Guest Post: Estate Attorney Paul Palley explains the problems when estates are divided into "partial real estate interests".

 

Chicago estate attorney Paul W. Palley

Much of my international appraisal work involves estates.  It sometimes dismays me that a decedent leaves his estate in the form of partial real estate interests, particularly when the heirs are in different countries, and the heirs don't know each other well.  Partial interests are usually valued and marketed at discounts.  

In this guest post, Paul W. Palley, Esq.,explains ways of maximizing real estate values for the heirs. 

"Don’t Discount Your Legacy: How to Avoid Devaluation When Leaving Real Estate in a Will

 When a will includes multiple pieces of real estate—especially commercial properties—dividing those assets among several beneficiaries can create unintended financial consequences. One of the most overlooked risks is the devaluation that occurs when beneficiaries inherit partial interests in real estate. This is particularly true for commercial properties, where the sale of a minority or fractional interest often triggers a discounted appraisal.

 Understanding how and why this happens—and planning accordingly—can help preserve the full value of your estate and prevent conflicts among heirs.

 The Problem with Partial Interests

When a person dies owning a commercial property and leaves it equally to three children, for example, each child inherits a one-third interest. On paper, this might seem fair. But in the real world, that fractional ownership may be worth significantly less than one-third of the property’s total value.

 Why? Because a one-third share in a commercial building isn’t easily sold on the open market. It offers no control over the property’s operations and comes with limited liquidity. As a result, appraisers apply what’s called a valuation discount—often for lack of control and lack of marketability. Depending on the property, these discounts can range from 10% to 40%, substantially reducing the value of what each heir receives.

 Real-World Example: The Family Retail Plaza

 Consider a real-world-style scenario: a man owns a small retail plaza that generates monthly rental income. In his will, he leaves the property equally to his three adult children. The plaza is appraised at $1.5 million. However, each one-third share is valued at only $300,000 instead of $500,000 due to the valuation discount applied for lack of control and marketability.

 Now the estate shows $900,000 in value rather than $1.5 million on paper. This not only reduces the apparent size of the estate for estate tax purposes (which may be a benefit in some cases) but also leaves the heirs with illiquid, discounted assets that are difficult to use, sell, or manage.

 What could have been a straightforward inheritance has now become a source of frustration—and financial loss.

 

Solution 1: Direct the Sale of Real Estate in the Will

 

One of the simplest ways to avoid this problem is to direct your executor to sell the real estate and divide the proceeds among your beneficiaries. By doing this, you ensure that:

• The property is sold at full market value (not discounted).
• Each beneficiary receives their fair share in liquid cash.
• Disputes over management or sale decisions are avoided.

 

This approach works well when none of the beneficiaries wants to keep the property.

 

Solution 2: Use a Trust to Hold and Manage the Property

 

If your goal is to preserve the income from a property or keep it in the family long-term, a trust may be the better option. A revocable living trust or testamentary trust can hold the property after your death and provide instructions for:

• Who manages the property (a trustee or property manager).
• How income is distributed to beneficiaries.
• When and under what conditions the property can be sold.

 

Because the trust holds title to the property as a whole, beneficiaries receive distributions from a unified interest—not discounted fractional shares.

 

Solution 3: Create a Family LLC

 

Another strategy is to transfer real estate into a limited liability company (LLC) either during your lifetime or through your estate plan. In this case, your will or trust would pass LLC membership interests to your heirs instead of the property itself.

 

This setup offers:

• Centralized management through designated managers or majority voting.
• Flexibility for heirs to buy out one another.
• Asset protection and potential tax benefits.

 

Just like with trusts, this helps avoid the sale of unwanted fractional interests and supports long-term planning.

 

Balancing the Estate Fairly

 

What if only one beneficiary wants the property while others would prefer cash?

 

In that case, your estate plan can equalize inheritances by:

• Leaving the property to one heir and giving other heirs equivalent value from other assets.
• Using life insurance to provide liquidity to balance out the distribution.
• Giving the executor the power to sell the property to a third party or to a beneficiary who can buy out the others.

