5th Retirement Anniversary - Real Estate Issues

One of the advantages of writing a personal retirement blog is the ability to look back on posts and reflect on the paths I have chosen that led me to where I am now and where I'd like to be in the next five years.  I am happy that I organized this blog in a way that allows me and the reader to see my goals' progress in the top ten categories of relevance to me.  Many of my posts cross into more than one category or "Label."  It is a good time for me  to look back from the first post in each category or "Label" and summarize the highlights to see the level of progress made in my first five years of retirement.  I can more clearly see a path ahead and adjust or make new goals.

I will write ten posts on this 5th Retirement Anniversary addressing each category or "Label." I can also see the stats and which posts have had the most public views.  At this time, my blog had 22,400 views.  That's about 100 views per week in 18 different countries around the world!  It is very rewarding to know that there is interest in what I have to say.  By helping myself I must be helping others with similar interests.  It is an incentive to continue.

Here are my brief summaries of the first five years of retirement and goal adjustments I want to make at this time.  If you want more information on a subject, please scroll down on the right side of the main page and click on the first months in 2011 where you will see where I'm coming from.      
My journey continues....

Real Estate Issues

This is a simple subject to summarize!  After 30 years in the business of real estate valuation, my interest has completely played out.  It took awhile to let go especially when it was so much a part of my life.  It was especially exciting as I was in the highest position as manager of the State Tax Commission of Missouri in my final years.  I was making all the changes needed so the department was more transparent and in line with what the legislature and private sector found acceptable.  I left it better than I found it.  

There was nothing left to do that interested me.  My hands-on experiences were statewide and there was no higher position of authority available in this state.  I had the satisfaction of implementing all the policies and procedures of the highest standards set by the International Association of Assessing Officers (IAAO).  I was even directly involved in the development of the new Ratio Study Standards working in person with the IAAO leadership in Kansas City, Missouri.  I was in regular conference with other Ratio Managers like myself in states such as Texas, Virginia, and California who were very interested in the precedent we were setting in Missouri.  I was in charge of the largest department of the State Tax Commission with up to 30 commercial appraisers in my charge.  I had the final say in real estate valuation oversight for 114 counties and the City of St. Louis.  I testified in depositions.  My only accountability was to three commissioners who were appointed by the governor.  I was encouraged to "tell it like it is" as our department needed more transparency according to the state auditor, Clare McCaskill, in 2005.  I did all that I said I would do in making changes in just 18 months!  Then it was getting more and more political with more of a "tell me what I want to hear" attitude from the commissioners.  I got bored and wanted to get back in the field and actually do the job as it should be done and work from my home office.  I tired of living away from home in the city alone.  I was eligible for retirement.  I worked three years more doing what I loved the most - working in the field with a home office close to home just like I did when I started only with maximum pay!

Even before I retired, I began burning hard copy files of commercial appraisals and market data...thousands of appraisals!  I was required to keep copies and work files for five years; seven if in litigation.   The final years of appraisals will be burned shortly.  Burning files is very therapeutic. The act unburdens me as well as helps me let go and be free to move forward!

After I retired, I completed my required continuing education and licensing requirements just in case I wanted to get back into business on my own.  People told me I would be bored in retirement and may want to work part time.  That never happened to me.  I have been a Limited Liability Company since 2003 mostly for tax purposes and security should anything ever happen to my public employment I could work for a bank or start up my own business.  I never did need it or do any appraisals in addition to my public employment.  So as of June 2016, the time ran out on my General Certification and license as I decided my interest in real estate no longer existed.  I am truly retired.  I will be retiring the subject of Real Estate in my blog with this entry.  It has served me well!

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The Joy of Real Estate Appraisal is Dead

2011 - Day of Retirement in my Home Office

I feel like I should be in mourning.  I am in my 5th year of retirement after 30 years as a real estate appraiser.  Some people go through a low period after only a couple years of retirement and go back to work.  Not me.  I have decided not to renew my General Certification Real Estate Appraisal license when it comes due June 2016.  I will not use the option to suspend it either as I am that sure I'm done with the career and real estate education I began in 1981. The cost to suspend is not much less than just staying in the game.  I have been burning thousands of appraisal and sales files regularly and it feels so good!  I was lucky to have been an appraiser in a time when it was a real joy and I had a highly successful and satisfying career!  It is time to let go.  Still I am a little sad.

I began my appraisal career retirement from the State of Missouri December 2011.  I left my options open just in case my head was not clear from all the negativity in the previous two years before I resigned.  I have written about that negativity in an earlier article in this blog The Joy of Real Estate Appraisal.  Since then, I tried to stay involved to the point of keeping my education and license current but accepted no work.  I regularly visited appraisal sites to be aware of the issues of importance to current active appraisers and was kept informed of any changes in the industry by appraisal organizations.  I remain disconnected to the State Tax Commission (STC) other than the generous pension and health benefits I earned from my 30 year career.  I no longer have the slightest desire to work as a real estate appraiser and my interest in property values has diminished more and more each year.  I will always have my education and understanding of value.  I have grown in many new areas of interest as can be seen throughout this blog.  Now I am free to remember the good times.  The decision to not keep up the requirements for certification was the hardest to make as I worked very hard to get it in the first place.  The recent changes in the appraisal industry, in my opinion, have become more complicated and not in a positive way.  Time to move on.

There were mostly good times and some sad ones!  Remembering helps me get through the reality that those good times have passed.  Writing them down is therapeutic and is something I can come back and read over and over.  I think I will just highlight the years for now and use it as a guide should I want to expand on the memories in the future.  I am thankful that I kept detailed journals of work-related activities for all those years.  I think this may be an appropriate time to retire the Blog Label "Real Estate Issues" and continue in "Personal and Spiritual Growth" after this post.

1981-1984  Hickory County Assessor Office  - Who knew that answering an ad in the local newspaper for temporary part-time work as a data collector could lead to a full-time position learning all the aspects of re-assessment and being chosen by the assessor to eventually replace him?  All that and being close to home, my husband's workplace, and my children's K-12 school was more than I ever expected from such a small rural county we chose to move to in 1978.  I would have been satisfied.  The opportunity to work for the state doing much less work for twice the pay with benefits came knocking.  My husband gave me his full support.  It was brave of me to give up what I knew to be secure and safe for the unknown.  The motivation was that I would have a home office with time flexibility in raising my children, good health insurance, and pension benefits.  The travel would be about two weeks out of 6-8 weeks.

1984-1990  Establishing my Credibility - The first year I stayed away from home about 50 days for schooling and some of my territory was too far to drive home every night. That was the most difficult thing I ever had to do and almost gave up because it was hard on my family with young children.  When I made it known that I had to be home every night or I would have to quit, my position changed to be away much less often and always close enough to drive home with maximum expenses.  I went from basically a residential appraiser to a commercial appraiser position.  My education continued and my experiences grew as I worked in 25 different counties.  I was establishing my credibility as more and more market data became available.  I grew in so many ways!

1991-1999  The Best of Times - With my credibility established and my property values rarely challenged, it was a time for personal growth in my private life.  The job was routine for the most part.  I found it fun and challenging as the first one on staff to be trained in computers, programs, and digital cameras before it was required of all the staff.  While I was at my home office for 4-6 weeks, I was very active with my children in school activities, scouting, church, family time, and developing my hobbies.  My husband's job at the garment factory was insecure so he began night school to better his skills for more secure employment.  There were many deaths in the immediate family so family connections were very close.  It was a good time for my job to be secure and relatively routine, easy, and predictable.  When I had to go out and collect data for two weeks, I was happy to have a change of routine and location to meet interesting and sometimes powerful people in the banking and real estate business.  I had wonderful challenges in the variety of properties to value.  It was exciting!  Then I was ready to be home again all day for 4-6 weeks in my home office and then it began again.  Always something new and never boring!

