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Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal issues. Today Todd nominates himself for presidence on a platform that punishes capital. …Jonathan Miller

The way I see it is this: if among the two dozen or so declared candidates, [Tom Vilsack](http://www.tomvilsack08.com/) and [Duncan Hunter](http://www.gohunter08.com/Home.aspx) can run for President (extra credit for anyone who can pick either of these guys out of a lineup), why not me?

I do today, therefore, with no consideration whatsoever given to the thoughts of my friends or family, declare my candidacy for President of the United States. Unlike my fellow candidates – who will focus on issues such as the war in Iraq, health care, education, global climate change, and immigration reform – my candidacy will be based on the single issue of “Capital” punishment, which is not to be confused with “Capital Punishment”.

“Capital” punishment is an issue I am introducing because I wish to improve the working conditions of oppressed and downtrodden real estate appraisers everywhere. And the beauty of “Capital” punishment is the fact that it will be meted out by appraisers, using their own wisdom and discretion, and not by spineless judges!

“Capital” punishment is nothing more than the addition of a few more adjustment categories to the Sales Comparison grid. And if the appraiser is put in a position where he or she must make adjustments in these new categories (which I will get into shortly), the result will be a lower appraised value, hence the term “Capital” punishment.

Feel free to add your own categories but mine would include the following:

Awning adjustment
This adjustment is dependent on the weather. If it’s raining when the appraiser shows up for the inspection and the house doesn’t have an overhanging roof, portico, or awning of some sort and the appraiser has to stand out in the rain while waiting for the owner to answer the door.

Shrubbery adjustment
This depends on several factors including the density of, and proximity to, the house. (In certain cases the appraiser may amend the statement of Limiting Conditions to include, “Due to the proximity of Holly, Barberry Hedges, and or Rosebushes to the subject dwelling, the actual square footage is anybody’s guess.”)

Excessive radius adjustment
Sometimes related to Shrubbery, but this is appropriate when the radius of the wall at a corner of the house precludes appraiser from anchoring the tape measure and walking it to the next corner without slippage. (can also be used if the radius at the corner is so sharp as to prevent the appraiser from unhooking the tape measure from 30 feet away and has to walk all the way back to free it)

Shape of house adjustment
This applies, in varying degrees, to any house that is not a perfect rectangle AND whose owner does not have a set of blue prints that you can borrow. (Of course, if the house was [designed by Frank Gehry](http://images.google.com/images?q=Frank+Gehry&hl=en&sa=X&oi=images&ct=title), even blue prints won’t help very much)

Dog minefield adjustment
Last, but certainly not least, is the Dog minefield adjustment and this one combines all the others, not to mention the size of the dog.

I am counting on the support of my fellow appraisers as I begin my campaign. Let’s bring the issue of “Capital” punishment to the front burner once and for all. Let those offending homeowners know in no uncertain terms that we are not afraid to, if necessary, Kill the Deal.

Tags: Soapbox Blog, Todd Huttunen, The Hall Monitor

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Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal issues. Today he pays homage to the midwest, where all the assessors are above-average. …Jonathan Miller

I’ve never been to Minneapolis, Minnesota and most of what I know about it came from listening to the dulcet tones of Garrison Keillor and his public radio production, “[A Prairie Home Companion](http://prairiehome.publicradio.org/)”. Personally, I think he’s hilarious (it’s a Scandinavian thing – my forebears came from Finland).

What brings me to Minnesota today, specifically Minneapolis, is the internet and how it has changed and will continue to change the nature of the appraisal profession. In the interest of full disclosure, I am NOT a computer guy. I can’t even insert the hyper-links to the websites referenced in this post without [Jonathan Miller](http://matrix.millersamuel.com/?page_id=521)’s help. But lately I’ve started to fool around with stuff like [Google Earth](http://earth.google.com/) and [Spatial Comps](http://www.spatialcomps.com/) and other GIS related programs.

Those of you who are closer to the technological cutting edge than I (which should be most everyone under my age of 50 and quite a few who are older), already know what the impact of the internet has been. But just in case any of you are still underneath the giant rock I just crawled out from under, allow me to share my wonder at some of what I found in the on-line world of 2007.

