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What is a Diminution in Value Appraisal?

The purpose of a 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.  One value is called the before value.  It is the value of the property as though there were no adverse circumstances existing.  The second value takes into account the adverse circumstances.  The difference between the two is the 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.  

EXAMPLES OF APPRAISAL ASSIGNMENTS, VALUE DIMINUTION ASSIGNMENTS, CONSTRUCTION COST ESTIMATION AND REMEDIATION ASSIGNMENTS


    Appraiser Malpractice
    Diminution in Value Appraisals   
    Valuation of "Stigmatized" Properties
    Valuation as of a past date (Retrospective)
    Appraisal Review - USPAP / Dodd-Frank Compliance 
    Remediation Cost Estimation in Construction Defects 
    Remediation Cost Estimation in First Party Homeowners Insurance Claims  
    Cost Estimation from Plans, Specifications, and Blueprints
    New Construction Progress Inspection
    New Construction Draw Inspection
    Commercial Real Estate Cost Estimation 
    Cost Approach - Cost New less Accrued Depreciation plus Land Value Estimation   
    Cost Estimation of Sinkhole Remediation
    Accrued Depreciation Analysis
    Actual Cash Value Analysis (ACV) pertaining to Insurance Claims 
    Deficiency Judgments
    Federal Bankruptcy Court
    Complex Hypothetical Condition
    Complex Extraordinary Assumption
    Complex Residential Valuation and Cost Estimation 
    Appraisal Review - USPAP Compliance
    Professional Liability Cases 
    Cost Analysis of Unique and One of a Kind property
    Trial Preparation & Consultation Assignments 
    Seminars & Presentations for Attorneys on Dodd-Frank & Appraisal Law 
    Seminars & Presentations for Real Estate Professionals on Valuation Topics

Examples of Courses and Continuing Education Completed (these are just a small sample). 

        In Addition to a Full Law School Course Curriculum
        Appraising the Appraisal 
        Wind Mitigation Methodology Retrofits
        Advanced Wall Framing
        Florida Laws and Rules 61G4 FAC
        Fair Housing: An In Depth Study of
        Advanced Building Code 5th Edition
        Advanced Building Code 6th Edition (2017)
        Evaluation: Today's Residential Appraisal
        That's a Violation: Appraisal Standards
        Limited Scope Appraisal
        Documenting the Appraiser's Workfile
        Supporting Your Adjustments - Techniques
        National USPAP Update (2018 - 2019)
        Florida Appraisal Laws and Regulations
        Millennials Are Changing Real Estate
        The New FHA Handbook for Real Estate
         Litigation Appraising
         Residential Applications             
         USPAP Update Every Two Years 
         Xactimate Cost Estimation        
         Defining the Hidden Cost When Estimating & Bidding
         Reading Commercial Blue Prints
         Florida Appraisal Law update
         Appraisal Institute Business Practices and Ethics 
         Cam-Tech Construction Law and Technical Applications
         Property Tax Assessment 
         Litigation Appraisal Specialized Topics and Applications    
         Relocation Appraisal 
         Private Appraisal Assignments
         Mortgage Fraud – Protect Yourself        
         Lockout Tagout 
         Lead in Construction 
         Energy Efficient Roofs 
         Daylighting for Energy Efficiency 
         Building for Energy Efficiency 
         Advanced Florida Code Permits and Applications 
         Active Solar Energy Systems 
         Appraising the Odd Ball 
         Appraising FHA Today 
         Solving Tough Appraisal Problems 
         Residential Marshall Swift 
         Elements of Heating and Air Conditioning
         Annual Construction Case Law Update
         State Court Trail Components
         Active Solar Energy Systems 
         ADA Guide for Small Towns
         Advanced Florida Building Code Permits 
         Building for Energy Efficiency
         The Energy Star Qualified New Home
         Florida Construction Laws and Rules - Chapter 489 
         Mold Remediation in Schools and Public Buildings 
         The Building Envelope 
         Wind Mitigation Methodology - Retrofitting Existing Homes 
         Workers Compensation - Understanding Chapter 440

Organizations:

    Appraisal Institute – www.appraisalinstitute.org 
    Hillsborough County Bar Association - www.hillsbar.com 
    Greater Tampa Association of Realtors – www.gtar.org   

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