokers and market participant to better understand the various market dynamics for the specific market place, which takes a great deal time and effort.  To this end, be wary of firms that promise everything before they can spend the required time to thoroughly understand the market. 

“Certified General Appraiser” License 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 unforeseen detriment to the general public as not all appraisers with similar “Certified General Appraiser” licenses have the same qualifications or diligence, which can be said for all professions. 

It is my 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 as it is difficult to properly understand the market area without thoroughly interviewing market participants and the circumstances under which the property was sold.  In December 2008 our firm reviewed two assignments done by other appraisal companies.  The following describes the shortocomings that were discovered during the review process. 

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 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 source for the comparables was listed as Public Records.  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 also based on public records which is misleading as public records do not include purchase price for 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) at the time of sale. 

    The net effect of the preceding errors is a misleading appraisal by undervaluing the goining concern. 

Property B: An apartment on Pacific Avenue, 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.

The information in this article was current at 02 Dec 2011

Keywords: Commercial Real Estate, Fractional Interest Analysis, Leasehold Analysis, Real Estate, Real Estate Appraisals,

Contact Southland Valuation


Print this page