I went to the website for the [City of Minneapolis](http://www.ci.minneapolis.mn.us/) to see what I could find out about the city, specifically with regard to real estate value trends, recent sales, etc. To my utter amazement, the information that was readily available, and free, was voluminous. From a list of the various neighborhoods in the city I chose, at random, to search “Kenwood” and immediately saw displayed seventeen sales. Five of these were on the same street, Oliver Avenue. In case you’re looking for a house on Oliver Avenue, please note:

1722 Oliver Ave. sold 8/06 for $715,000
2208 Oliver Ave. sold 5/06 for $888,500
2212 Oliver Ave. sold 11/06 for $875,000
2312 Oliver Ave. sold 7/06 for $873,775
2410 Oliver Ave. sold 9/06 for $1,100,000

In minutes I had not only the sale dates and sale prices, but also lot sizes, year built, gross living area and the number of bedrooms and bathrooms for each house. In addition, I found the assessed values going back as far as 1988, as well as taxes, both current and historical. Another mouse click gave me the building permit history for each property.

BTW, the sale at 2410 Oliver appears to have been a teardown since a demo permit was taken a month after closing. That lot, nearly one third of an acre, happens to be twice the size of the others so perhaps it had subdivision potential. I didn’t spend any time researching zoning maps and ordinances, but they were available, had I been so inclined.

The coolest thing they have is the GIS link which gives you the aerial photograph zoom in to see a close-up of the “roof print”, zoom out for a wider perspective of the surrounding area – not to mention the additional “map layers” with lot dimensions and other useful stuff. Even if most municipalities in the country don’t have what Minneapolis has on line (Peoria didn’t, and that was the only other one I checked) you can still use Google Earth to get that “overview”.

My initial reaction to what I found in the assessment records for Minneapolis was jealousy. Because I work in an assessor’s office in Westchester County, NY and the practice of assessment in most of Westchester is still in the Stone Age by comparison. What a joy it must be to do appraisals in Minneapolis, where you can get such detailed information without even picking up the phone.

It’s really not fair when you think about it. Out there in the Midwest, where everybody’s so polite and helpful they’d be happy to give you anything you need if you called, you can get everything you need on-line. Here in New York, where there’s almost nothing available on-line, you’re at the mercy of someone at the other end of the phone. You’d better hope the person who answers the phone is from the Midwest.

Tags: Soapbox Blog, Todd Huttunen, Radio, The Hall Monitor

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Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal issues. To start the New Year properly, Todd digs deep into cemeteries, offering an appraisal angles we can put a shovel to. …Jonathan Miller

The population of New York City was less than 1,500,000 in 1863 when the [Woodlawn Cemetery](http://en.wikipedia.org/wiki/Woodlawn_Cemetery%2C_Bronx) was established in the Bronx. This cemetery, which comprises an area of 400 acres, has today some 400,000 “residents” while New York City’s “active” population has climbed to 8,000,000. Although the twentieth century brought us waves of new construction to accommodate the immediate needs of our burgeoning numbers, the same cannot be said for our future, more “long-term housing” requirements. There has been almost no new cemetery construction in the New York area in the last one hundred years during which time the country’s population has tripled to more than 300,000,000.

Although Woody Allen did say I don’t want to achieve immortality through my work, I want to achieve it through not dying, he was joking when he said it. Death is a subject which many people are not comfortable discussing seriously, but I am, so I will (not too seriously, I hope).

Access to census data through the internet makes it simple to research population and demographic statistics. It’s easy to find out how many people live in a certain place. What’s much harder, I found, was discovering how many people are buried. Most of the on-line cemetery sites do not provide actual numbers of plots, or indicate how much space, if any, is still available. Not having any hard numbers to work with, I leafed through the Hagstrom Atlas for Westchester and counted the cemeteries identified in its pages. I found twenty five cemeteries large enough to be labeled as such. This does not include small graveyards and those adjoining churches, of which there must be dozens more. Anecdotally then, it seems that in Westchester County there have to be at least as many people beneath the ground as there are above (roughly 1,000,000).

There seems to be an industry-wide move away from individual plots to higher density, mausoleum style burial, which would seem to be a reflection of the shortage of vacant land. These new “corpse condos” are a far cry from the large and ornate, older mausoleums which you find in the older parts of the cemetery. And these are nothing as compared with the granddaddy of them all, [The Taj Mahal](http://www.islamicity.com/Culture/Taj/).

Since we are all destined to move to smaller accommodations eventually, the manner in which we deal with this is as worthy of concern as any other aspect of housing. Clearly, the notion of individual plots is one whose time is coming to an end. We simply don’t have the land available, unless we start recycling graves, which seems unlikely.

Cremation is gaining in popularity. Urns take up much less space and they can be seen as decorative objects, to be kept in the home. (My own preference would be for my ashes to be kept in the trunk of the car, where I could be put to use, one last time, in the event the car got stuck in the snow) Ultimately, this is a question that is already being answered in terms of highest and best use. In new construction today, the stodgy “formal” rooms of a house (living, dining) are already getting smaller in exchange for big kitchen/family rooms.

