In the years immediately following, several other prestigious groups were formed,
notably the American Society of Appraisers, the American Right of Way Association, the
Independent Fee Appraisers, the Organization of Governmental Appraisers and others.
All of these groups had various goals to achieve, but their primary aim was the same: To
make real estate appraising a profession and all of their members true professionals.

Now let’s have the courage to call an obvious fact a fact. A whole passel of so-called
appraisers licensed and certified have sprung up over the years, to a point where the
public is overwhelmed and confused not knowing who’s the most qualified, because they
all present themselves to be able to appraise or analyze all types of properties and real
estate investments whether competent or not.

I don’t know why we can’t say what the problem is, because the public, our judges,
attorneys, clients, lenders and knowledgeable laity, are saying it out loud repeatedly,
writing letters about appraisers, the actions of appraisers, and reporting fraudulent,
unethical and incompetent activities in ever-increasing numbers. And just what is it they
are saying? The ones who only have a cursory knowledge of real estate and real estate
appraising simply state that, based on their experiences, the letter designations don’t seem
to mean a thing. The public does not seem to recognize the difference between a
Designation and a State licensed or certified appraiser. They report that one seems to be
just as bad as any other, and none of them seem to be real professionals. But the people
who have a bit more sophistication, which include the courts, attorneys, lenders, and
today the majority of the buying and selling public, are more articulate and more specific.
They will mince no words and tell you that they know why most of the so-called
appraisers came into existence during the past 15+ years: These johnny-come-latelies
passed State exams with a minimal amount of training and dubious course work and have
grown because it is relatively easy to get.

They have the minimum education requirements with very little work review, simply
send in a log showing you have taken some courses and take a simple test; send in your
money and you’ll be granted a license or certification. This plus the minimum
continuing education courses of study are far below the rigid requirements that have
made the Institute and like organizations strong, progressive, viable sources, and centers
of professional growth and knowledge. The various designations of the Institute
continuously demand hard work, dedication, additional study and a willingness to
subscribe to a set of professional ethics and standards. Not the minimum standards found
in licenses, certifications or designations COD by return mail.

I have talked about drawing in new members through our professionalism, ethics, continuing education, ability to make more money, and a strong, national, unified appraisal organization. These are different topics, but all inter-related and having a common goal. The public, our clients, are not talking about us as much as I would like, and I am afraid they don’t know who we are. I believe it is time for us to stand up, look at ourselves in the mirror of reality, and tell it like it is. The question is what are you, you, going to do about it?

Professional real estate appraising, in my opinion, is at a very serious stage in its history; we either go forward or backward. We are at a crossroad. We must take action. I believe we are in the position of the bicycle rider pedaling up a hill with a tiger on his tail: we can’t stop or stand still, and if we try to coast, we’ll go back downhill, so our only course is to keep on pedaling.

You’re right: Real estate appraising and real estate appraisers have come a long way since the middle 1930’s, but I believe the battle is just beginning, and we’ve still got a long, long way to go.

Setting the Appointment:

A typical scenario is the refinancing of a home and the bank/lender is sending out an appraiser. When the appraiser calls to the schedule the inspection appointment, feel free to offer up some information on your home. However, stick with the facts regarding the physical attributes of the home and DO NOT discuss the value (how much you think your home is worth). (More about this later.)

My initial phone conversation with a homeowner includes the following:

• Does your home have a particular style?
• How many floors does your home have?
• Does your home have a basement? Is the basement finished?
• How many bedrooms and bathrooms are there?
• Does your home have a view, e.g., lake, mountain, city, territorial?
• What is the condition of your home?
• Have you updated the interior in the last 5 years?
• Have you replaced any major systems of your home?
• Is there any on-going construction in your home?

Honesty is the best policy when it comes to answering these questions. You can expedite the appraisal process, save the appraiser a lot of time and frustration and the overall cost of the appraisal by being forthright with these answers.

Before the Appraiser Arrives:

Once the inspection appointment has been and set, you should tidy-up the home before the appraiser arrives. I say tidy-up because cleanliness is not the goal. Instead, the goal is removing the everyday clutter so the appraiser can see the amenities of your home. Unbelievably, I’ve been to homes with so much clothing on the floor that I did not know whether the room was carpeted or had hardwood floors. Why is tidying up so important? Because, in addition to the required exterior photos of the home, front and back, most lenders now want to see interior photos of the home. These photos speak volumes about the condition of your home.

The living room, kitchen and baths have become the standard required interior photos, but photos of special features such as custom designed family rooms with floor to ceiling fireplaces or media rooms with built-in seating with movie screen, may also be include in the report. On the exterior, photos of sport courts, garages and ponds may be included.