2000-2005  Nothing Ever Stays the Same - As soon as my supervisors realized my children were grown and out of the house on their own, I was given some challenging break-out assignments that kept me away from home more and more.  It began with assignments in the southeast corner of the state along the Mississippi River.  Then larger cities such as Joplin and Springfield appraisals which gave me experiences that helped me become a General Certified Appraiser.   I had unique experiences from commercial recreational areas around the many Missouri lakes and the Branson entertainment market.

With my husband's work situation changing, I decided to go back to school and take all the courses needed to become a certified appraiser as state jobs took a turn with talk of staff reductions and expenses reduced.  I thought I should increase my job skills and contacts to be able to work in the private sector should the need arise.  I was successful but it was much harder than I originally thought because my training and skills from the state were not typically transferable because they were more specific to larger market areas.  It was a different path that far exceeded the path taken by the average appraiser.  It was a transition period for the appraisal industry that was progressing to certify appraisers both in the public and private sectors.  It was difficult to regulate appraisers when one employer serves the public and one employer serves profit.  I was the first in our group that managed to make it through the National Uniform Standards Profession of Appraisal Practices (USPAP) accreditation. The Missouri Appraisal Commission, who provides the state appraisal licenses, had recently been given national credibility after about 10 years of formative progress in Missouri.  It appeared that not only was I being scrutinized personally, but also the STC, the leading final authority on property values for the public.  It was the state licensing agency vs the state taxing authority.  I was a winner and I had done it all by myself without the help of the STC although they did reimburse my expenses afterward and verbally supported my efforts.  Big changes in the appraisal industry were happening both in the public and private sector.

Elizabeth A. Pearson, Manager Ratio Study Section of the State Tax Commission of Missouri

2005-2007  Manager of the State Tax Commission of Missouri -  I was the most current General Certified Appraiser on our staff as of 2005.  A couple other staff members had the certification but attained it during the early years of the licensing agency before they were very credible and people were mostly "grand-fathered" into the certification.  This was before the more extensive experience and educational requirements were finally established in compliance with USPAP.  When I learned that the manager of the STC was retiring after 27 years and the assistant manager was also retiring, I applied after giving it thought for two weeks talking it over with my husband.  I had never considered it before and never had it as a goal.  But my intuition told me that I could best influence statewide property values and do right by USPAP in the position of manager where I could actually change policies and procedures.

I got the position!  For the second time in my life, my salary nearly doubled and my physical work load reduced!  There was much more stress but much satisfaction as I was in a position to implement all that I had learned to make the department more transparent and efficient in compliance with USPAP.  I had told the commissioners that I would accomplish all that I wanted in three years; I did it all in 18 months!   As manager, I was required to live in Jefferson City, the state capital where I worked.  I rented a duplex condo and bought all new furniture that I planned to move back to the Hermitage home later.  I drove back to Hermitage on weekends.  My office at the Truman Building was on the 8th floor and had a picture window wall overlooking the Missouri River and the State Capital Building across the street.  I had a staff of 30 in the field and use of office secretaries and a Statistician.  I only had 2-3 STC Commissioners appointed by the Governor to answer too.  I was in the best position on staff to implement the audit changes required by then State Auditor, Claire McCaskill.  Legislature was changing and the STC's purpose was redefined.  It was up to me to bring the STC more transparency to the public in compliance with USPAP and provide policies and procedures for all 114 counties and the City of St. Louis in updating their property values.   My first project was to produce three extensive reports - how we got to where we are since re-assessment began in 1978, where we are now and what we are doing, and recommend changes through policies and procedures.  All of which was approved through the International Association of Appraisal Organization (IAAO) which was headquartered in Kansas City, Missouri.  I worked extensively with them and helped establish new ratio study codes which are used nationwide.  It was the most exciting time!

After 18 months, the newness and excitement wore down as my health issues were affected by the added stress.  I had done all that I had wanted to do in half the time I said I would. My intuition was telling me that the Commissioners wanted a manager that would "tell them what they wanted to hear" instead of my "tell it like it is." Politics began to take over after all the changes I made were working.  The only thing lacking was the follow-thru process where final tweaking and changes may be needed that could only be identified as it happened.  It was very easy for a new manager to step in; much easier than it was for me with the mess I found when I began!  While the staff was out implementing all the changes in the field, I sat in the STC office and waited for the appraisals to come to me for finalization.  It was all working well enough and I was proud of all that I had done.  I wanted to go back to what I liked best which was field appraising and a home office.  I negotiated my salary to the highest level on field staff which I never would have gotten had I not taken the manager position due to salary freezes.  It was a hard decision resigning the manager position at the peak of my career!

2008-2011  Pre-Retirement - The transition from manager back to field appraiser was easy.  Even with some surgery and extended sick leave, I was called frequently and had to appear in person for important meetings during the transition.  It took a long time for another manager to take my place.  When it was filled, it was with the local county assessor who had just been elected and choose to leave his office mid-term which pretty much killed him politically.   He was under more political pressure to do as he was told by the Commissioners.  I think that may be why he disliked me and made the final two years of my time not so pleasant.  He changed as much as he could of my policies and procedures to make them his own and get credit.  I didn't care so much as his arrogance finally done him in and he was gone a short time later.  The female that I had recommended for the position when I left finally got the manager position and is still there as far as I know.  I can only smile as I got all that I could ever want by doing the best I could leaving the STC better than I found it.

It is all dead to me now.  I will remember the joy of real estate appraising as it was and what I made of it for my life and all those that I have affected.  It was a good life as an appraiser.  It was a good career.  It was what I did and not who I am.  It was the means to a golden retirement.  I will stop being sad one day past my appraisal certification renewal deadline!

Income Approach to Value

So many things in life are a gamble.  You do the best you can with the tools you have at the time.  When you know better, you do better.  When you do better, you keep doing it so you don't lose it.  You let it go when it is no longer of any value to you.  Right now, I'm not sure why I'm still in the appraisal game.

I needed to challenge myself and chose to include a course on the Income Approach to Value as part of my 28 hours needed for Continuing Education for my State Certified General Real Estate Appraiser license which comes due every even year by June 30th.  I just got an 87% on the exam which is good for me after not being active for a few years!  I think that's the highest score I've ever gotten on any income approach course.

This time I am doing all courses online through McKissock.  I like that it is less expensive to do it online and that you don't move forward until you understand the concepts presented which is definitely getting your money's worth.  Physically attending classes costs more - the courses cost more and gas mileage which for me is quite a chunk of money unless I want to stay overnight in a motel which is another expense.  I had taken many of these courses over the years and the best place near me has been with Lowman & Company out of Sedalia, Missouri.

There are a couple advantages to taking courses in person vs online as you only attend for the number of hours you get credit for and you have contacts with peers which is beneficial for busy and actively working appraisers.  You may or may not retain all the concepts because the class moves forward whether you keep up or not.  The online courses generally take longer because of the stop and start aspect and you just take more time because it is at your speed (for me anyway).  Being retired since 12/2011, I'm in no hurry and have been giving it a couple hours 1-2 days a week which is pleasant and I feel confident knowing the material and it is kind of fun the way McKissock presents.

