Appraisals

We are starting to see properties "not appraising out" lately.  That's an early indicator that prices may be increasing, at least in submarkets or areas where supply is limited.  What we mean by that term is that the appraisal number is lower than the amount on the sales contract.  If the buyer needs a mortgage, it's an issue, because he/she may not be able to borrow the full amount that they expected.  In other cases, where the buyer is paying cash, it is not uncommon for the buyer to put in a clause that the sales price cannot exceed the appraised value. 

There are two ways to look at this issue, as with so many things.  One is that the buyer should be willing to pay what a property is worth to him/her, regardless of the appraisal.  The other side of the coin is that the practical value of a property--what it would resell for, and what you could borrow against it--is dependent upon the appraisals.

Appraisals tend to lag the market, because an appraiser can only use comps from within a narrow range of closing dates, and within a very small area around the subject property.  It can be very hard sometimes to find good comps, and adjustments must be made from properties that might not be exactly the same in quality or type.  Since the comps come from recent sales, those prices could be lower, in an increasing market, than the sales prices on contracts that haven't yet closed. 

What advice do I have after all of this discussion?  Appraisal is as much an art as it is a science, and both buyers and sellers should be reasonably skeptical about exactitude.  Given the restrictions on bank lending these days, it is harder for a bank to take the same attitude, so just be prepared to make an independent decision in any given instance.

Our Newest Venture--Pearce Consulting Services

Pearce Commercial has expanded!  We've decided that there is a hole in the market, for a service lacking in today's complicated real estate world.  Much of the property being unused or underutilized in the commercial arena in our region belongs to corporations or municipalities, that aren't disposing of the property because of something that needs to be done, either in terms of zoning, rehabbing, or environmental cleanup.  Pearce has put together a group of experts that can guide that process from appraisal and evaluation through rezoning, marketing, and closing, and much, if not all, of the funds needed can come out of the proceeds at the closing.  In addition, many of these sites can then go back onto the tax rolls, and can employ workers and add to the grand list.  Some of our team are Pearce agents, allowing owners to pay for services through the commissions generated.

We have assembled construction, brownfield, wastewater, appraisal, financing, permitting, and marketing experts, who can provide one-stop shopping for all of those specialties, with one call to us.  Also, we can tailor the team each time, to offer the services needed to reclaim the property.  We know that it must be a good idea, because, after we formed our group, we noticed that another such firm was assembled in another part of Connecticut.  It's clearly an idea whose time has come, especially in an era when firms and cities and towns lack the resources to keep specialized experts on staff. Call us for details!

First Entry

Welcome to the new and improved Pearce Commercial Real Estate Website, and to my commercial blog.  While I have been blogging for a long time, this is my initial foray into exclusively commercial material.

It's always an interesting feeling to be writing in cyberspace.  You have no idea who, if anyone,  is reading what you post.  Nor do you know, unless they contact you, what they think of what you say.  That's my way of saying that I'm going to write about whatever occurs to me that I think might be useful or relevant to the potential audience, and I would be delighted to get feedback from reader about potential future topics.

By way of introduction, Pearce Commercial Real Estate covers most of Connecticut, largely excluding Litchfield and Fairfield Counties.  We do sales, leasebacks, leases, exchanges, and buyer brokerage for industrial, office, retail, and investment property.  We also have a large residential department, and joint ventures in appraisal services, insurance and mortgages.  We see the market from the "boots on the ground" level, and get enough industry material to also get the view from 10,000 feet above the ground.  I will try my best to balance those two perspectives, and hope that you will find this site useful.