We can complete the transition of our outdated floor plans, and respectfully provide for our departed loved ones at the same time. What to do with those urns? Instead of calling it the “Living Room” (where no one really wants to be anyway) let’s call it the “No Longer Living Room” (where no one really wants to be anyway).

Tags: Soapbox Blog, Todd Huttunen, The Hall Monitor

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Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal issues. Today Todd suggests residents in Westchester County, NY (but it also applies elsewhere) eat twice as much cake as they need to so the sugar rush masks they high taxes they pay. …Jonathan Miller

[The Administrative divisions of New York [Wikipedia]](http://en.wikipedia.org/wiki/Administrative_divisions_of_New_York) consist of 62 counties, 62 cities, 932 towns and 553 villages. The County of Westchester, which has the highest property taxes in the United States, has between 43 and 48 municipalities, depending on how you count them. Scarsdale seems to be both a town and a village – as do Harrison and Mount Kisco. These three town/villages have boundaries which are co-terminus. This is not to be confused with Mamaroneck (Town) and Mamaroneck (Village), Ossining (Town) and Ossining (Village), Pelham (Town) and Pelham (Village), or Rye (City) and Rye (Town) all four of which, or is it eight of which, are indeed separate entities. (those of you not familiar with Westchester County can take solace in the fact that those of us who are familiar are just as confused by this paragraph as you are)

Trying to make sense of all of Westchester is impossible so let’s focus on one town which is in the southern part (within 30 minutes of Manhattan). The Town of Greenburgh measures more than 30 square miles, the largest town in lower Westchester, and has a population of around 86,000. It consists of six villages as well as an unincorporated area. The villages, each of which has its own school district, are Ardsley, Dobbs Ferry, Elmsford, Hastings-on-Hudson, Irvington and Tarrytown. The areas of town outside the villages have two additional school districts.

More than 50,000 residents of the town, those living outside the villages, are served by a Town Supervisor, with a police department, assessor, building department, town clerk, highway department, etc. to provide basic needs of residents. The six villages, whose total land area comprises just 40% of the town, each have their own village manager, police department, assessor, building department, village clerk, highway department, etc. to provide for their basic needs.

Does a town of 86,000 residents covering 30 square miles really need seven different supervisor/managers, police departments, building inspectors, highway departments, etc? Not to mention the eight school superintendents for the various districts (one of which has fewer than 1,000 students).

Don’t get me wrong. Greenburgh is not an egregious example by any means. It merely has the geographic size and large numbers of villages that make it easy to highlight the way services are provided. But the absence of any observable economy of scale, with regard to services, is evident in any number of other municipalities throughout Westchester.

The funny thing is this. Whenever anyone suggests merging a function of a village into that of a larger town, the residents of the village invariably rise up in protest, fearful that they will become the unwanted stepchild whose garbage won’t be collected or whose streets won’t be plowed.

We love to complain about the level of taxes we pay. But we have little interest in addressing the manner in which services are provided. We want to have our cake and eat it too, which is fine, as long as we’re willing to pay for two cakes.

Tags: Soapbox Blog, Todd Huttunen, The Hall Monitor

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Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal issues. Todd notices that there is a real lack of understanding about time adjustments by appraisers. …Jonathan Miller

During the five years I’ve worked in an assessor’s office, single family houses in my town (whose prices are right around the median for Westchester County) have increased about 60% in value, although they actually topped out in 2005 and have remained stable since then. Or have they?

In the county as a whole, the median selling price is virtually unchanged through the third quarter in 2006 as compared with 2005, right around $716,000, according to WCBR Sales Statistics the mean selling price is actually up about 3%, from a little under $900,000 in 2005 to a little over $900,000 this year. Same is true for mean list price, which is up slightly. The only downward indicator, in terms of pricing at least, is in the median list price, which is down a whopping one percent. Not much of a correction based on these numbers, and certainly no bubble bursting!

And yet most brokers and builders, as well as appraisers I talk to tell a different story, saying prices are lower this year. If that’s the case, why are the (statistical) selling and asking prices telling us prices are stable?

What has changed dramatically is the VOLUME of sales, as well as that of listings. In terms of those numbers, sales are definitely down and listings are up. But the shift in inventory has been going on for more than a year already with little or no impact on price levels.