I have taken many courses specifically on the income approach; my first taught by a man named Irv Johnson back in 1984 when I first started working as a Commercial Appraiser for the State of Missouri.  IRV is the basic income approach formula:

Income
Rate x Value

Income = Rate x Value or
Rate = Income / Value or
Value = Income / Rate

And so it begins…you have to know two of the components of the formula to find the third.  That is the basic game plan.  It gets much more complicated and every appraisal has many different ways to find each component and to test it's accuracy.  Experience over many years brings confidence.  It took me about five years to gain that confidence and I used it in my practice for 30 years and have applied it thousands of times.  It is never the same as each component constantly changes and like a slot machine, you have to have the right information compatible with all components at the same time.  When it does come together, it can be challenged almost immediately and usually was in my kind of work monitoring the county Assessors' Offices.  Creating a path to value with defensible documentation and reasoning is important.  Rarely is an appraisal 100% document-able.  As with all three approaches to values, intuition is necessary, and that comes with experience.  In today's world, intuition is not as acceptable as it was and probably rightly so as it was abused and there was much fraud in the industry.  It brought down Savings & Loan Banks in the 1980's and hurt our economy.  The 1990's brought appraisal certification with national Uniform Standards of Professional Appraisal Practice (USPAP) evolving; although the lending institutions grew the fraud by making bad loans which eventually increased to bring down the economy even more by 2008.  I have addressed these issues in earlier blog articles under Real Estate Issues.

A quick review here may help with understanding the process of real estate appraisal.  Start with the Types of Value - business value, disposition value, fair value, going-concern value, goodwill value, insurance value, investment value, liquidation value, market value, use value, and value as is.  As a commercial appraiser, I have to understand and identify all types of value but market value is what I do in my line of work.   The market is where I get all the components needed for the three different approaches to value.  All three approaches are addressed in each appraisal and reconciled to a final value.

The three Approaches to Value are:  Cost Approach, Market Approach, and Income Approach.  The Cost Approach is most defensible for newer constructed properties as cost manuals are very accurate in measuring the building cost value.  It is also good for odd or unique properties.  Marshall & Swift is the most widely accepted cost system in the world.  It is up to the appraiser to measure and report physical aspects correctly.  The variable aspect is depreciation which has more guess-work (intuition); the older the building, the more it is affected by outside forces such as functional and economic issues.  Also, land value has to be validated separately for it's highest and best use.

The Market Approach is most defensible in an active market especially where sales of comparable properties occur frequently enough to measure time factors.  Also, it is not common to find exact
comparable properties so the adjustment figures weigh very heavy on credibility.  Then you need to find at least three or more comparables to do statistical analysis.  This method is what the government-back loan agencies require most frequently such as VA, Fannie Mae and Freddie Mac.  There is very little room for guess-work (intuition) because this area is where the world of bad loans took a dive.  Adjusting comparable sales became an art in itself and massaging figures to make the mortgage loan value the most beneficial in the bank's favor is why USPAP has become such an important compliance tool accepted by everyone in the appraisal field for all types of value.

The Income Approach is most defensible when the income characteristics of a property attract investors.  Homeowners are attracted to houses because of the amenity benefits inherent in ownership; it is driven by emotion.  The typical investor anticipates future benefits that are financial in nature.  Property uses such as retail, office, and warehouse can be rent producers.  2-4 unit properties are typically bought for investment purposes.  The use of a gross rent multiplier would be appropriate.  More than 4-unit complexes would employ a capitalization of net income by a capitalization rate or a discounted cash flow analysis.  General Appraiser Certification is required beyond 4 units.  Leases must be analyzed as well as different kinds of rents - contract, scheduled, market (same concept as Market Value).

HP12c Financial Calculator

There are up to 12 formulas to develop an overall rate used in direct capitalization.  There are several techniques such as band-of-investment which uses a mortgage constant.  There are residual techniques where different rate components are known from building, land, equity, and/or mortgage.  The world's first horizontal financial calculator was first introduced in 1981 known as the HP12c.  This instrument is the most useful tool for the commercial appraiser!  Most courses on the income approach require at least basic skills with the HP12c.  Most of the courses are exercises in solving financial problems to develop a final value.  To solve a problem, you need to know any 3 items - then solve for the 4th unknown item.  Some problems you need 4 items to solve for the 5th.  The information can be added into the 5 keys in any order.  Those basic 5 components are: present value (PV), future value (FV), payment (PMT), interest rate (i), and term (n).

Here's where that IRV formula comes in.  The Income must be net operating income.  The process to get net operating income is:

PGI (potential gross income)
plus Other Income
less V&C (vacancy & collection loss)
equals EGI (effective gross income)
minus TOE (total operating expenses)
equals NOI (net operating income)

All of these components must be known and well documented from a year's worth of income and better yet, 3 years.  Use of income tax reports is most useful but you have to know what items to exclude, like mortgage payment for one.  Figuring out how to obtain the clean numbers in this formula is a large part of any income approach course.

The Rate process is much more complicated.  There are whole courses on how to develop capitalization rates but basically you are looking at Yield Capitalization vs Direct Capitalization.  Yield capitalization is a profit, or yield, oriented and simulates investor assumptions about the present worth of expected future benefits, assuming specific profit or yield requirements.  With yield capitalization, the overall value is estimated by adding together the present worth of the income and the present worth of the reversion of capital.  Return of the investment and return on the cash flow.  Direct Capitalization is a snapshot of a point in time.  Assumes that the income and expenses won't change over time and that you will hold the property until it wastes away to nothing and never recapture the capital invested.

Finally, the Value is usually the unknown item you are looking for.  Get the income and divide by the rate and you have the value.  Simple.  But sometimes you have the value from a sales price of the subject property and/or you have verified it with the Market Approach.  You may use this information to find one of the other components.  You take that sale price (value) and multiply it times a rate you have processed confidently and you can then estimated the income that a property could produce.  Also, you can take a sales price (value) and divide it by income (NOI) and to get a rate you may use in other similar use appraisals.  Pretty simple stuff once you line up all similar fruits in the slot machine!

I'm still in the game as long as I'm having fun but still not seeking active employment in my retirement.  Too many other ways to have active fun!

Environmental Issues for Appraisers

Winter 2014 is a good opportunity to complete Continuing Education (CE) requirements because as a General Certified Appraiser, I need 28 hours to keep my license which is renewed every two years by June 30th.  I understand that I have the option of going inactive since I retired and am not seeking employment.  The only benefit to the inactive status is that I could save $250 on the license fee which is normally $300 to be active.  I could also skip the 28 hours CE for one cycle but recently found out that I would have to take ALL skipped CE if and when I should decide to work in the appraisal field again.  If I went more than one cycle, the State of Missouri would void my license and I would have to have extensive additional education according to requirements for new applicants and apply all over again.  Not worth going inactive status until I am absolutely sure I don't want to work anymore.  I worked very hard to get where I am and as long as I am interested in the subject, I will keep it going.  I also have to keep my files available for 5-7 years so I will re-visit the option of going to inactive status no sooner than 2016-2017, the next cycle.

