Diminution
in
Market Value Appraisal

nb@nelsonboswell.com
813-215-7384

Nelson Boswell Jr, JD, SRA
FL Licensed RE Broker 437493 FL
FL Certified General Contractor
FL Cert Res Appraiser RD403

The purpose of a DIV, or diminution in value appraisal is to determine the loss in market value due to some adverse condition or circumstance affecting the property being appraised.  It involves two values on the subject property as of a single date of value: a "before" value and an "after" value.  The before value is the value of the property as though there were no adverse circumstances existing.  The after value takes into account the adverse circumstances.  The difference between the two is the DIV, or diminution in value due to the adverse condition or circumstances.

Theoretically, the loss in market value perceived by the market due to an adverse factor is determined by comparing sold properties that are identical except for the presence of the adverse condition.  This is called a "paired sales analysis."  These are not the sales compared to the subject property in the Sales Comparison Approach - that comps later.  This exercise is only to quantify the market's reaction, if any, due to the adverse condition or circumstances. The difference in their sales prices represent the affect on value due to the adversity.  If for example a property without a certain construction defect sells for $300,000 and an identical property with a certain defect sells for $200,000, the loss in value for a certain construction defect can said to be $100,000 and represents the market adjustment applied to the sales compared to the subject property in the Sales Comparison Approach.

These types  of assignments in all actuality are usually highly complex.  Seldom are there sales available that are identical to each other except for a particular adversity, and furthermore the type of adversity affecting the subject property.  Furthermore, many of these types of  "paired" sales must be analyzed for a reliable estimation of the market's reaction to the effect on marketability due to a particular type of adversity.

Often these types of appraisals are done as of a retrospective effective date of market value because the harm occurred in the past.  Retrospective valuations present their own challenges.  They require the skill and expertise of a real estate appraiser who can not only explain in written format, but by oral testimony, concepts, terminology, and methodology in real estate appraisal and construction to the trier of fact in simple terms that would not otherwise be easily understood.  Nelson Boswell, Jr., JD, SRA, CGC has performed many of these types of assignments and has an excellent command of real estate, appraisal and construction terminology, as well as poise and preparation in the techniques of expert witness testimony so that the trier of fact grasps the material issues at hand.  Each assignment is unique and complex in their own right due to the amount of time that has passed, regardless of the complexity of the property type.  In many cases, our independent, supportable analysis has allowed clients to settle cases without going to court.

The cause of the adverse condition or circumstances can be virtually anything, physical or economic, internal or external to property in question.  Examples are construction defects, site subsidence, nuisance, seller non-disclosure (i.e. Johnson v. Davis cases), the list goes on and on.  The potential causes of diminution in value to real property and the causes of action brought by property owners is virtually limitless.

Attorneys especially appreciate working with an expert who can provide clear, enlightening testimony that is technically accurate and scientifically supportable.