An appraiser also has the responsibility of photographing defects of the home as well, especially when they affect value. So be proactive and finish those projects so the bank/lender does not see the hole in the wall where the door handle broke through the drywall, or the dangling light fixture that was missing one part, or the bathroom tile work that wasn’t as easy to install as they said on the home improvement show. The same goes for the exterior. Broken down cars, no matter how much you cherish them, should not be on blocks in your front yard. Do you have a ladder against the home? Take it down and put it away. The bank/lender may assume the ladder is there for an unfinished repair. Avoid the costly situation where the appraiser is recontacted to return to your home to take more photos or hiring a roof inspector to confirm that the roof is in good condition.

The Appraisal Visit:

The appraiser arrives, and your house is clutter free and looking good. The appraiser will walk through the home, look in every room and take notes. The appraiser performs the inspection in order to assess quality, condition and amenities to determine the home’s value. If there are items that you think are special features in the home that may be overlooked by the appraiser, feel free to bring those to the appraiser’s attention. You don’t want an appraiser to overlook a bathroom, wet bar or any finished living space that is behind a paneled or locked room. Many older homes have built-in features including desks, stereo/intercom systems and foldout ironing boards. The appraiser may not attribute value to all amenities, as some may not be fully appreciated in the market place to typical buyers, regardless of how much money they cost to build or replace.
Stay Professional:

Many homeowners ask the appraiser how much they think the house is worth. This is not an appropriate question to ask at the time of the inspection. The appraiser should actually refuse to answer this question to comply with USPAP (Uniform Standards of Professional Appraisal Practices) and respect the client/appraiser relationship that, in part, led to the credit crisis fiasco in the sub-prime market. You will learn the value of your home when the appraiser has delivered the completed appraisal report to the bank/lender. The homeowner has a legal right to view this report.

Good Luck.

The old cliché, the clothes make the man, is true only for a very brief instant, or while the suit is on a dummy, or in a photograph, because as soon as the image is animated, whoever is wearing the clothes, names, or expensive tailoring will hide or disguise the person under the clothes.

Designations are important, vitally important to our industry. To the people who retain us, to the bankers and lenders who rely on our professional ability, and to the attorneys and courts who listen to us as experts. Additionally, they prove a great deal both to the outside world and to the individual, because they represent the culmination of a great deal of study, hard work, and discipline. But acquiring the letters behind one’s name, earning the professional designations, is just the first step. As any very candid M.D., or D.D.S., or J.D. will tell you, once he or she has the coveted little initials after their names, that is when they really began to prepare, to study and learn. Doctors, dentists, lawyers, all professional people, really only begin to practice their professional AFTER they have been designated.

In the real estate profession a lot of us were interns for a number of years, working as appraisers, and working toward our designations, and harboring the hope that on the day we were designated we would be given enlightened intelligence, that the designation would be the key to solve all of our problems.

What a shock: We finally received that coveted group of letters, and an impressive document to frame and hang on our office wall, but the fact of the matter was we were just exactly the same person we had been twenty minutes earlier. We still knew as little, or as much, we were still filled with the same hopes and fears, but there was one essential difference: We had the knowledge, ability, and stamina to complete a very rigorous course of study and had been so recognized by our professional peers and associates.

Having earned a professional appraisal designation seems to make a person stand a little taller, look a bit sharper, and act more decisively. A professional designation doesn’t grant immunity to mistakes, or make the average appraiser into a genius, but it seems to make the person more aware of his responsibilities, to make him want to do a better, more thorough job.

In the last twenty-five years, we have gone from slide rules and mechanical typewriters to word processors and computers, and the speed at which the appraisal profession is changing is simply awesome. If the appraiser doesn’t keep up with the changes, the advances, he will surely be left behind.

A designation as a professional appraiser is a hallmark that the individual has dedicated a great deal of time, energy, effort and study to improving his ability to serve the public and I sincerely believe that the designation will become more important in the future. With the increasing speed of communications and all the other technological advancements, appraisers must devote more and more time each just to stay abreast of these changes. And the criteria of ability will trend more and more to be a professionally designated appraiser, because he or she will be involved in mandatory education recertification programs.

A professional real estate designation tells the world that you care enough to be the very best!

I think all of us daydream once in a while about finding the pot of gold at the end of the rainbow, winning the State Lottery, or inheriting a fortune from some long lost relative we’ve never even met.

But the dream passes, and we come back to reality, back to our jobs, and our daily routines. Too often though, we tend to equate back to work, or reality, with drudgery, or unpleasant tasks, and miss the fact that our golden opportunity, the key to future happiness and success, is right there in front of us and always has been just waiting for us to take the initiative.