I’m no statistician but I have a theory and maybe it explains what’s going on here. No matter whether it’s a buyers market or one favoring sellers, the more desirable property of those available for sale is always going to be the one with the more desirable location, in better condition, with more amenities, etc. I’ve heard it referred to in terms of choice, as primary and secondary. Everybody wants to buy the “primary” house but in a hot market they can’t afford the house they really want so they settle for the “secondary” choice, the one that needs work, has the less desirable location, whatever.

Perhaps what’s happening in 2006 is this – although the selling prices are the same this year, since there are more houses to choose from the buyers are getting their “primary” choice for the same price as was being paid for the “secondary” choice in recent years. The trend in selling prices may say “things are stable”. You’re paying the same for a house this year as you did last year. But just maybe, you’re getting a better house for your money.

Does a scenario such as I’ve described above warrant negative time adjustments? Strange as it may seem, when prices were going up I rarely saw an appraisal with positive time adjustments. Maybe it’s just because most appraisals I see are done for people trying to lower their assessments but I have a feeling that the same appraisers who didn’t recognize increasing values will have no such trouble documenting their decline.

Tags: Soapbox Blog, Todd Huttunen, The Hall Monitor

Comments Off on [The Hall Monitor] Adjusting To Time (Clueless In Westchester)

Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal issues. In this week’s column, he makes the case that we should all get adjusted, when it comes to our land. …Jonathan Miller

The Uniform Residential Appraisal Report, Fannie Mae Form 1004, was revised less than two years ago, yet when it comes to the Sales Comparison Approach (the grid) it is still a relic of the 1930’s and completely inappropriate for use in significant parts of the country, specifically, locations whose demographics are similar to those of Westchester County, a high priced suburb just north of New York City. The grid was designed for a time when the “typical” land to value ratio was in the range of 15 to 20%, which it was, for much of the first half of the twentieth century.

Please keep in mind that I am talking about fully built up areas near thriving, vibrant cities, where there is little or no vacant land available for development. This would include much of the northeast and parts of the west coast, not the entire country.

The grid provides for value adjustments in nineteen labeled categories. Three pertain to sales concessions, market conditions, and form of ownership. Of the remaining sixteen, three (19%) pertain to the land and thirteen (81%) to the improvements. This division between land and improvements would seem to suggest that those things which have the most effect on the value of real property are those related to its improvements, not the land. No doubt this was true in 1939 and perhaps it was still true in 1960. It is not true today.

Builders tell me that when it comes to land, the rule of thumb is they will pay for the site one third of what they expect to get for the new house they build. My own research of “paired sales” (sales of teardowns followed by sales of new houses on those sites) indicates a higher land to value ratio, ranging from 40% to as high as 50%. But let’s assume, for the sake of argument, that the “typical” land to value ratio for a new house is only 35%. That’s for a new house with no physical, functional, or external obsolescence.

At the other end of the spectrum is the teardown, whose land value is more than 100% of the total value (deduct the cost of demolition from the sale price). We now have a land to value ratio which ranges from 35% for new houses to 100%+ for teardowns. Within that range, what’s typical? Well, of course this will depend on the specific property being appraised. But if it’s a fifty year old house which has not been updated, is it not reasonable to conclude that the “typical” land value may range from 60% to 70% of the total value?

If the “typical” land to value ratio is 65% then shouldn’t the value adjustment categories on the grid be revised to reflect that fact? Why are 81% of the adjustments being made to the improvements, where they may constitute just 35% of the value? The grid needs to be revamped to address the reality that most of the value today is in the land, and not the improvements.

Tags: Soapbox Blog, Todd Huttunen, The Hall Monitor

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Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal issues. This week, Todd laments the out of sight cost and construction timing of the place of our favorite pasttime. …Jonathan Miller

Yankee Stadium, which opened in 1923, was constructed in less than a year at a cost of $2,500,000. Yankee Stadium II is expected to take almost three years to build at a cost of $800,000,000.

Even if $2,500,000 in 1923 was equivalent to $800,000,000 today (and that’s a really big if) there’s been no inflation in the number of days in a year so how come it will take three times as long, using modern equipment and technology, to build it now as it did to build it then?

What’s more interesting than the cost or construction time of stadiums, however, is the difference in the economic lifespan of the old ones as compared with the newer ones. Fourteen baseball stadiums were built between 1881 and 1932. The average age of a decommissioned stadium from this era was 68 years. Twenty three stadiums were built from 1954 to 1982 and seven of these are still in use (though four, including one built in 1982, are slated for demolition.) Of the sixteen that have been replaced, the average age was just 29 years. In mere survival terms, the “old timers” have a batting average of .142 as compared to just .130 for the younger ballparks.