 

Careful appraisals and clear instructions can make this process transparent and fair, reducing the likelihood of disputes.

 

Work with a Professional Team

 

Real estate adds a layer of complexity to estate planning that calls for professional input. In particular:

• A qualified estate planning attorney can help you structure your plan to reflect your goals and protect your beneficiaries.
• A real estate appraiser can provide accurate valuations and explain how discounts may affect the estate.
• A tax advisor can help you evaluate the impact on estate taxes and potential capital gains.

 

Your estate plan should reflect not only what you own but how you want to preserve its value and minimize friction among your heirs.

 

Conclusion: Don’t Let Your Legacy Be Discounted

 Owning multiple properties—especially commercial ones—is a sign of financial success. But that success can be eroded if the assets are divided without considering the impact of partial interests and valuation discounts.

 With thoughtful planning, you can ensure your real estate is passed on at full value, distributed fairly, and handled in a way that honors both your wishes and your family’s needs.

 Whether that means selling a property, creating a trust, or forming an LLC, the right strategy can help you avoid a discounted legacy—and leave behind a gift that truly reflects your life’s work."

"Mr. Palley is an estate planning attorney in private practice in Chicago, Illinois. Educated at the University of Chicago (AB), and DePaul University (JD), Mr. Palley serves clients throughout the greater Chicago area, from young adults just starting out up to high net-worth individuals with complex estates to those needing help with probate after the loss of a loved one. Visit his website at https://palleylawoffice.com/ or contact him directly at ppalley@palleylawoffice.com"

Thank you, Paul, for your words of wisdom.  Paul is a licensed Illinois attorney who I have known for 50 years.

As most of my clients are in California, I can also recommend attorney Anthony Diosdi in San Francisco.  Our Team - Anthony Diosdi | SF Tax Counsel

The Helms-Burton (“LIBERTAD”) Act of 1996 and resultant property claims from the Cuban Revolution of 1959

 Fidel Castro, Cuban revolutionary leader

The Helms-Burton Act, signed by President Clinton in 1996, allows all U.S. owners of properties seized by the Castro government in Cuba to sue for compensation from the current foreign (non-Cuban) owners of these properties. These properties were generally seized between the years 1959-1961. OFAC prevents litigation against Cuban owners of these properties.

The enforcement of this Act was suspended by subsequent presidents for diplomatic reasons, and President Obama was particularly interested in normalizing relations with Cuba. Also, foreign ownership of Cuban properties was not allowed until Cuba’s Foreign Investment Act of 2014. 

Now there is a new fearless leader, President Donald Trump, who has declared the Act to be enforceable. This will be fun for any appraiser who appraises in Cuba. 

The first defendants in these actions have been Carnival Cruise Lines and French distiller Pernod Ricard. Other foreign rum distillers are also involved. 

This Act benefits U.S. corporations, as well as Cuban exile families who are now U.S. citizens, basically the children and grandchildren of the original Cuban property owners who lost their properties to the Castro Revolution and fled to the United States. (Carnival, however, is an American corporation that did not exist at the time of the Castro revolution.) But litigation is only allowed against non-Cuban owners of these properties.

The Helms-Burton Act, which is rather vague in its language, suggests that the plaintiffs are entitled to 3 x the value of the property at the time of its taking by the Castro regime, to be paid by the current non-Cuban owner of the property, so the litigation only makes sense for large properties not inhabited or owned by Cubans. Valuations at the time of the taking of a property are consistent with eminent domain theory throughout the world. That's the only way it can work.  What if a foreign company erected a one billion dollar structure to the land since the taking? There is no legal precedent that would allow the former landowner to share a part of that, whether in a communist system or a capitalist system.

The lawsuits will be tried in U.S. civil courts and not involve the Cuban government as a co-defendant. Foreign owners face severe penalties in the U.S. if they do not pay the judgment. Likewise, US OFAC has severe penalties for Americans trying to take back properties from Cubans.

There are about 6000 government-certified claims so far for the Helms-Burton Act.