If you are working to become a professional real estate appraiser, why not upgrade that goal to read, “I am working to become the BEST professional real estate appraiser.” Too many people sacrifice themselves to mediocrity simply because it is the easy way out. There is always an excuse available if needed. One can always justify the reason for not doing something. It’s just human nature at work. But remember, success and accomplishments don’t need to be rationalized, explained, or excused: They tell their own story.

One of the really serious problems of our appraisal profession has been that a large number of real estate appraisers have never taken appraising seriously. They arrived, sort of by accident, found they could make a fairly good living, and having reached a certain level they stopped reading, studying, learning, and trying to advance their knowledge and skills. As a result, we have a lot of people working in the appraisal profession who are actually satisfied with mediocrity, are willing to deliver just enough to get by, and will accept the income such work justifies.

They don’t want to join a professional organization because they say it costs too much, and anyway they get all the work they want without belonging. But these are the people who have benefited from all of the work done by professional appraisal organizations, by the research and techniques developed by members of professional groups, and they enjoy the standards of pay or fees that others have established. They are free loaders.

Human nature won’t change, so there is probably nothing we can do about this attitude of some appraisers, but we can do something about our own attitudes, our own approach to the problem of enlarging and increasing our professional expertise.

Instead of worrying about what “they” do out there, if each one of us will strive to improve his or her professional qualifications this coming year, by attending meetings, seminars and courses, we will discover that opportunity is right there knocking at our own front door. It’s strange, but every time you improve your techniques or capabilities, you find a need for them; you discover a market for your added skills, and a market that will pay for your professional services.

There are opportunities galore for the well-qualified, well-prepared, educated professional appraiser. He or she will find all of the “opportunities” he or she can handle, and then some. Just look back at our recent recession: A lot of “appraisers” dropped out of sight, but the qualified, the designated appraisers, kept right on working.

Opportunity: It’s right there in front of all of us, just waiting to be taken advantage of. And the key to success is preparation, education, and professionalism. Opportunity isn’t an accident, it isn’t luck; opportunity is the result of good hard work.

Appraisal

In the 80’s word processing, electronic databases and the internet were nonexistent. Real Estate Appraisers were required to go to the County court house to gather sales documents directly from the County Assessor’s Office; property photos were physically developed at the a one-hour photo mart, and all appraisal reports were hand-typed, mostly by a receptionist. This all took time and a specialized skill set that the market place paid good fees for – appraisal fees were at their highest at that point.

In the early 90’s, however, the dawn of the computer drastically changed the way information was recorded and accessed. Real estate information that was originally in paper format held by the County and large title companies suddenly moved to a computerized database format. Larger real estate appraisal firms like ours benefited greatly from this transition since we could afford to purchase or license access to these expensive database services. Instantly, our appraisers could perform their duties without spending countless hours working through large catalogues of printed records at the court house.

Independent real estate appraisers working in small shops or out of their home could not feasibly cover the expense of a database. As such, they stuck to the old ways of appraisal reporting. Eventually, the independent appraiser couldn’t compete as our firm was able to cut weeks off of the delivery of our reports.

Consequently, as access to real estate information became available at their fingertips, appraisers found themselves having to perform more of the research and report assemblage tasks that were previously performed by hourly workers. Learning these new technical skills really presented a challenge for the well-established appraisers who have been operating under the previous model for years.

Simultaneously, the overhead structure of our firm was changing as the increased use of computers and real estate databases eliminated the need for typist and young researchers. These people were beginning to be replaced with hardware, software, and technical specialists who knew how to setup and maintain the systems.

Computer databasing was the first big technological transition, for which I think our firm capitalized on effectively – strengthening our competitiveness. Unfortunately, our position was short-lived and the problems with the appraisers adapting to the changing business model only escalated with the emergence of the Internet and the digital business environment.

The explosion of the Internet and digital revolution began in the mid to late 1990’s and into the early 2000’s, occurring hand-in-hand. This was about the time I entered the company. Coincidentally, my college experience at UW was heavily influenced by new technology considering Microsoft donated millions to ensure that every student had free access to computers, particularly ones that carried MS Office products. At the same time, the hottest concentration on campus was Information Systems. As a result, I got tons of exposure on a daily basis to Word, Excel, Access and other related programs and applications that were beginning to dominate the outside business world, as well.

Relative to my classmates at UW I was no expert by any means. Conversely, on joining the company I noticed how little the majority of appraisers at our office and in my professional apprasial networks knew about computers, and my first competitive advantage was discovered. As a result, I was able to exchange my computer literacy for appraisal mentoring, and my career development moved to the fast track.