Without question, improvements in medicine and science have been instrumental in helping people live longer lives. Unfortunately for the buildings we are constructing however, including baseball stadiums, that trend is moving in the opposite direction. When did this happen? At what point did the economic life of buildings begin to decline? The turning point with regard to quality of construction, for many buildings and houses, is World War Two. Anyone even remotely interested in real estate, especially in a city like New York, knows the difference between “pre-war” and “post-war” and the connotation of those phrases.

With regard to [The Fields of Major League Baseball](http://www.ballparksofbaseball.com/), the golden age for stadium construction was the decade between 1905 and 1915, which saw the construction of ten new ballparks. As recently as 1990, four of the ten were still hosting games.

The next boom in stadium construction wasn’t until the period of 1965 to 1975 (the nadir of American architecture, in my opinion) when twelve were built. The good news for anyone who cares about beauty, style, grace, or even just good functional utility is that nine of those twelve have already been demolished.

By far the greatest period of new stadium construction, however, is the one we’ve been in since 1992, led by Camden Yards in Baltimore. Seventeen have been built since, and six, including Yankee Stadium II, are in the works. In terms of their designs, most replicate the best features of the ones which were built 100 years ago. As the song goes, [“Everything Old Is New Again”](http://www.oldisnew.org/).

Here’s hoping this latest crop will still be around when our grandchildren are taking their children to their first baseball game.

Tags: Soapbox Blog, Todd Huttunen, The Hall Monitor

Comments Off on [The Hall Monitor] Building Shorter Economic Lives In Our Favorite Pasttime

Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules (and pretentious, arrogant, know-it-all seemed a little harsh). He offers Soapbox readers tongue-in-groove insight on appraisal issues. Today Todd makes a big point on a small issue on resistance to large new homes by the neighbors, or was that a small point on a big issue? …Jonathan Miller

An article in the [Home & Garden](http://www.nytimes.com/2006/11/16/garden/16baby.html?ref=garden) section of the New York Times the other day (and this [Sunday section story too](http://www.nytimes.com/2006/11/05/realestate/05habi.html?ex=1164085200&en=903c0480b31ff34d&ei=5070) -ed), got me searching my bookshelves for Sarah Susanka’s [The Not So Big House](http://www.notsobighouse.com/), written in 1998. Maybe it was just a matter of timing, since 1998 marked the start of a seven year boom in real estate, but from my vantage point very few developers or their customers (in Westchester at least) read that book (or agreed with its premise if they did read it) when it first came out. Now that the boom has ended, however, and there’s time to reflect on what’s been built in the last few years, how will the market judge, come re-sale time, the most recent crop of new houses and what trends can we expect to see in the next wave of new construction?

If recent growth cycles ushered in the “Era of the McMansion”, might the next one bring us houses that are – dare I say it – smaller? In “The Not So Big House”, Sarah Susanka explains, “Maybe it was the 1980’s that created what I call the ‘starter castle’ complex the notion that houses should be designed to impress rather than nurture. More rooms, bigger spaces, and vaulted ceilings do not necessarily give us what we need in a home.”

Since there is almost no vacant, developable land in most of Westchester, new construction usually takes place on a small scale, a new cul-de-sac with four houses as opposed to a 500 lot subdivision. In many built-up areas new construction happens literally one house at a time, in the form of additions/alterations to, or teardowns of, existing houses, as they sell.

No one can reasonably argue that the houses built to meet the needs of people in the 1920’s, 30’s, 40’s or 50’s meet the needs of those buying houses today. Some kind of alteration to these houses, if not outright demolition, is necessary. We all recognize the world we live in today is different from that of our grandparents.

Yet the reaction to big, new houses built in recent years, particularly in neighborhoods of smaller houses, has been vocal and generally in opposition. Many communities have tightened their zoning ordinances in an effort to limit the size of new houses. The flip side of the “too big” argument comes from builders who say they are just building in response to what their customers are demanding, and this is not an unreasonable position.

But now that the market is (taking a breather?), perhaps both sides of the “how big is too big” question can sit back, cool their jets, and, with a nod to the recently departed Milton Friedman, let the market decide.

Will the next generation of houses be a rejection of the McMansion in favor of something smaller and smarter, as Susanka advocates? The building supply store Lowes is now offering [kits for Katrina cottages](http://www.csmonitor.com/2006/1002/p01s01-ussc.html). Will “small” be the new “big”?

Update: Speaking of a small world, saw this article on MSN/Real estate today [For many homeowners, less is so much more](http://realestate.msn.com/improve/Article.aspx?cp-documentid=353659&GT1=8800).