I have chosen McKissock as my online source for education as I had good experience the last cycle when I needed 8 hours of Uniform Standards of Appraisal Practice (USPAP). I had gotten 20 hours while I was still employed by the state at the state's expense.  I will be taking the updated version of this required class soon.  I like that McKissock offers interesting subjects and an option to pay $499.99 for an unlimited all-access pass that will not only have choices for minimum hours required, but allows the appraiser to go over the required CE hours at no extra cost.  So far I have chosen four CE courses that total 23 hours.  I will wait until I have completed those and then see what else interests me before the final completion date of June 30, 2014.  I have completed two CE courses to date and will blog about some things I found interesting enough to share.  They are Environmental Issues for Appraisers and Essential Elements of Disclosures and Disclaimers.

The first chapter is all about Radon, Mold, and Lead.  In the Appraiser's Certification statement, Item 14, speaks to the limitations of the appraiser's ability to identify environmental hazards.  It is wise to advise the client to have suspected hazards tested.  The appraiser should always disclose what they see or suspect.  Research is done through comparable market sales if an environmental hazard or suspected hazard has an affect on the value of the property.  The market measures value by comparing a non-affected property with a similar property of known or suspected hazard.  Testing can be done to determine the dollar amount to correct the hazard problem or show that suspected hazard is nonexistent.

Radon - The Environmental Protection Agency recommends getting house tested when buying or selling; some lenders require it as well as some local health agencies.  There is no uniform state or national legislation dealing with the radon issue.  Beginning in 2004, HUD required release agreement for all FHA insured mortgages.  Reducing radon levels of at least $5000 cost can be financed through a 203(k) mortgage.

Radon is the second leading cause of cancer.  Nearly one in every 15 homes in the US is estimated to have an elevated radon level in the dangerous level.  All 50 states in the US have some presence of radon.  There may be heavy concentrations in one property and none next door.

The course goes into much detail about radon testing for professionals as well as the do-it-yourselfers.  Radon mitigation can lower radon levels for $800-$2500 (average cost $1200).  There are some simple steps that can be done such as stopping radon seeping in by fixing cracks, exposed soil, and around sump pumps.  Also providing better outdoor air ventilation with exhaust fans or mechanical air exchangers.  A pro-active fix would be trapping and detouring the radon before it even gets into the house by sub-slab suction which is basically drilling a hole in the basement floor, install 4" plastic pipe that runs through a wall or closet and up and out.  Cost to run a fan and any heat loss would be $100-$150/year.   In new construction, cost to install passive radon-resistant features run as low as $100 but typically range $350-$500.  Only about 1% of radon in the air comes from drinking water such as when showering and the particles become airborne.  Stomach cancer is rare from direct drinking unfiltered water with radon.

Mold - Most homeowner insurance policies specifically exclude mold as it is a natural occurring organism that helps sustain animal/plant life as well as parasitic relationships and consume their host.  Some can be toxic to some humans.  Symptoms range from itching eyes and runny noses to triggering asthma attacks and flu-like symptoms.  Most serious can cause neurological disorders, cancer, and death.  The key to controlling mold is to control moisture.  It also needs a food source of organic material and favorable temperature (40-100 degrees).  If any of these three ingredients were removed, the mold colony can simply become dormant up to 10 years.  Add back the missing ingredient, mold comes back to life.

Water-damaged areas must be dried within 24-48 hours to prevent mold growth.  Hard surfaces can be washed with detergent and water and dried completely.  Absorbent materials such as ceilings and carpet may have to be replaced.  All mold materials can be taken to a dump without special permit.  Construction practices since the 1970's led to tightly sealed buildings with inadequate ventilation.

Molds can be readily observed and usually smells.  Wherever there is likelihood of finding moisture, look for mold.

Lead - In it's natural state, lead is not a problem.  Once it has been processed there is no known way to dispose of it or render it harmless.  Lead is toxic and can accumulate in bones and soft tissues over time; many documented detrimental health issues especially in children. The older the home, the likelihood it has lead-based paint.   1978 is when lead-based paint was banned in the US.  In good condition, lead paint is not a hazard but the potential is there if it is disturbed such as in remodeling. Since EPA started Lead Awareness Program, lead blood levels in children have dropped to 310,000 in 2002 from beginning 13.5 million in 1978.  It works!  In 1992, Congress passed Title X, Sec 1018 which extensively regulates ratification of contracts for housing sale/lease by sellers and landlords to disclose lead, not test or repair any lead-based problems.  Appraisers know what to look for and will disclose all observations for potential lead-based issues.  EPA estimates about 64 million homes contain lead-based paint.

The second chapter goes into great detail about Asbestos, Underground Storage Tanks (USTs) and Above-Ground Storage Tanks (ASTs), Water Issues and Hydraulic Fracking, Superfunds and Brownfields, Indoor Air Quality, and Home Design & Building Techniques That Reduce Waste.

Asbestos - Most products today do not contain asbestos which is a natural occurring, fibrous silicate mineral mined for useful properties such as thermal insulation, chemical/thermal stability, and high tensile strength.  Microscopic fibers may become airborne when damaged or disturbed, inhaled into lungs and can cause significant health problems similar to radon lung problems.  Like radon, it may take 20-30 years after exposure for symptoms and is greater risk to smokers.  Until the 1970's many types of building products and insulation materials used in homes contained asbestos.  Houses built between 1930-1950 may have asbestos as insulation; textured paint and patching compounds were banned in 1977.  There is more information available on the EPA website to identify common products that may have contained asbestos in the past and guides about handling, testing, and legal aspects.   The best advice is to LEAVE IT ALONE.  If material break down or crumbles easily it is called "friable" and requires action.  Leave it to professionals using two separate firms:  testing/assessment and correction to avoid conflict of interest.   

Two types of correction include repair and removal.  Repair involves sealing or covering and is cheaper than removal but may make later removal more difficult, if necessary.  Removal is most expensive method and should be considered last option if it is required by state or local regulations.  Call the professionals if removal job is bigger than your hand.  Keep material wet to reduce likely airborne fibers.  Appraisers should always err on side of caution calling for additional inspections when suspect or may risk legal problems in future.

Underground Storage Tanks (USTs) - defined by EPA as having at least 10% of their combined volume underground.  Estimates are that about 25% of all USTs are leaking; commercial and home fuel oil.  Prior to mid-1980's, all USTs were made of bare steel which corrodes.  Tank removal must be under supervision of proper authorities, cleaned and disposed properly; very expensive.  Contaminated soil must be placed in drums and shipped to hazardous waste disposal site.  Some recent technology allows treatment with bacteria that eats up oil.  Permanent closure of site and record keeping for at least three years of actions taken after determination of contamination was positive is required by EPA.  Because of enormity of the problem, EPA delegated regulatory authority to approved state programs.  Only 29 states with approved UST programs submitted since 1988.  As of 9/30/2006 over 460,000 confirmed releases had been reported and more than 350,000 have been cleaned up.  There's about 113,000 UST sites remaining to be cleaned up.  Above-Ground Storage Tanks (ASTs) are also subject to both Federal and State/local regulations.

Water Issues and Hydraulic Fracturing ("Fracking") - this section breaks down how important water sources are and connects them to public and private use.  The definition and importance of wetlands is defined by the Clean Water Act Section 404.  The US loses about 60,000 acres of wetlands each year.  Wetlands are among the most productive ecosystems in the world similar to rain forests or coral reefs.  They help to moderate climate conditions by storing carbon instead of releasing carbon monoxide; also plants generate oxygen.  Often they are situated between upland and downstream outlets so serve as a settlement for contaminants.  See how Wetlands Work for Us at: Earthgauge

"Fracking" is used in the development of shale gas and coal bed methane.  Water used in process may be impaired and can be treated on-site and reused.  Excess return water may be piped/trucked to nearby municipal water treatment plants and can largely impact local treatment centers.  May impact water quality in rural areas more.  Public concerns range from welcoming the energy industry recognizing the energy need to NIMBY (not in my backyard) concerns of those citizens with limited exposure to oil, gas, or coal operations.