In my first year at the firm I was an apprentice to several residential appraisers; doing research, taking pictures, making maps and filling out forms for my mentors. Over this time I was exposed to the existing systems and technology that was developed for performing residential appraisal reports. The systems were impressive yet suffered from a multitude of technical and human errors.

In part, due to the high volume of residential mortgage work caused by the deregulation of the mortgage industry (i.e. Fannie Mae and Freddie Mac) and an unparalleled drop in interest rates following the last recession, the need for streamlining drove the implementation of technology efficiencies in the residential lending process.

The streamlining was brought on by digital form reporting that standardized the residential appraisal process making it far less time consuming. Eventually, the larger banker clients saw this as an opportunity to put downward pressure on fees and higher expectations for fast turn times. Consequently, the established appraiser networks faced with shrinking fees, felt that the one way to stall the fee drop was to constrain the number of appraisers in the industry. So, they set out to increase the barriers to entrance by upping educational requirements and eventually passing legislation that mandated all trainees to be licensed. (This argument was masked as a way to limit fraud, yet that should be the role of the established appraiser mentors not the naive apprentices. The increased barriers only hurt new employees trying to get a start).

Suddenly, our residential department was caught in a storm. Fees started falling, education costs soured, technical staffing and systems costs increased, pressure from clients escalated and, worst of all, the feasibility of hiring and training new employees began to fail. This stalled our potential for growth. Meanwhile, all of this occurred simultaneously with the appraisers having to struggle to learn these new computer skills. To say the least, the morale and tone of the appraisers was poor at best, despite the spike in appraisal order volume resulting from the hot real estate market and declining interest rates. Moreover, the company bottom line was suffering and I felt we desperately needed a change in direction.

The first change I made was to become a trainee in the commercial department to hedge myself from the ensuing decline of the residential appraisal market. Again, my technical skills and namesake played an intricate part in securing training opportunities with mentors. Within the first couple of months in the commercial department I realized that the technology and systems used to perform narrative commercial reports was five to ten years behind the residential department and depending on the appraiser, sometimes even greater. There was little to no use of Excel; only a basic understanding of Word; no use of digital filing or archiving; no use of Access databasing, and little understanding of computer networks and Internet capabilities.

Most commercial appraisers in our office and throughout the nation were well-established, (of an older generation). These folks contained massive amounts of education, experience and knowledge, yet were entirely resistant to the new and emerging ideas. More so, their influence in the firm made them seemingly invincible to change, as even the boss was hesitant to learn new tricks. So things just stumbled along for them. I also noticed, despite their great depth of knowledge and background, that there were no superstar employees. Their revenues and production were flat, if not on the decline. This in part, was due to all the time wasted fidgeting with the report formatting, editing, publication, and redundancies. In sum, they all shared a deficiency of digital wherewithal.

It quickly dawned on me that if I could create a new system that combined my computer skills with some of the digital efficiencies I witnessed in the residential department, I could really compete in my office and go head-to-head with any of my competition in the marketplace. The best thing about it was that the fees for a standard commercial appraisal report are 10 to 20 times greater than the fees for residential appraisal reports. And with the system I envisioned I could produce commercial narrative reports at a rapid speed, yet with greater reliability, less errors and nearly seamless transferability of data. Therefore, I began developing my first template.

Creating a template was definitely a work in progress, an evolution that still exists today. The process has sharply refined my data and word processing skills. It also forced me to think digitally in all aspect. To make the whole process work well, our entire office needed to become digital in unison. We had 30 years of appraisal history locked in paperback copies, sitting on shelves collecting dust. Worse off, our filing system for the old reports was random and burdensome to access.

So I hired a buddy of mine to come into the office and scan as many documents as he could, then convert the paper into a Word document that could be filed. From this project I was able to categorize hundreds of zoning code descriptions, market area descriptions, building type descriptions, etc. that were accessible to anyone on the network. The best thing about having access to this data was that it was now in a digital narrative format that read well - likely created by the well-educated, experienced and knowledgeable real estate appraisers that I mentioned before. A young trainee, like me, could simply cut and paste a sample and modify the existing statements to meet the needs of the new assignment. He or she could build off of what has already been created and wouldn’t have to stare into a blank page.

Within the template design stage, I also saw that technical skill was not the only component of a success. More so, I had to learn how people interfaced with the system- it was my exposure to the human behavior and reactions that began to mold my vision into a reality. This took a few years to perfect…which is an overstatement since it’s still nowhere near perfect.