Tags: Soapbox Blog, Todd Huttunen, The Hall Monitor

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Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal issues. Today Todd probes the extreme, excessive, inordinate, or exorbitant definition of market value. …Jonathan Miller

There is more than one definition for Market Value but for our purposes today we will use the one listed first in The Appraisal of Real Estate, 12th Edition, which reads:

The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.

That definition works great, except, sometimes, for the last eight words, “and assuming that neither is under undue duress”. If you look up definitions for “undue” and “duress” you might put together the following phrases whose meanings are similar to “undue duress” “extreme coercion”, “excessive compulsion”, “inordinate constraint”, “exorbitant pressure”.

Since the definition does not read “neither is under duress”, we know that some degree of duress or coercion, compulsion, pressure, etc. is assumed, likely to be experienced by both buyer and seller to varying degrees depending on market trends. What then, constitutes “undue” duress as opposed to the “due” variety? That’s where these other words like extreme, excessive, inordinate and exorbitant become useful.

I believe that for most of the last seven years many buyers were “under undue duress” and, if the doomsayers are right, sellers will get their turn soon enough (note the future tense of that sentence – to be contrarian these days you have to be an optimist).

As someone who bought a co-op apartment in 2004, I feel qualified to speak on behalf of “buyers under undue duress” (BUUDhists). My broker and I had looked at more than 30 apartments and I had made offers on none of them (she was and still is my friend, believe it or not). As a result of so much looking however, almost before I even opened the door of the apartment I now live in, I knew this was the one.

This was a vacant, sponsor (developer) owned unit which had been on the market for about two months. I had seen enough to know that I should make a full price offer immediately, and I did. As it happens (as it used to happen), that full price offer was matched by “another buyer” the very same day. If I wanted this apartment (and I did) I would have to increase my offer in a sealed bid within one week, which I also did. I ended up paying almost 10% over the asking price.

Did the circumstances surrounding this sale cause me to pay more than “Market Value” for this apartment? In light of market conditions at the time, probably not. But mine is by no means an extreme, or even typical example of what many “BUUDhists” experienced during the boom years.

There was a story in The New York Times, June 9, 2002, (I kept the article) “Seller’s Market Continues for Homes in the County”, recounting the experience of a real estate broker who was himself looking to buy in Westchester and had been outbid on several houses before finally, in desperation, showing up at one house with his infant daughter in tow, hoping to gain the sympathy of the sellers. It worked and he got the house. “My advice to prospective buyers,” he said, “is to make a good impression on the seller. Wear a tie, comb your hair and look like you really want that house.” (I realize we were in a much different market in 2002, a sellers market, but that still sounds to me less like how to get a house and more like how to get girls.)

But seriously, can that kind of “duress” be described as anything but “undue”, extreme, excessive, inordinate, or exorbitant? When market conditions so greatly favor either buyers or sellers, the last eight words of the definition of Market Value need some adjustment. And who better to make adjustments than appraisers? When there is stability in the market (when is that?) the textbook definition applies. At other more turbulent times, how about a multiple choice: ” and assuming that seller/buyer is under undue duress” (circle whichever is appropriate).

Tags: Soapbox Blog, Todd Huttunen, Appraisal Pressure, The Hall Monitor

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Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules (and pretentious, arrogant, know-it-all seemed a little harsh). He offers Soapbox readers tongue-in-groove insight on appraisal issues. Today Todd asks the question : If an assessed value exceeds construction costs, will the assesor make a sound? …Jonathan Miller

Henry David Thoreau published “Walden”, in 1854. “I went to the woods because I wished to live deliberately, to front only the essential facts of life, and see if I could not learn what it had to teach, and not, when I came to die, discover that I had not lived.”

He built his cabin in 1845 and in 1846 he spent a night in jail for refusing to pay his poll tax. That experience led to the publication of [Civil Disobedience](http://thoreau.eserver.org/wendy.html) in 1849. Now, maybe I’m just sensitive because I work in an Assessor’s office, but when I look back at his writings from that time, I can’t help but think that the Concord Assessor had his hands full with one Henry David Thoreau when the time came to assess his new house. Although the “letters” that follow are a total fabrication on my part, I have borrowed some of Thoreau’s own words which you will have no trouble discerning from those which I put in his mouth.

