CHICAGO (May 5, 2008) – The Spring issue of The Appraisal Journal continues in its mission to provide professional real estate appraisers with information on analysis and valuation of real estate interests. This quarter, feature articles explain how to analyze and value water rights and aircraft hangers. In addition, articles on appraisal review as it relates to expropriation, the inconsistency of expert witness standards for appraisal testimony, and the Japanese take on asset impairment accounting as related to appraisers are also featured.
As a follow-up to last issue’s article on legal concepts related to the nature and transferability of water rights, the cover feature of the Spring issue, “The Appraisal of Water Rights: Valuation Methodology,” by Steven J. Herzog, MAI, focuses on water rights valuation methodology. The author uses a case study to illustrate approaches for determining the stand-alone value of a water right and how that value contributes to a property’s overall value. The author finds that a clear understanding of the interest being appraised is foundational to the entire appraisal process.
In “An Introduction to the Valuation of Aircraft Hangars—Part 2,” by Timothy J. Lindsey, MAI, illustrates specific appraisal techniques for valuing aircraft hangars through the use of a case study. Lindsey recommends using all three approaches to value as well as fieldwork to confirm the nature of the market whenever the reliability of data related to aircraft hangars appears to be weak. Part one of this article, in the Winter 2008 issue of The Appraisal Journal, examined characteristics that affect value such as location, structural systems, hangar features, property rights and leases tied to fuel consumption.
Appraisal review as it relates to expropriation or condemnation appraisals is the topic in “Expropriation Appraisal Review,” by Tony Sevelka, MAI. In this article, Sevelka explains that in condemnation appraisals, there are statutory requirements that form an integral part of the appraisal development process and these must be considered in the review of a condemnation-related appraisal. The author concludes that the ultimate objective of the technical appraisal review is to test the reasonableness of the logic, assumptions and value conclusions as well as compliance with standards, and statutory and regulatory requirements.
“Daubert and the Appraisal Expert Witness Revisited,” by authors Richard W. Hoyt, PhD, MAI, SRA, and Robert J. Aalberts, JD examines how the expert witness standards enunciated in Daubert v. Merrell Dow Pharmaceuticals have been applied by state courts in cases where the appraisers’ methodology is being contested. The four factors that Daubert identifies for the courts to consider (theory testing, peer review and publication, known rate or error and general acceptance) have been interpreted differently by various courts. But after looking at the courts opinions, the authors find the courts’ are focusing on whether the methodology and data are reasonable, reliable and easily understood, and comply with generally accepted appraisal practice. Hoyt and Aalberts conclude that the courts are taking disparate directions and currently there does not appear to be any visible pattern among the courts.
Rounding out the feature articles is “Asset Impairment Accounting and Appraisers: Evidence from Japan,” by Takashi Yamamoto, PhD, which examines the characteristics of companies that have adopted asset impairment accounting in that country. Yamamoto’s analysis shows that larger companies with large latent property losses, chose to apply asset impairment accounting earlier than other companies. The article also compares the characteristics of companies that use appraisers’ valuations, as opposed to internal directors’ valuations, in asset impairment accounting. Yamamoto attributes a greater use of appraisers’ valuations to the need of certain companies to improve investors’ perceptions of management, control directors’ behavior, and enhance the reliability of financial reports.
The Appraisal Journal, published quarterly by the Appraisal Institute, serves as a forum for advancing appraisal theories and practices. Containing articles, columns and letters written by experienced appraisers and educators, The Appraisal Journal presents ideas, concepts and analytical techniques to be considered. Each issue offers alternative valuation methods for serious thinkers seeking creative solutions to appraisal problems, appealing to appraisers, educators and other real estate professionals.
For more information about The Appraisal Journal or for review copies, please contact Nancy K. Bannon at 312-335-4445.