In 2005, the first year the template was relatively operational, I became the highest producer in the company. I had just earned a general certification and all my revenue came strictly from my own production- no supervisory role at this time. In comparison, my revenue stats were nearly 50% higher than the next highest producer. In 2006, I became a supervisor and mentor to three employees, in which they were required to use my system. My gross revenues that year jumped roughly 62%. Then, following minor tweaks and refinements to the system, in 2007 my gross revenues jumped another 26%, (or 88% over 2005). My efforts now account for nearly 30% to 40% of the overall company revenue.

Overall, my template system has provided many competitive advantages. Nevertheless, it has been ridiculously difficult to convince established appraisers in our office to adapt. This is one of the greatest challenges I’ll face in the next one to three years as other firms within our market begin to benefit from their own technological advances that are likely to be better than what I’ve created. I fear that this competitive advantage will be lost.

To combat this threat, I would like Lamb Hanson Lamb Appraisal Associates, Inc. to start thinking on a 6-month cycle, where at every period we examine if we’re operating as efficiently as possible with up-to-date technological systems and methods.

As we’ve seen in the last twenty years, systems will always change and it usually happens right after you get comfortable with the old one. Yet, if we can create a culture here at Lamb Hanson Lamb Appraisal Associates, Inc. that embraces the willingness to change, while abandoning the comfort of “doing things the old way”, we might be able to ride this one-trick pony way off into the sunset.

MM: Patrick Lamb is 30, recently married, a Commercial Real Estate Appraiser and the Director of Business Development for his family business. He still has time to attend yoga class on a regular basis. What surprises me week after week is this big guy can do amazing things with his body. His practice has inspired me to continue doing postures “out of the box” because “it feels right to do”. Patrick really is a leader in many ways.

Patrick, how did you get into practicing yoga?

PL: My first experience in yoga was about five years ago. At the time, I was rowing for a crew on Lake Washington. In rowing, two important terms commonly used by coaches was to make your body “long” and “elastic”, like a rubber band fully extended. In doing so, you can maximize the resistance against the water by utilizing every inch of your body- from your fingertips on the ore handle to your toes against the blocks. Even though I didn’t know much about yoga, I assumed it involved a great deal of stretching and strengthening that I figured could only help.

So I started yoga as a cross-training activity to improve my rowing skills. The results were amazing! My only regret is that I didn’t start my practice far earlier in life, possibly as early as elementary school. I think the skills and lessons taught in yoga are an excellent foundation to all athletic activity.

MM: You’re married. Congrats. How has your yoga practice influenced your partnership?

PL: I see yoga as an act of self-improvement. It helps me to achieve mental states of calm, completeness, satisfaction and joy. From what I’ve found, the more of these traits I can possess the easier I am to be around, and I think Saragh (my wife) appreciates that fact.

MM: Have your learned any life lessons doing yoga?

PL: My practice has allowed me to expand the threshold of what I previously thought was physically possible. For example, when I first heard of athletic yoga from a fellow member at the club, it was explained to me that the instructor has the students balancing inverted on two hands or on their heads. On first thought, this was not something that really appealed to me. I thought I knew my body very well at the time- its limitations and its strengths- and I was comfortable knowing I may never do that. However, I realize now that my personal assessment was way off. In a matter of a few months, I’ve surpassed all of my expectations, in addition to losing track of my perceived gravitational boundaries.

In short, the idea that I’ve exposed is that self-doubt is sometimes ignorant. This is one of the most beneficial lessons I’ve taken from my practice. It now makes me wonder; where else do I sell myself short through doubt? And what if success in these areas can be achieved as easily as the success I’ve encountered in my practice. Proving myself to be wrong was a real motivator and now drives me to confront new challenges in all aspects of my life.

MM: Are there spiritual aspects to your yoga workouts?

PL: Some aspects of my practice remind me of praying, like when I was a child. I close my eyes, clear my mind, and mentally focus on all the positive things I want to have happen for myself and the people in my life.

MM: You work with your family. Does yoga affect your work?

PL: The good thing about working for the family business is that I have the opportunity to be close to the people I love the most nearly everyday. Moreover, the trust we have in each other is far greater than anything a typical business partner or associate can offer. These things make our business very rewarding.

The bad this about family business, however, is that we tend to treat each other like family members instead of business partners. Whereas, sometimes we express our frustrations with each other in a very emotional way without much tact, (similar to the Tuddle family from Orange County Choppers, if you’ve seen that show).