 The black circle with the toxic skull areas show "Fraccidents" or areas where fracking caused problems.  The brown areas show active and potential natural gas drilling and fracking.

Groundwater is protected by the EPA's Groundwater Rule since November 8, 2006 which provides increased protection against microbial pathogens in public water systems that use groundwater sources; especially fecal contamination.  Storm water, lakes, rivers, streams, oceans, coasts, estuaries, beaches and water rights are discussed in depth on their direct and indirect influence on property values.  Regulations have increased since the 1970's with a most recent presidential Executive Order 13547 that establishes the Nation's first comprehensive National Policy for stewardship of the ocean, our coasts, and the Great Lakes.  EPA is now in process of working with Federal, State, and tribal partners to coordinate efforts in implementing goals outlined in EO 13547.  

Appraisers should use the National Wetlands Inventory maps in the appraisal exhibits just like one would use a Flood Map.  Market-driven conclusion of value demands evidence on either side of the asset.  Highest and Best Use must be analyzed as well as potential mitigation.

Superfunds and Brownfields - EPA definition is any land in the US that has been contaminated by hazardous waste and identified by EPA as a candidate for cleanup because it poses a risk to human health and/or the environment.  Identification and prioritization are at the core of the Superfund program.  As of November 29, 2010, there are 1280 sites on the National Priorities List (NPL) and are in every state.  Extensive information is available about the process of identification and prioritization  through the EPA website.  Brownfields are sites that have suffered previous contamination.  The EPA estimates about 500,000 Brownfields nationwide; most common contaminant is petroleum. 

Indoor Air Quality - The air-tight construction of buildings since the oil/gas crisis in 1973 has produced buildings that couldn't "breathe" very well and trap moisture and/or irritants or hazards and become concentrated.  Many buildings were built with no windows or windows that don't open in climate controlled environments.  Some of the pollution sources found indoors include carbon monoxide, tobacco smoke, organic gases from household products, pesticides, volatile organic compounds (VOCs) such as formaldehyde which has many sources (new carpet, plywood, paneling, cabinets, draperies, etc).  That "new car smell" is formaldehyde.  Ventilation is important to dissipate.

Home Design & Building Techniques -  This section has mainly EPA suggestions for advanced and efficient framing techniques for new homes or additions that can be found on their website.  It includes designs for new homes that consider deconstruction/renovation using fewer materials to realize design for salvage materials and using fewer adhesives/sealants.  Basically, to maximize the value of a building's material while reducing environmental impacts; easier to rearrange, recover, and reuse.  I have previously completed a CE course on Green Buildings which you can see from this blog by using the "Search This Blog" tool on the right side of the main page or click on the Real Estate Issues Label and see more related issues.

The final chapter of this course goes into more appraisal specific issues mainly on environmental reporting.  This is the technical area relating to USPAP and government reporting forms for VA, FHA, Fannie Mae.  Sources for additional information are given.  The best and most useful website for specific environmental hazard locations using Geographic Information Systems (GIS) can be found at the EPA EnviroMapper. 

The second CE course I took was Essential Elements of Disclosure and Disclaimers.

Most of this I already knew as it is part of USPAP.  Here we get into exactly how the appraiser must comply and real world examples of reporting.  The best site to understand this importance is the Liability Insurance Administrators.  This is one big reason why it is not in my best interest to continue working in the appraisal field as an independent.  Although I have been a Limited Liability Company (LLC) since January 2003, the cost of the E&O insurance would be something I had never had to incur in the 30 years I had worked as a salaried  employee for the state.  They had me covered.  The level of liability has greatly increased in recent years as the regulations for lenders increased and the reporting requirements are practically insatiable for the appraiser.  Yet the price per appraisal has not increased much since the 1990's; $250 then to about $350 per residential appraisal now.  Also, I am seeing and hearing from peers that appraisers are expected to pay additional fees to lenders to be on their lists for work.  It is not worth it to me as a retired appraiser who worked during the best of times before a few bad appraisers and lenders messed it up for everyone with their dishonest practices that brought down the Savings & Loan Institutions in the 1980's and distorted the economy in the 1990's.  It all finally fell as corrections needed to be made by 2008; BAM!  We now need more regulation than ever to protect the consumer so it doesn't happen again and continuing education to keep up with all the changes.  

My primary experience has been as a Commercial Appraiser which includes all real estate that is not residential or agricultural although I have to know how to value all uses in order to break out the specific commercial use in mixed-use properties. I have done all uses in my 30-year career and was responsible for all property values in 114 counties and the City of St. Louis as manager.  It was a golden time to be an appraiser during 1981-2011 especially working for the State of Missouri where I was in a position of monitoring the assessment offices as a retrospective appraiser and then implementing changes as Ratio Manager.  I have never worked in the private sector.  Legally, the private sector looks a little scary to me to be an independent appraiser/consultant in this time of high reporting regulations and lawsuit potentials.  According to my peers, collecting your fee from clients and constant legal challenges take all the fun out of the profession in current times.  Good luck to all those young appraisers starting their careers who never knew the profession in a time of honest disclosure and trust.  Intuitive Value was respected.

USPAP - National Uniform Standards of Professional Appraisal Practice

All certified appraisers are required to take a 7-hour USPAP Update course each renewal cycle (2 years) which updates them on changes made to the USPAP document.  I completed the course online May 7th and 8th for 2012.  This was the first time I took a course online and found it to be very satisfactory.  The course available from McKissock is the only AQB-approved online provider of the 7-hour 2012-2013 USPAP Update course.  It is also available in a LIVE classroom setting.  I believe they are a good source for other appraisal courses but have not had any other personal experience with McKissock.

This course was a multimedia experience, with video explanations from Appraisal Standards Board members, video case studies, narrated chapter summaries, interactive student polling and learning games, and practice exercises to maximize learning while fighting tedium.  I found it to be a pleasant surprise in learning which gave me confidence in mastering the concepts sometimes not complete in regular "face time" classroom settings where all you have to do is show up and sign the log and get credit for the course.  The price of an online course is similar but without the expense of gas and travel time.

For more information for this USPAP course and other appraisal courses from McKissock:

www.McKissock.com

For a comprehensive Real Estate Appraisal Curriculum for qualifying education and continuing education approved in Missouri, Kansas, Arkansas and Oklahoma I recommend Lowman & Co. which provide the best LIVE classroom setting:

www.lowman-co.com

The following are some of the highlights from the USPAP course I took online from McKissock which began with what USPAP changes are based on.  These includes suggestions from appraisers, users of appraisal services, the ever-changing needs of the marketplace, written or oral public testimony on proposed changes and periodic review of existing standards and other materials.

There was a review of the general structure of The Appraisal Foundation (TAF) which is not a government agency and has no enforcement powers.  There are 26 members but you cannot join as a member.  Its sponsors include organizations representing appraisers and users of services.  It is basically a private educational foundation.  Since 1987, there are four boards:  Board of Trustees (BOT), Appraisal Standards Board (ASB), Appraiser Qualifications Board (AQB), and Appraisal Practices Board (APB).

1.)  Board of Trustees (BOT) which is the governing body that exercises all power and functions of TAF except for the authority delegated to ASB, AQB, and APB.  BOT is responsible for funding all the boards as well as appointing their members.

