One of the primary bones of contention for 18 months has been the appraisals. As we have argued, the appraisals fail to reflect the market conditions of a rapidly declining real estate market.  We have been told that since no one on the County Staff is a certified appraiser, no one there can review the appraisals, with quite truthfully the same comments thrown our way as well.

While we are not certified appraisers, we can certainly do math, verify zoning issues, and understand market conditions.

The Clerk’s Office is currently processing about 500 foreclosure filings per month. Most of these properties are upside down and worth less than what is owed. All of these upside down houses had certified appraisals done as a condition to their bank loan.

Clearly, appraising property is not an exact science. They are nowhere near perfect, and a rapidly declining market magnifies the imperfections while clearly highlighting the fact that appraisals more than a few months old are no longer valid unless adjusted for the rapidly declining market.

We have constantly been given appraisals based on values set during the Housing Bubble, and often time adjusted upwards in a blatantly declining market.

One of the Hunters Brooke appraisals states:

The adjustment in the real estate market over the past year also is reflected in the median sales price of existing homes in Brevard, which fell 18% from a high of $248,700 in August 2005 to $203,400 in November of 2006, the latest figures available from the Florida Association of Realtors.   Builders and other industry officials, however, anticipate a comeback in 2007 as inventories of existing and new homes lower.  Then, it is believed the market will begin to shift away from last year’s trend of falling prices.

Well, 2007 is just about over and rather than prices coming back we have continued to witness their ongoing plunge. Therefore, how can an appraisal which last looked at values a year ago be valid today?

This property was purchased in 2005, near the peak of the real estate bubble, for $15 million. Now, two years into a declining market, the County is poised to pay $25 million for most of the property, with the seller keeping back about 100 acres of the uplands.

In the last meeting, we pointed out that critical portions of the two independent appraisals were not simply similar, or reflected an exchange of data, but were word-for-word duplicates. The critical areas involved the three comparable sales used, their descriptions, and the word-for-word comments that the current sellers got a bargain when they made their purchase in 2005 because the former owners had a ‘distressed’ sale. The source of this distress, however, was never verified with the former sellers. We have only the comments from the current sellers, and of course, we have them twice, word-for-word.

Both appraisers threw out the 2005 purchase with the exact same language:

According to Mr. R. Duke Woodson, a representative of the property owners, the purchase was somewhat distressed due to litigation between the previous owner, the SJRWMD, and the USF&WS. Therefore, the previous sale of the subject will NOT be considered in our valuation conclusion later in the report.

How independent can these appraisals be when both appraisers threw out the original 2005 purchase, with exactly the same language, and neither contacted the former owners? In fact, it is highly likely that only one appraiser even spoke with the representative at all based on the word-for-word description of the conversation and results.  Common sense appraising standards and true independence would dictate each appraiser would contact both the current and prior owners to verify the facts before they threw out the most pertinent comparable sale in the entire county, the $15 million purchase of this land at the height of the real estate boom in 2005.

Clearly, one appraiser has used the work of the other, not just the data. We will not venture our opinion of who copied who. The 2005 purchase price has been thrown out and 2006 values have been used without downward adjustment. In addition, the original review appraiser seemed to have failed to have caught much of any of this. The second review appraiser, whose report we received last week, has reviewed the parcel while looking at the work of a 2006 appraisal done on the exact same property by another appraiser in his same appraisal firm. Nothing in any of the work we have seen indicates much independence anywhere other than one of the original appraisals, whose conclusions we disagree with based on current market conditions and various assumptions of zoning, roads, utilities, and density.

The review appraisals highlight that factual data can be shared, yet each should independently verify this information. Mr. Sutte states it is not unusual for two appraisers attending the same meeting with County and City officials to have the same information, yet we have found no evidence any such meetings took place. We believe one appraiser did call for said information, yet how the other got the exact same conclusions and wording is a mystery. Both review appraisers consider the appraisals to meet minimum standards, with one implying haste or laziness on the part of one of the appraisers. Is all we want for reports for a $25 million land purchase just “meeting minimum standards”?  We have found it highly unlikely the two independent appraisers acted independently in verifying the sales history of the property, the selection of the comparable sales, and the development information available from local government entities.

This is a $25 million land purchase, one half of the entire money remaining in the EELS program. To date, it has been handled like a small right-of-way acquisition rather than the largest single purchase of anything in Brevard County history. There has been a unnatural rush on these purchases, just like we had with the Sarno Landfill, with the Board given “Now-or-Never” immediate deadlines when the real estate market is dying off and it is highly unlikely other buyers are just lining up to build a thousand houses in Titusville. I have no idea why the EELS supporters continue to support these overpriced purchases, because in a few years people are going to wake up and realize they grossly overpaid for lands acquired in a hodge-podge fashion and the money is now gone forever.