One thing my practice encourages is to have control over my ability to find a sense of calm and clarity. This is most prevalent in the first minute of class, when I close my eyes and find my breath. Despite any angst I felt toward my family members that day, at that moment all of those conflicts vanish, (it’s like a reset button for stress). Subsequently, confronting the root of these conflicts the next day always seems more bearable.

MM: That’s great PR for yoga. Thanks for practicing, Patrick.

PL: Thanks.

The first step is deciding what you would like for your development specialty. Single family homes? Office buildings? Neighborhood retail space? Residential lots? This is all up to you. You can be successful in any of these arenas if you are focused and stay on top of the game. Most of the readers will have heard the answer to the question “What are the three most important aspects of a piece of real estate?” In case you don’t know the answer, here it is for absolutely no charge. 1: Location. 2: Location. 3: Location. It may well be a cliché but it’s true, true, true. Lake Washington waterfront land was more valuable than Queen Anne Hill land, which was more valuable than Phinney Ridge land, which was more valuable than Woodinville land (assuming common zoning, of course) in 1970. It is still true in 2008. It will be true in 2025.

The second thing that is important about land, regardless of location, is that there is some level of utility. Location being equivalent, land zoned for commercial uses is more valuable than land zoned for multi-family use is more valuable for land zoned single family residential. The zoning is not the only measure of utility, however.

Given equivalent location and zoning, a nearly level and generally dry piece of land is more valuable than a steeply sloped piece of land is more valuable than a wetland. (Yes, I know that there are people who think that wetlands are highly valuable, and they may well be right. But we are talking about utility of the land for use by humans, not frogs or spotted owls.) Why is this true? It is simply an accurate statement that utility is also tied to the total benefits available from the land. It is much easier to build roads and streets and to install utilities such as sewers and water mains on flat ground. It is easier to build a house (or just about anything else, except maybe a ski resort) on flat ground. Most land use codes now incorporate rules for the total lot size in a given zoning, and the size of each lot usually goes up as the slopes get steeper.

The third thing to think about is the access to the required utilities, the existing surface transportation routes, and the availability of such things as sewer hook-ups, domestic water, and so forth. The Sammamish Plateau has a lot of nearly flat land that is generally dry and has desirable zoning. It is a desirable area with new schools, golf courses, new homes, new neighborhood shopping centers and strip malls, and all of the other things which are attractive for new development. It is clearly in the path of progress – witness all of the new construction occurring at this moment. It must be a good place to take the plunge and invest your money into some type of development project -–right? Well, maybe not. You see, I failed to list all of the things that the Plateau has. It also has a near gridlock of traffic. This has prompted the requirement of developers to get certificates that allow them to add to the traffic, and they’re not easy to get. Oh yes – the area also has a lack of available domestic water hookups. The only way to get a letter of water availability is by lottery, and there are a lot of projects on hold because they have not yet won the lottery. By the way, neither of these two deficiencies is likely to be fully cured within the coming decade. Maybe the Sammamish Plateau isn’t a good bet for a fledgling developer after all.

The fourth principal consideration, at least from my personal point of view, is “what’s the political environment?” Is the area pro-development (rare around here) anti-development (much more common) or are the bureaucrats just doing the job assigned to them without injecting their personal philosophy into the equation. It is a most unfortunate situation, but people with an agenda staff most of the building departments, planning departments, land use departments, etc.. It is natural enough, I suppose, that some people who “care about the environment” gravitate toward careers which allow them to influence land use and environmental issues. That’s probably laudable. The problem, however, comes from the simple fact that they have the ultimate say. It is often based on interpretation.

Another general observation is that most of these bureaucrats have a limited tenure. I know of some of the reasons why they move onward, but obviously not all. One of the most important is that people in the public sector who really understand the issues, work toward solutions, and treat developers and the general public with courtesy and cooperation end up getting a job in the private sector, working for one of those very developers in getting project entitlements because they “know the ropes”. It is not just the bureaucrats who can get in the way. Individual citizens and groups of citizens can also cause grief. There is a strong attitude among many that says “I got mine – You go somewhere else to get yours”.

Overview

So what have we learned about selecting a development site? Let us review and enlarge on some of the issues.

A) Decide what you want to develop. Lots, houses, commercial, offices, downtown towers, all are possibilities, and all are needed on one area or another.

B) Find a good piece of land on which you would like to perform your miracle. Ideally it is well located, relatively flat, has good street access, has little or no wetland or other environmentally critical issues, has an adequate water supply available, has sewers or adequate septic system possibilities, has the other required utilities available, and is located in an area which is tolerant of growth. It also will have good soils with the ability to physically bear the improvements you have in mind. Of course (since you already considered the location aspect) it is located where there is an existing (and likely continued) market demand for this thing you want to develop.