2.)  Appraisal Standards Board (ASB) exercises all authority over subject, style, content, and substance of USPAP and performs all functions of TAF with respect to establishing, improving, and promulgating USPAP.  They may also issue "other communications" which don't change USPAP such as Advisory Opinions, Frequently Asked Questions, and USPAP Q&A's. Agenda is based on items suggested during prior year.

3.)  Appraisal Qualifications Board (AQB) established education, experience, and other criteria for licensing, certification, and re-certification as identified by FIRREA as the source.

4.)  Appraisal Practice Board (APB) was created in 2010 as guidance to assist appraisers in issues related to recognize valuation methods and techniques.  It utilizes panels of Subject Matter Experts (SMEs) in developing guidance.  This is all voluntary with no force behind it.  Some of the early examples were in guidance on how to handle seller concessions and guidance on appraising in changing markets.  This new board raises the question, "recognized by whom?"  In my opinion and experience, it may take years to establish credible guidance from the SMEs as issues are challenged through the courts.  It is in an infant stage at this time.  It is only as strong as the client who orders the appraisal and their ability to hire an appraiser to comply with their guidelines...a highly manipulative strength which has the potential of misleading value.  Without careful oversight, this board and its issues could muddy the otherwise clear waters finally established since the Federal Financial Institutions Reform Recovery and Enforcement Act (FIRREA) was established in 1989 after the Savings and Loan Crisis of the 1980's resulted in the Savings and Loan Bailout Bill.  That was the catalyst for the government to draft standards.

Since 1993, USPAP compliance was required by another federal law - Uniform Relocation Assistance and Real Property Acquisition Policies Act (The Uniform Act).  Also, the Office of Management and Budget (OMB) published Circular A729 which recognizes USPAP for federal agencies, HUD, IRS, Fannie Mae, Freddie Mac, Worldwide ERC. 

The next part of the USPAP course concentrated on the steps needed to make changes in USPAP.  The five steps are:

1.)  Drafts are developed and submitted for public exposure.
2.)  Comments are solicited and received during a specific period.
3.)  Comments are analyzed and reviewed.
4.)  Additional exposure drafts may be issued and comments sought.
5.)  Changes finalized at a public meeting.

Then the course goes in much detail concerning changes made to definitions and exposure time.  Much addition concerns issues related to the newly established concept and practice of an Appraisal Management Company (AMC) which have gained strength in recent years and has increased as the independent experienced appraisers decrease.  The AMC is the so-called middle-man between the mortgage lender and the appraiser.  As long as the appraiser knows the intended use of the appraisal, the AMC does not have to disclose the identity of the mortgage lender.  The AMC can also request their name be left off the appraisal report if the client (mortgage lender) includes their name.  It is my observation that a game of hide-n-seek can now be made so it is not clear as to who is named in the appraisal report which could lead to legal questions about whether the appraiser truly knows the "intended use."    Hopefully, as the current market turns into a more stable market, the intended use of the appraisal will become more defensible.  Market Value has many definitions.  A certified appraiser cannot accept an assignment without a clear intended use of that appraisal report and the appropriate market value defined.

The exposure time reporting is explained in more detail but is only required to be reported when it is a component of the value definition.  Marketing time is not required by USPAP, however, it may be an assignment condition by a client.  Some appraisal terms needed additional explanation and so USPAP was revised to include more information on the effective date, extraordinary assumption, and hypothetical condition terms.

Further clarification and revisions were also made separating the Record Keeping Rule as part of the Ethics Rule.  Any violation by the appraiser of the Ethics Rule had the highest violation.  It was decided that clerical errors made in record keeping should not be considered an ethical violation so it stands as separate rule for 2012-13.  Other miscellaneous changes were made in Standards 7&8 taking out the phrase Highest and Best Use.  In Advisory Opinion 21, Advocacy is not allowed as the appraiser must be independent, impartial, and objective.

The rest of the USPAP course concentrated on relevant current issues and review.  Much was reviewed with more detail concerning Scope of Work Rule.  The bottom line is that the Scope of Work decision is the appraiser's alone who must be able to support any exclusions.  An appraiser must withdraw from an appraisal assignment if relevant information is not available because assignment conditions limit research opportunities unless the appraiser can modify assignment conditions to expand the scope of work to include getting the information or use an extraordinary assumption about such information if credible assignment results can still be developed.  My state appraisal work in 2009-10 was in direct conflict with this current USPAP update due to time restraints, budget cuts, and new management policies.  Hopefully, the new manager will find the appropriate flexibility to get the job done right and in a reasonable time while following USPAP guidance for 2011-12.

Finally, the remaining topics in the course were very relevant and useful.  The final two chapters were "USPAP in the Real World - Examples and Discussions" and "In the Real World Examples of Everyday Appraisal Issues."  This is where it all came together.  I mastered it well and printed out my certificate.

This USPAP course was my final 7 hours needed for Continuing Education requirements.  The requirement is 28 hours and I had gotten 21 hours before I retired from my state position 12/1/2011.  Before June 30, 2012, I will go online and pay  the required $300 to renew my General Certification License for the State of Missouri.  It will be good until June 30, 2014. 

Right now, I have no plans to seek employment in the appraisal field and likely will go to an inactive status for 2014-15.  This status can be reactivated when I complete another 28 hours and pay $300 again should I want to continue.  So far, I have not seen enough changes in the market to show confidence in the real estate industry.  I don't think it is fun anymore; 30 years is probably enough anyway. 

The Joy of Real Estate Appraisal

After a couple of months adjusting to retirement as a General Certified Appraiser that worked 27 years exclusively for the State of Missouri, I am taking some time to reflect on my position in the rest of the appraisal world.  The first 25 years were fun and interesting and allowed me to grow in my skills.  There were many positive aspects along with many changes in the real estate industry since the 1980's; too many to address in one blog.  For the most part, I enjoyed the freedom to work on my own, have a home office that allowed me to put my family first, travel, and really get to know the people and properties in 25 counties in SW Missouri.  Most rewarding was the confidence I developed in my appraisal skills as I grew in experience and education.  I had the credentials of a bonafide commercial appraiser.  The financial and other benefits working as a state employee exclusively are good and addressed in other areas of my blog.

The past couple years were negative experiences for the most part.  I was surprised to find that letting go of the bureaucratic policies and procedures of the current client would be so easy...it was like opening a window and breathing fresh air!  As Manager for the Ratio Section (4/06-10/07), I felt a similar exhilaration as I changed and created policies and procedures that had been established the previous 27 years from the only former manager, Jim Follina.  What I did during that relatively short time completely changed what had been excepted before and it was extremely rewarding to be allowed to make all the changes I set out to do; or at least draw attention to areas that needed changes.  We become transparent.  I identified the areas of strength and of weakness and put policies and procedures in place to improve.  I left the Ratio Section better than I found it.  But my heart was in being a field appraiser and I was fortunate to be allowed to return to what I enjoyed the most and with a substantial raise in pay.  It was more fun to be responsible for my own work than to enforce the new policies and procedures for a couple dozen staff appraisers.  I worked about four years in the field as a Commercial Appraiser after I was Ratio Manager.  I retired December 1, 2011; about three years after I became eligible to retire.