Religion and Real Estate: Obituary for former client Televangelist Reverend Jimmy Swaggart

Rev. Swaggart begging forgiveness for his satanic attraction to prostitutes. But in all fairness, he never touched them; he just left little Jimmy hanging out of his pulpit.

In 2003 I was a review appraiser working for a Florida investment bank that later got absorbed into Blackstone. They sent me in February 2003 to review 11 appraisals in New Orleans and Baton Rouge.

The properties in Baton Rouge were part of the Jimmy Swaggart World Ministries campus in Baton Rouge, Louisiana, located on valuable land situated next to the local regional mall. And Jimmy Swaggart was the sole owner of the 100-acre Ministries Campus.

I spent the day before in the den of iniquity known as the French Quarter in New Orleans, reviewing 8 appraisals. That evening I stayed in my motel room to watch and study the Jimmy Swaggart show. The sermon that night was “Do Not Worship the Counterfeit Jesus”.  I found his sermon to be most confusing, but he did sometimes break to commercial to promote a cassette tape that explained it all. So that’s where the money comes from. Actually, at the time of my visit, his revenues were a 9-figure number. He was an ideal banking client.

“Brother Swaggart” actually made about 20 minutes of time available to personally talk to me, and he stayed in character for a truly memorable performance.  He talked a lot but didn’t listen much.

What Rev. Swaggart was doing was subdividing properties from his campus to serve as collateral for loans. Rev. Swaggart was actually a competent real estate developer who built very functional warehouse properties without making them white elephants like other holy men sometimes do.

I asked him what he needed the loan proceeds for, and he told me that he wanted to buy radio stations, and lenders won’t take radio stations as collateral, so he had to subdivide his ministry property as collateral.  I asked how many radio stations he wanted and he said he wanted radio stations in 48 states. So I asked “You mean radio stations in the 48 continental United States?” and he said “No, every state except Mississippi and Arkansas, because those people don’t have any money, anyhow.” Maybe he was joking.

The Swaggart Ministries Campus has a bible college, TV studio and radio station.  When I was at the TV station I watched the producers editing one of his appeals for money:

“Friends, if you truly love the word of God and want to walk with JESUS, get out your credit cards”.

So I have mixed feelings about Jimmy Swaggart.  On the positive side, he never lied to me, unlike many commercial real estate developers, but he didn’t have to, because he was so good at it, and he had millions of admirers in at least 100 countries, some claiming that he had healed or saved them.  On the other hand, I saw him as the world’s most successful Bible salesman, and perhaps sales were more important to him than saving souls. He died a very wealthy man.

The Most Common Fatal Flaw in Discounted Cash Flow Analysis

 

I entered the appraisal profession at an opportune time – in the mid-1980s, when discounted cash flow (DCF) analysis had come into vogue in the real estate industry.  The crowning moment for DCF’s new place in real estate investment analysis became apparent in the purchase of the Pan Am building (now the Met Life building) in New York in early 1981.  The price paid shocked many, as it reflected a “going-in” capitalization rate of just 4% for an 18-year-old building in a time of very high consumer price inflation and very high interest rates.

Manhattan was just awakening, though, from a 1970s stagflation-induced real estate coma of no new construction, and the rapid expansion of the financial industry brought the Manhattan office market to full occupancy, with office rents increasing 50% from early 1979 to the end of 1980.  The buyers of the Pan Am Building relied on a DCF model based on cash flow projections for years into the future, anticipating the ability to re-lease space at much higher rental rates.  In this context, the purchase price was justified.

I was recruited out of graduate school by Jones Lang Wootton, where I was promptly put to work creating DCF models for regional malls and high-rise office buildings owned by their institutional clients.  Because JLW was a full service real estate firm which managed many institutional properties, I had access to many property operating histories. Seeing these operating histories and also consulting publications from IREM (Institute of Real Estate Management) and BOMA (Building Owners and Managers Association), it became obvious that over the life of a commercial building, expenses increase faster than rents.

