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March 23rd, 2012 5:34 PM

The Income Approach/Rental Analysis

If the income approach had been a required technique in all Real Estate Appraisals over the past 50 years, I am certain that we would have avoided the boom and bust in the Real Estate Market.  

Why have appraisers always been taught that the income approach is not applicable in almost all single family appraisals?  I believe that it is because the rule makers (Banks and GSEs) know that the Income Approach must be ignored in order to support the market value estimates needed to keep the money flowing.

I don't have a great deal of confidence that the Income Approach will ever make it into the owner occupied single family appraisal process.  However, I believe that an estimate of Potential Rents and something like the Debt Coverage Ratios could and should be made part of the appraisal and underwriting processes.  This is especially important now that there is a history showing how readily borrowers will walk away from their mortgages.

The addition of a rental analysis and debt coverage ratio will add a layer of protection for those who invest in mortgages and mortgage backed securities.  I believe the time has come to rethink how we value owner occupied single family properties.

Lawton Grantham, Jr., SRA

Posted in:General
Posted by Lawton Grantham on March 23rd, 2012 5:34 PMLeave a Comment

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August 16th, 2010 4:21 PM

Because many counties are really hurting for revenue, some County Revenue Commissioners are going through and cleaning the books of old property tax bills.  Even in good times, the Commissioners will go through periodically and round up old unpaid property tax bills.  This results in some serious surprises for some taxpayers.  The County Revenue Commissioners will look back multiple years (usually around 7 years) to try and collect back taxes. 

The property taxes owed for a single year are generally very small in comparison to the penalties and interest accrued over time.  Your bill for a single year could be 4 or 5 times (or more) higher than the original property tax bill because of accrued penalties and interest. 

Some Revenue Commissioners are bad about letting interest and penalties accrue for years without notifying taxpayers.  A taxpayer can end up with a huge tax bill six or seven years after the fact. 

If you have paid back penalties and interest because of old property tax bills and especially if you were not notified for several years of back taxes that you owed, I suggest that you go to your local governing authority and request a refund of some or all of the penalties and interest that you paid. 

You may or may not get the refund that you request but at least you would have had an opportunity to make your case before your representatives.

Good Luck.

Posted in:General
Posted by Lawton Grantham on August 16th, 2010 4:21 PMLeave a Comment

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