After returning to field appraising, the first two years were directly influenced by the policies and procedures I had put into place as manager.  It was wonderful with a deep satisfaction in producing the kind of appraisals of which I was proud, that served the public with the truth, and were transparent produced in ways that explained the path to value followed by the appraiser.  I felt I could do this work forever!  The replacement manager accepted my work.  My appraisals were not challenged by any assessor.  My intuition, based on experience, was valued in my skills to develop market value.  Intuition is an important aspect of appraisal when market value does not follow text book criteria due to a lack of sales in rural areas or any area with limited or no market activity.  My skills are unique as is my experience valuing properties that have limited or no market value.  Most of the properties I have appraised fit this description as an ad valorem tax appraiser.  The validation of this unique skill comes with the retrospective nature in which properties are appraised for the client all in compliance with accepted standards (USPAP).

The last two years were directly influenced by the policies and procedures put into place by the replacement manager, Shawn Ordway.  Although adequately experienced in his local family appraisal business (mostly residential-type appraisals) and serving the public as an elected official as Cole County Assessor (one uncompleted term), he also volunteered for the state appraisal board and served as chairman a couple years.  He finally became a General Certified Appraiser in the year after I left the manager position.  I had high hopes that he would continue the policies and procedures I had put into place and produce the Ratio Study Reports in a timely manor which is the main purpose of this section of the State Tax Commission as the oversight agency for the state in monitoring assessment offices.  The Ratio Reports were not completed until 9/2011.  Too many changes were implemented in the 2009-2010 Ratio Cycle.  These changes have muddied the otherwise clear waters I left as manager. 

There are too many areas to address in this blog but, specifically, the areas of concern were in sale validation and local multiplier tests.  I was not comfortable using the replacement manager's tools in my appraisals and felt that they weaken, rather than strengthened, my appraisals.  These inadequate tools and other policies and procedures took the "fun" out of appraising for me.  Of course, I invited discussion of these methods and tools required by the replacement manager but soon realized that any "open door policy" was for appearance only and to watch your ass when you turn your back so as to not have that door hit you.   Anytime I referenced my experience and intuition as part of my path to value (only used when no other defensible market value was possible), it felt like a witch-hunt and I was "burned-at-the-stake" for speaking of it instead of obediently applying tools that are not relevant.  Appraising to serve the public has become appraising to serve the lawyers.  I refused to "make" the so-called tools mentioned look like they are producing a reliable conclusion in my appraisals.  I believe it to be misleading. I clearly stated when there was limited marketability and why experience and appraiser's opinion was the best indication of value.  I had completed three counties that had been accepted and processed in this ratio cycle.  I had the remaining three counties completed on schedule and awaiting final approval from the replacement manager. There was a six-month period when we could have worked out any problems between the time I completed the three remaining counties and his end date of this ratio cycle.  The replacement manager was already months late to present a Final Ratio Report to the Commission for all 115 counties from all appraisers.  My final three county appraisals suddenly became unacceptable on September 30, 2011 during a manager conference call that included my "silent supervisor."  These three counties were no different than the first three counties that were approved in the beginning of the ratio cycle in the issues of concern.  I felt like I was thrown under a bus and later that day in an email, told my supervisor and the assistant manager that I didn't see it coming.  Their response was silence. At the end of that day, I started the retirement process which takes no less than two months.  No one saw saw that coming either.  I gave only two weeks written notice (6 weeks later) never speaking to the replacement manager again after his call on September 30, 2011.  He is not the man that I thought he was in the first two years.  If he is in fact the good man I thought he was, he changed under pressure from the Commission to reduce staff which is possible considering the declining economy and state budget.  Because I was already eligible for retirement, I may be the one employee that may be affected the least.  Whatever the case, I no longer have any respect for the State Tax Commission and do not want to waste anymore of my time with them.  I trust my intuition that this was the right decision to retire at this time as I believe it would only get worse if I stayed.  Now, four months after I decided to retire from the STC, I was right because I feel a great weight lifted and know in my heart I'm in a better place. 

Unfortunately, my idea of integrity is no longer in the majority.  The world has changed.  The joy of appraising has changed because it has become necessary to make market value to protect yourself rather than see it for what it is and be honest that sometimes there is no other defensible marketability other than what is developed from experience and intuition.  I want no part of an appraisal industry that has eliminated the human element.  Time to move on to having a life that celebrates Intuitive Value.

Since real estate appraising has been such a large part of my life, I will take a break from it and re-evaluate if my experience and skills can again bring joy into my life.  I need to jump in once in awhile now that I'm detached from any State Tax Commission influence and see if real estate appraising can be a joyful experience again...I'm not even sure I want it to be at this point.  Rather than just stop being an appraiser, I will complete my Continuing Education (CE) for this term and pay for my license which will be good for another two years beginning June 2012.  I only have one 7-hr class remaining at this point and that is Uniform Standards of Professional Appraisal Practice (USPAP) which I will take before June 2012.  I want to keep my General Appraisal Certification which I attained in August 2005.  If I cannot find any joy or desire to appraise when it comes time to renew again in June 2014, I will officially de-activate my license.  Once that is done, to activate it again, takes 28 hours of  CE (about $600) and pay the $300 license fee.  I'll know by then if the joy of appraising is still in my heart.  The world may change...right?

GREEN Buildings

Per Wikipedia, GREEN building, also known as green construction or sustainable building, is the practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building's life-cycle: from siting to design, construction, operation, maintenance, renovation, and deconstruction.

Building GREEN is about a relationship between a building and its occupants and the world around them.  It's a process that encourages the conservation of energy and natural resources to promote a healthy environment.

Reasons for "going green" have three main benefits:  Environmental, Economic, and Social: 

The Environmental issues involve using energy, water and other resources more efficiently.  It also helps protect the health of the building's occupants and makes them more productive. Finally, it reduces pollution, waste and environmental degradation.

The Economic benefits include lower utility bills, tax incentives, mortgage incentives, and higher resale values on real property.  In addition to lowering utility bills, it might reduce operating costs.  There is also the potential of expanding the market for green products.

The Social aspects may improve the health of building occupants as well as an enhanced aesthetic appeal.  It may also limit stain on infrastructure.  Recent studies indicate an increasing demand and importance on GREEN.

Since the real estate market appears to be placing more importance on GREEN and recent studies indicate an increasing demand for GREEN buildings, it is good to know what to look for and how it weighs in comparison to value.  Studies have also indicated a higher value for a GREEN building than a comparable property that is not GREEN.

As part of my Continuing Education as a General Certified Appraiser, I completed a course study sponsored by Lowman & Co in March 2011 on how to appraise GREEN buildings.  First and foremost are the currently established standards/certifications used to evaluate GREEN buildings. 

The only established standard to date is the GREEN Building Standard (2008) ANSI approved ICC-700-2008. www.nahbrc.org/technical/standards.  This Standard, formerly guidelines, defines GREEN buildings for single and multi-family homes, residential remodeling and site development projects yet still allows for the flexibility necessary for regionally-appropriate best GREEN practices.  A related site is the National Green Building Program  www.nahbgreen.org.

There are four Certifications:

1.  HERS Index (Home Energy Rating System) which is a scoring system created by the Residential Energy Services Network (RESNET) www.natresnet.org.  A HERS index of 100 represents the energy use of the "American Standard Building" and an Index of 0 (zero) indicates that the proposed building uses no net purchased energy (a zero energy building).  The lower the home's HERS Index, the more energy efficient is the home.  A one point reduction in the HERS Index equates to a 1% reduction in energy consumption compared to the HERS reference home.  Example:  If a home has a HERS Index of 70, it would be 30% more efficient than a HERS reference home.