C) Consider the access to the parcel of land. Is it easy to enter and leave? An otherwise good location may be rendered less desirable because it is too hard to access due to fast traffic, poor lines-of-sight in the streets, or difficulty in building a street to connect to the existing roadways.

D) Consider compensating factors that may be of interest to the market. These can frequently add enough value to override other concerns. Think about Somerset, for example. This development was done on fairly steep slopes. The compensating factor was the good to great views afforded by the hillside lots. Yep, it cost more to develop than if had been flat land, but the lots sold for a premium because of the views. And it did have location, even at the time that it was developed.

E) Get to know the people in the public sector who will be responsible for putting their blessing on your dream. They are usually quite helpful in doing a preliminary assessment of the feasibility (physical – not economic) of your project. They have a lot of information available. You can learn from them about how much your various fees will be, what mitigation fees might be required and when they must be paid, what construction standards might be, what the specific zoning will allow (both maximum and minimum), whether utilities are available and if so where they are currently located, what the project application process will be, how the entitlement process works in that jurisdiction, etc. No one person is likely to be able to give you all of those answers, but the planning department can usually provide many of them and tell you whom to see for the balance of your answers.

By the way, some of the answers you get will be preceded by “You can probably” or “It is possible that”, or “We usually”. Just ignore this and assess the reliability of the answers as realistically as you can. Too many times a “You can probably” is heard as “You can” by the future developer. Then the bad surprises are all set to start. When they do, the most commonly heard phrase from the developer is “But you said –“. Do not fail to understand that the answers you get are in no way a guarantee of anything. They may (or may not) be entirely accurate at that moment.

The rules change, however. And the rules that apply to your project are those which are in force at the time that you submit a complete application. (The bureaucrats are the ones who determine when it is complete.) That’s when your development rights become vested, and not one moment sooner. The rules and regulations at that time are the ones which can be enforced (by all parties – interested private citizens, the bureaucrats, and the developer).Well, you’re all ready to go now! Then again, maybe you would like to wait for the next article where we will talk about acquiring the land, and the basics of doing an economic feasibility study. The subsequent articles will be: The application process and getting entitlements; Estimating realistic development costs; and Developing your vision.

During the course of several articles, we will examine an overview of the elements involved to be a developer. You will note that the previous sentence did not say successful developer. No series of articles can assure that. Diligence on the part of the entrepreneur, good judgment and financial capability on his/her part, and some element of luck will determine the outcome.

The first thing that must be recognized is that pre-planning and proper assessment of the market is required before success can even be contemplated. This does not mean that a full-fledged feasibility study will be required, but sometimes it will.

Preplanning and feasibility include (but is not limited to) such elements as follows:

Into what can the subject property be developed?
Does the market have a need for such a product?
Will the need still be in evidence when the project is completed?
Does such a plan conform to the land use in the neighborhood?
Will the neighborhood embrace the project, ignore it, or fight it?
Are there critical areas or elements that will add uncertainty?
Does the comprehensive plan allow for such use?
Does the zoning allow for such use?
Is the off site infrastructure in place to support such a use?
How much will the land cost?
Approximately how much will the development or redevelopment cost?
What will the property be worth when the development is complete?
Is there an adequate profit available for having gone through the trouble?
We will examine, briefly, each of these elements, in turn.

The start of any project is having a vision as to what the end product will be, how it will look, and how it will help the marketplace by providing a product that is needed. It helps if you don’t try to swim upstream. If, for example, the land is designated in the comprehensive plan as “5 acre residential” and is zoned as “5 acre residential”, and is surrounded by other undeveloped land or land already developed into 5 acre lots – don’t even dream of 5 lots to the acre or 1 acre lots. It ain’t agonna happen!

On the other hand, don’t be discouraged from trying to get a higher zoning. Sometimes it makes sense to you and will make sense to everyone else, as well, if you can sell your vision to them. It may be possible, for example, to “up-zone” single family residential land to apartment land if that land is contiguous to commercial use. Putting apartments between commercial and single family residential – as a buffer zone – is a commonly accepted practice and main gain favor.

In the movie Field of Dreams, the hero was admonished “Build it and they will come”. This advice might be nice for the movies, don’t bet your bankroll on it in real life. There are platted lots all over the country that have never had houses built on them. Some of them even have paved streets, sewer and water, and the entire infrastructure required to “just start building”. The problem is that there was a product completed, but no market need. Failure to properly assess the market led to a complete project failure – and a bankrupt developer. Maybe even disgruntled partners and angry bankers. It is also important to try to look into your crystal ball to see if there will likely be a future need for the product. You must keep in mind that years may lapse between the concept and market ready end product. Markets and market influences change.