Dear Sir
I have recently completed construction on my humble abode and am fully cognizant of the fact that you, as Assessor, intend to place a value on it which will be used to apportion my fair share of the Concord property tax. There can be no question that you are familiar with Mr. [Sam Staples](http://www.americanheritage.com/articles/magazine/ah/1975/5/1975_5_36.shtml), Tax Collector and Jailer, who only recently locked me away for a night due to my refusal to pay the poll tax. I make mention of this only to remind you that I take the issue of taxation quite seriously and, with regard to the property tax, I have studied the law and am confident that your assessment cannot exceed the actual cost I incurred to construct my house, which details are as follows:

I have thus a tight shingled and plastered house, ten feet wide by fifteen long, and eight-feet posts, with a garret and a closet, a large window on each side, two trap doors, one door at the end, and a brick fireplace opposite. The exact cost of my house, paying the usual price for such materials as I used, but not counting the work, all of which was done by myself, was as follows; and I give the details because very few are able to tell exactly what their houses cost, and fewer still, if any, the separate cost of the various materials which compose them:

>

These are all the materials, excepting the timber, stones, and sand, which I claimed by squatter’s right. I have also a small woodshed adjoining, made chiefly of the stuff which was left after building the house. As “Cost tends to set the upper limit of value” I respectfully request that you set the assessment for this property at its actual cost of $28.12 (rounded).

Obediently yours,
Henry David Thoreau

The Assessor responds:

Dear Mr. Thoreau,
Impressed as I am with your knowledge of construction and your meticulous record keeping, your understanding of the real property tax law is less than comprehensive. You are correct when you state “cost tends to set the upper limit of value” however, your recitation of costs has several glaring omissions, notably the value of the land. You may in fact be a squatter who paid nothing for the land, nevertheless, it has value as evidenced by the fact that the eleven acres, one of which you occupy, sold just last year for $8.08 per acre.

Further, although you may have done all of the work yourself, I am obligated to assess the value of that work irrespective of the fact you incurred no cost. Since you started building in March and took occupancy in July, I am estimating labor at $100 ($1.00 per day @ 100 days).

Lastly, you have failed to allow for entrepreneurial profit, which, in this case accrues to you at 15% of your direct costs – $28.12 x 0.15 = $4.22.

The tentative assessed value, which includes land value as well as direct and indirect costs, is hereby set at $140.00.

If you disagree with this assessment, you may file a formal grievance with the Board of Assessment Review. Please do not hesitate to contact me if I may be of any further assistance.

Faithfully yours,
Assessor, Town of Concord

Tags: Soapbox Blog, Todd Huttunen, The Hall Monitor

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Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal issues. Today Todd speculates that Darwin was an appraiser. …Jonathan Miller

Here’s an Op-ed written by Todd last year, published by [The Journal News](http://www.lohud.com/apps/pbcs.dll/frontpage) in their Community View section on October 1, 2005.

The debate over Darwin and the nature of the real estate market are more closely related than one might imagine. “Natural selection” is a Darwinian principle that applies not just to species evolution, but to real estate evolution as well. While Darwin’s theory is widely accepted, evolution in real estate is controversial. It wasn’t much of an issue until it reached into our neighborhoods and the terms “Teardown” and “McMansion” entered the vocabulary.

An imbalance in the supply and demand for vacant land is the primary reason teardowns occur. In recent years, demand for vacant land has been high and the supply is all but “extinct”. Land values have skyrocketed and the rate at which existing buildings depreciate in value has accelerated. This trend is by no means limited to residential property. Commercial properties improved with buildings that are not necessarily old or physically worn out, but have reached the end of their economic life, are redeveloped as market conditions warrant. Notable examples of demolished “newer” buildings include professional sports stadiums built as recently as the 1970’s and 80’s, and casinos of a similar vintage in Las Vegas.

“Highest and best use” is a principle that is integral to the real estate appraisal profession. It is also an evolutionary concept in that it involves change over time. The principle of highest and best use asks two questions. What is the ideal improvement that should be property that is currently improved? Consider the General Motors factory on the banks of the Hudson River in Sleepy Hollow, just twenty miles from New York City. When it was constructed in the early 1900s, the highest and best use for that 96 acre waterfront parcel was manufacturing. Obviously, that is no longer the case. How exactly that property will be redeveloped has not yet been determined but it certainly won’t be for manufacturing.

With regard to residential development trends, the post-war period in America ushered in the baby boom and the housing boom of the 1950’s. In response to the demands of a nascent middle class, Levittown style developments offered cookie cutter houses affordable to veterans and their families. The decade of the fifties witnessed the construction of more new single family houses than any decade before or since.