2.  LEED Scorecard was created to rate the GREENness of a building.  The U.S. Green Building Council (USGBC) was created in 1991 and is recognized as a leader among GREEN professionals. www.usgbc.org/LEED/homes.  A scoring system is known as "Leadership in Energy and Environmental Design" (LEED).  It is a voluntary guideline for developing high-performance sustainable buildings.  It is a very detailed report and likely too costly for residential properties; can range from a few thousand dollars to $10,000 or more.  Some benefits of getting a building LEED certified include a possible increase in value, may attract more potential buyers, and possible tax breaks, expedited permitting, etc.  The GREEN level of the building (Basic, Silver, Gold, Platinum) is determined by earned points in each of six categories.

3.  The Energy Performance Score (EPS) is a calculation derived after having done an energy audit of the home.  This is done by the EPS auditor.  Electricity consumption is based on kilowatt-hour (kWh), while natural gas uses therms and heating oil or propane may be based on gallons.

4.  The Energy Star Rating is an international standard indicating energy efficient products.  It  was developed in 1992 by the US Environmental Protection Agency (EPA) attempting to reduce energy consumption and greenhouse gas emission by power plants.  Products caring the Energy Star logo use 20-30% less energy than required by federal standards. www.energystar.gov

As an appraiser determining market value on a property from a GREEN perspective, the following building components are considered as Market Desirable Items and are weighted in importance:

Insulation (18%)
Tankless Water Heater (18%)
Energy Star Appliances (13%)
Air-tight Construction (pre-engineered w/insulation in between) (11%)
Insulated Foundation, Walls, Floors (10%)
HVAC Energy Star (8%)
Fixtures such as stools, faucets, etc.(8%)
Windows Energy Star (8%)
Structural Insulated Panels (6%)
Doors (6%)

The information I have learned in this course study is helpful in my current job as a real estate appraiser as I know what to look for in newer construction and in remodeled buildings and the building component weight in the overall value.  I am also very interested in what I have learned so as to make the best decisions when it comes to remodeling my personal house for retirement.  I want to reduce energy costs as much as possible when there will be a fixed income.  There is also a possibility that I may want to work part time in my retirement years and this field offers many opportunities that would allow me to make an income specializing in an area that I find more interesting.

GREEN Websites:

Building America:  www.buildingamerica.gov

Builders Challenge:  www.buildingamerica.gov/challenge

State Incentives for Renewable Energy:  www.desireusa.org

Institute of Green Professionals: www.instituteofgreenprofessionals.org

NAR Green Resource Council:  greenresourcecouncil.org

US Green Building Council:  www.usgbc.org

US Environmental Protection Agency:  www.epa.gov/greenbuilding

US Dept of Energy:  www.energy.gov

Real Estate Issues

I will begin with how I became interested in Real Estate Issues and then how it had become such an important part of how I made a living.  At this point in time, I am like a Senior in high school in that I have waited a long time for graduation and can hardly get through the final days until freedom.  Only until one looks back after reaching their goal can they really appreciate all the work that got them there.  In less than two years I will be retired from a career in real estate that actually began in 1981.

I believe I first developed an appreciation for real estate as young as three years of age when I remember going with my father on his Saturday work deliveries.  He sold Fuller Brushes door-to-door and his territory was Old Downtown Alexandria and Mount Vernon in Virginia.  I didn't go as often as my older brothers but the times I did go were very special and I will always remember.  The houses in this area were very impressive and I was more interested in the buildings than the people in them.  Same with the historic buildings in Washington D.C. where my father took me many Sunday afternoons.  In my neighborhood, most families fit into one of three categories - military families that stayed 2-4 years, government families that couldn't talk about what they did since they worked at the Pentagon or FBI or CIA, and then the families like us who serviced the area.  Many of these families moved a lot so I knew the houses better than the people in them.  The area grew so fast that school districts changed and classes became very large.  Property values increased rapidly especially after the Beltway was built around Washington D.C. and we were on the inside with more construction and population closing in.  The building growth was exciting and I loved seeing all the construction and activity.  The increase in population...not so much.  I had an opportunity to finish high school in Iowa; so I did.

The first real estate I owned with my husband was a little one bedroom house in Onawa.  The payment was less than the rent and the landlord/seller, Bud York, lived a few doors down.  He had several similar houses on our street that he bought up after WWII.  He was very generous and we were very prompt with our payment in person each month.  After about 6 months of rent, he allowed us to put that rent towards purchase and didn't ask for any down payment. We paid ahead and avoided any interest.  I'm not sure Bud meant for that to happen but we were deeded the property in just 4 years.  We fixed it up a little and rented it out when we moved to Missouri in 1978.  We sold it and then it burned down and the new owner rebuilt.  I believe we doubled our money when we sold and had the rent money on top of than for a couple years.  It was a $10,000 house when we sold it.

The next real estate we bought was 50 acres of land near Elkton with a no value log cabin, large barn and an 8'x40' trailer on it with a pond but no well or lagoon.  It was $20,000.  We bought it from the Walkers with $5,000 down and $200/month.  We torn down the log cabin, built a 24'x24' building attached to the trailer, 400' well and a lagoon.  We fenced the perimeter.  Before we sold it, we removed the trailer and converted the attached room into a garage.  We sold it in 1986 for $30,000 with at least 10 years of interest before payoff.  The Ferris' bought it and put a new double wide mobile home on it and dozed much of the beautiful trees for open pasture which was a mistake because it was in trees because it was rocky ground and couldn't grow good grass.  The profit went toward our new home.

It was during this time that I was given a lot in West Palm Beach, Florida from my grandmother.  The intent was for each of her grandchildren and my father to build and enjoy the warm weather near where she lived.  We all keep the lots until shortly after her death in 1986.  My lot sold for $15,000 after keeping it for about 10 years.  It was a $5,000 lot to begin.  The profit went into bonds for my children's higher education.

In 1986, Keith and I bought our current house in Missouri.  We paid $50,000 with no down payment using Veteran's Benefit for a first time home buyer.  The loan started out as 15-year but we refinanced a few years later and extended it to 20 years for a lower monthly payment and interest rate.  The last payment was made in 2006.  There are no plans to purchase anymore real estate.

My career in real estate began while we we living on the 50 acres.  I applied for a temporary job as a Data Collector for Hickory County during the Reassessment that began in 1981.  That job gave me enough experience to apply for a state position in 1984.  The state position was with the Ratio Study which monitored the Assessor's Offices.  It was the increase in my salary from this state job that enabled us to purchase a house.  It was a beautiful house to become a Home Office and raise a family.  Keith's workplace and the children's school were only a mile away.  It was an ideal situation where we grew and prospered until changes began in the summer of 2001.

Because of these changes, I realized I must secure my position in real estate outside of the State Tax Commission.  I hired a lawyer and became my own Limited Liability Company in January 2003.  I worked very hard attending all the required classes and documenting all the required appraisal work to became a General Certified Appraiser by August 2005.  I attend the required 28 hours biannually of Continuing Education to maintain my license.  The real estate world has changed greatly since I began in 1981 and I have changed with it.  I do not like the direction it is going and am looking forward to moving on to other interests. Of course, I cannot discuss anything related to my work directly while I'm still employed by the State Tax Commission of Missouri. I can make sources available to help others find answers to their real estate questions and also show the path to certification. I will try to collect my thoughts on the Real Estate Issues I am involved in and have an opinion about and keep reporting in this Intuitive Value blog even in my retirement.  I hope it will be therapeutic.