My Turn: Beware of broadstroking appraisal criteria

Posted: Friday, January 24, 2003

Although I don't want to express an opinion favorable or unfavorable on the UA sale of land to ALCAN, or the apparent plans to log this land, I do want to comment on the perceived land value issues.

The opinion article (Empire, Jan. 23) stated, "This giveaway of prime land will dramatically lower property values in the vicinity of the sale and negatively impact property owners and the Ketchikan Gateway Borough. Since property values are based on current comparable sales, homeowners lose equity through no fault of their own and the borough loses a large portion of its tax base."

While it is true that comparable sales are a factor in determining property value, in this case, UA's sale to ALCAN would in all likelihood not be considered as a comparable sale.

"Market value" is defined in the Uniform Standards of Professional Appraisal Practice (4/90) as:

"The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."

It seems the property did not have adequate exposure to the market, especially in Ketchikan where a comparable property would normally be marketed heavily. Bid sales, or auction sales are normally avoided as comparable sales because they are so often not truly market sales and the sale price often doesn't reflect the market.

This is a large tract of land and would not be used in comparison with improved residential lots or small acreages. To compare these two types of property (with vastly different sizes and/or uses) would be potentially misleading and a violation of USPAP (Uniform Standards of Professional Appraisal Practice). Unless you are the owner of a similarly sized, unimproved acreage that you wish to sell as a whole like this one was, you are more than likely not affected by the ALCAN sale price.

The mass cutting of trees and any resultant esthetic effect may indeed result in lower property values but this effect would have to be proven over time or borne out through investigation of similar conditions in other economically similar areas. The sale price of the ALCAN property alone, however, will not cause a drop in value of any residential improved property near it that is not comparable in size, use, etc. It also will likely not cause a drop in tax base either, due to the same reasons.

I am not a certified appraiser in Alaska but have worked as an appraiser for more than nine years in the Lower 48. I would suggest that any questions concerning any valuation effects that the ALCAN sale price (or the logging of the land) may have on other Ketchikan properties be investigated through a state certified appraiser. This will allow any potentially affected parties to get an experienced unbiased professional opinion which should help them make good informed decisions and come to rational supported conclusions.

Deborah Miller lives in Juneau.



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