An example: In the late 1960s a study was done that indicated a need in the Burien area for a number (just a couple hundred, as I recall) of additional apartment rental units. Everyone read about it in the newspaper, including a number of builder/developers and some bankers. As a result, a number of different builders moved to enter that market. Each of several banks financed the construction of all or most of the identified number of units. As the construction was occurring, Boeing entered a severe downturn. The end result was that an oversupply was created while the quantity of available tenants declined. Vacancy rates soared.

The pre-existing apartment buildings were affected with increasing vacancies, the new buildings only partially filled, and many investors found that they could not meet mortgage payments. The condition of the multi-family housing stock declined due to inadequate maintenance budgets, and ultimately many buildings were lost to foreclosure. When the properties went to auction, often no one outbid the banks (which bid their mortgage amounts), so a number of properties became REO (Real Estate Owned) in various bank portfolios. Not looking into the future on the part of a few resulted in financial difficulties for many. It took nearly a decade for the Burien apartment market to recover. During that time, no new buildings were erected.

Comprehensive Plans are fairly new, but zoning has been with us since 1932. A Supreme Court decision in the “City of Euclid” case held that governmental entities had the right to dictate that certain uses were incompatible with other uses, and could thereby control, by ordinance, uses to which land could be utilized. This governmental regulation of land use started with every good intention and a justifiable need.

The original intent was to create a device that would prevent such things as a rendering plant being built in an existing residential neighborhood. Such an event would render (pardon the pun, but have you ever smelled a rendering plant) real damage to the pre-existing properties and their market values – not to mention possible health issues, etc. As is usually the case, government and bureaucrats continued to extend their control and influence on land use to arrive at where we are today. Then, of course, there has entered the environmental considerations. Slopes, wetlands, proximity to rivers or lakes or streams, former land uses and possible resultant contamination – all of these are considerations which will impact the possible uses of any given piece of land. As a potential developer, you need to address these issues. Look before you leap.

Even if a use is permitted, it may not be clear sailing. Every full time developer can tell you from their own experience anecdotes about being delayed because of neighboring property owners, area community councils, NIMBYs, and other “interested” parties. Often the objections are without substance or merit, but the delays they cause are very real – and time lost is money lost. Personally, I have experienced such delays. Once, at an informal meeting with neighborhood residents, I was told “We may not be able to stop you, but we can sure slow you down.” This was for a completely compatible subdivision development It cost me more than $50,000 and a year’s time to overcome their objections. Their real objection was that they treated my 8 acres of land as their children’s forested park and their yard waste dumping area. They didn’t want to lose that.

Lastly, you need to develop a Pro Forma income and expense schedule. The usual motive for private parties in developing property is profit. If a realistic budget cannot be developed showing enough profit to make the exercise worth while, run –don’t walk- away from project. Don’t count on price escalations either, because that’s something on which you can’t depend. If a projection developed on today’s end product prices doesn’t work, the project doesn’t work. Just consider that the time and money expended to arrive at this decision was an insurance premium, and “move on”.

When doing your pro forma, don’t forget that there are two sets of costs. The first is what we call Hard Costs. This includes the costs for clearing and grading, putting pipe and wires in the ground, paving streets, pouring curbs, gutters and sidewalks, installing street lights, street signs, etc. Hard costs are generally easy to estimate fairly accurately – but not always. Sometimes an alligator will reach up and bite you in ways that you cannot foresee. I have had occasion, as but a single example, to see street costs soar over budget because of difficulty in getting required compaction. This was true despite the fact that professional geophysical testers were hired during the feasibility study and paid for reports which proved to be inaccurate or inadequate when construction began.

The second element of costs is Soft Costs. This includes (but unfortunately is not limited to) the following list of elements: Engineering and/or architectural expenses; the cost of borrowed money, both interest and “points” for the acquisition and development loan; surveying costs; costs for studies such as geotechnical studies, wildlife studies, wetland studies, hazardous material studies; traffic studies; construction impact studies, and if all goes badly, full environmental impact studies. Then there are fees to be paid – project application fees; plan review fees; utility design fees; final product review fees; construction inspection fees; utility hook-up fees, and others as the different governmental bodies may discover or invent. Every project should have a contingency fund for unexpected cost over-runs (they will occur). Then, of course, there are mitigation fees; for traffic, for sewer, for water, for parks, for schools, —–. Some of these may be passed on to future users such as the builder if you are developing residential lots for sales to builders.

If all of the above looks good – go ahead and start getting rich - maybe.

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