Appraisals and the Courts

Appraisals are viewed with a good deal of suspicion and rightly so. There is inherently a degree of latitude in a determination of market value and appraisers have been used as tools in banking and savings and loan scandals over the years. All that aside, it is impossible to determine market value with the same sort of precision and verifiability as a scientific conclusion.

A recent Division III Court of Appeals case, Washington Beef, Inc. v. County of Yakima (Feb. 14, 2008) reveals the vagaries of the discipline almost to the point of parody.

There we have the county assessor determining determining the value of building and equipment at about $35 million and the owner’s expert valuing the same assets at about $7 million. The owner’s valuation involved the “income approach” which capitalizes cash flow, basing the vlaue on the amount of money the asset is expected to generate. The county used the cost approach which estimates what it would cost a purchaser to acquire the assessed asset. There was credible expert opinion supporting each approach to the valuation of the assets under consideration.

The trial court, when asked to determine the outcome, concluded that neither side was right and came up with a valuation the was supported by none of the experts, but far closer to the county’s position than the taxpayer’s.

The court of appeals began its analysis with the proposition that appraisals are more of an art than a science. It had to remind itself of this at one point in its decision when it attempted to apply the “law of appraisals” to the baffling calculations before it. Finally, the court not seeing any obvious errors made by the trial judge in his independent calculations, affirmed his decision. You can almost hear the collective sigh.

The reader is left with the impression that appraisals are certainly not a science and with no appreciation of them as an art form. They appear to be more of a crap shoot.

Appraisals and the Courts
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