Many neighborhoods that were first developed so quickly fifty years ago are being re-developed today, thanks to the phenomenon known as the “teardown”. Perhaps you live in a neighborhood that is undergoing “suburban renewal”. Is your house a potential teardown? If it is located in a highly regarded school district and it was built after 1945 then the answer is quite possibly yes. In the parlance of real estate valuation, “natural selection” equals “highest and best use”. In many residential neighborhoods, teardown has become the answer to the question of what is the highest and best use for this property.

Why is it that so many 1950’s houses in high priced neighborhoods are being torn down while houses built in the 20’s and 30’s are renovated? Both pre-war and post-war houses have become obsolete in one way or another. Older luxury houses were designed for a more formal lifestyle. Rooms intended for use by the family did not include the kitchen, for example, which was the domain of domestic staff. The kitchen/family rooms of today, on the other hand, have become the focal points.

Although their room layouts are obsolete, many older houses have a quality of construction superior to what is possible today. Architectural traits such as stone or brick walls, slate roofs, and custom millwork, make these houses worthy of renovation. They have adapted over time by virtue of “gut renovations”, which cure their outdated floor plans while retaining their “good bones”.

Many of the post-war Split Levels and Ranches lack the high quality materials and architectural features of the pre-war houses. What these newer houses frequently have going for them however, are generously sized lots. These properties are adapting differently since their desirable traits are in the size and quality of the land rather than the significance of the building. Hence, “teardowns” are replaced with “McMansions”.

Clearly, it is in the neighborhoods where teardowns and massive additions are common that residents may rightfully question whether or not the new construction going on all around them is a good thing. Neighborhoods are being literally transformed. But the evolutionary concept of highest and best use recognizes that change is inevitable. In virtually every aspect of our lives, we expect and embrace new and improved products and technology. The Hybrid cars and High Definition flat screens of today are the offspring of the chrome bumpers and console televisions from the 1950’s. Is it reasonable to expect that our neighborhoods (and absolutely nothing else in our lives) should be exempt from the theory of evolution?

Tags: Soapbox Blog, Todd Huttunen, The Hall Monitor

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Todd Huttunen began appraising more than 20 years ago with a few years off in between to pursue a career in cabinet making. He relegated that to hobby status and is currently an appraiser in an assessor’s office. His best friend dubbed him The Hall Monitor because of his rigidity and respect for rules. He offers Soapbox readers tongue-in-groove insight on appraisal issues. Today Todd breaks down the logic behind a tax rebate program to up the ante for his PBS membership. …Jonathan Miller

The note reads as follows:

Dear Fellow New Yorker:

In accordance with the new [STAR school property tax rebate program](http://www.tax.state.ny.us/nyshome/starrebate.htm) approved by Governor George Pataki and the State Legislature, we are pleased to provide you with the attached check to help reduce the burden of your 2006-07 school taxes. This money is in addition to your existing STAR benefit.

Sincerely,
Andrew S. Eristoff
Commissioner, Taxation and Finance

The check is in the amount of $330.61 and it has my name written on it. Like everyone else, I prefer checks like this because I get to sign the back instead of the front.

My problem is I don’t know who to thank for this “tax rebate”. In my case, it’s not a rebate at all. It’s a gift of some kind but I don’t really know who gave it to me.

You see, I live in a co-op (in a studio apartment) whose market value is about $100,000. I don’t get a tax bill for my individual unit. The bill for the whole building is paid by the management agent and my fair share of that bill is included in my monthly maintenance. My share of the school tax this year, without STAR, would have been around $1,300.

But here’s the thing The Basic STAR exemption is worth roughly $1,600 this year in the Eastchester school district. Naturally, the only people who get the full $1,600 taken off their school tax bills are those whose bills exceed $1,600 in the first place, which is only fair. So, I really can’t complain about my school taxes because (thanks to STAR) I don’t pay any school taxes!

That fact notwithstanding, Governor Pataki, the State Legislature and the Commissioner of Taxation and Finance sent me a check for $330.61 to “help reduce the burden of (my) 2006-07 school taxes” but they can’t reduce my burden because I have no burden (other than the one I feel about having this check I don’t deserve).

I suppose I could send it back or tear it up but that wouldn’t ease my burden, it would just make me feel stupid. Then again, I could use it to pay down some of my own debt. But if paying down debt was a good idea I’m sure the State of New York would have used that money to pay down some of its own, rather than send rebates to 3,000,000 people right before Election Day. I think I’ll just use it to renew my WNYC and PBS memberships, and for that kind of money I’d better get a tote bag AND a coffee mug.

Tags: Soapbox Blog, Todd Huttunen, The Hall Monitor

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