This can be graphically demonstrated by a typical subset of BOMA data in Figure 1, and is equally supported by IREM data for other property types as retail centers and apartment buildings.  Notice how the line representing the operating expense ratio for each age subcategory increases in slope relative to gross income.  The numerator, Expenses, is increasing faster than the denominator, Gross Income.  This is a graphical proof of expenses increasing faster than income for income properties. Why does this almost always happen?  Because buildings are deteriorating assets.

                              

                                                           FIGURE 1

Data from BOMA (Building Owners and Managers Association)

There is a logical reason for this. As a building ages, it becomes less competitive in its marketplace and the rate of rental increase slows, while the aging of the property requires increasing maintenance and capital improvements expenditures. This is the reality of physical and functional obsolescence.

The natural end of the economic life of a building is when expenses finally exceed collectible income. If expenses typically grew no faster than income, on the other hand, no building would become obsolete. That would be nice for building owners, but the real world does not operate in this manner.

DCF models which forecast expense growth to be the same rate as consumer price inflation are therefore fundamentally wrong and overly optimistic.

The above graph, indicating the typical pattern of expenses increasing faster than income for income properties, was originally intended to be part of my book (see sidebar) for the Appraisal Institute, but was not allowed by the editors, as the Appraisal Institute maintained that income and expenses increase at the same inflation rate over the long run. This was in 2011.

Nowadays, in year 2025, the truth is increasingly taught by appraisal educators and real-life managers at major firms, but some appraisers have not yet caught on because they were taught wrong earlier in their careers.

A building is a deteriorating asset. There are two forces governing expense growth – price inflation and increasing maintenance and capital improvement needs. This places the rate of expense growth higher than price inflation alone. This is the same reason that your new car depreciates so quickly.

Why is this matter so important? Most DCF models project 11 years of cash flows, and the underestimation of expense growth gets compounded, resulting in serious overvaluation.

One of my fellow Appraisal Institute authors, Howard Gelbtuch, assembled and edited an enlightening book in 2011 entitled Real Estate Valuation in Global Markets, in which highly decorated appraisers and valuers from many nations explained how real estate valuation is done in their countries. Once again, most who presented DCF models had final year operating expense ratios lower than beginning expense ratios. Many of the violators were Western nations that are considered financially sophisticated. Nations getting it wrong were:

Belgium, Canada, Czech Republic, Denmark, France, Germany, Hong Kong, Italy, New Zealand, Poland, Portugal, Saudi Arabia, Spain, Sweden, Taiwan and Turkey.

Which nations got it right? Nations less likely to be considered part of the supposedly sophisticated Western herdthink:

Argentina, Bulgaria, Chile, Indonesia, Japan, Romania, South Korea, and the Turks and Caicos Islands.

Getting beaten by the likes of Bulgaria in DCF analysis should shame appraisers and valuers from the more affluent Western nations into "stepping up their game", if they haven't already done so.

Even the author of the book, who wrote the section on appraisal practice in the United States, failed to consider increasing operating expense ratios in his own DCF projection, in which his operating expense ratios remained stationary. Bear in mind though, that this book reflected appraisal practice at the time it was written in 2011.  Time for an update?

PS: I originally wrote this post in 2014.

My Part in a Successful Arbitration Against a Sovereign Nation

 

No, this is not about the Korean situation I was handling before, in which the Municipal Government of Seoul underpays property owners in an out-of-control eminent domain system.

There are actually sovereign nations within the United States of America, known as Indian Reservations.

By U.S. law, Indian Reservation land cannot be sold to outsiders, so to have some type of real estate interest on the reservation, the outside investor needs to lease the land, and the ownership interest is called a “leasehold interest”. This is how one obtains a valid real estate interest on an Indian reservation or elsewhere such as Hawaii or the Zona Maritima in Costa Rica. This is often done on Indian reservations by developers of gambling casinos, for instance.

In this particular case, a client of mine wished to build an industrial park on an ideally located section of an Indian Reservation, and then he divided the proposed park into pieces to lease out to three willing outside tenants. What he possessed, as a leasehold landlord, is commonly known as “sandwich leasehold interests”. He pays rent to the Reservation, but in turn was already collecting rents from 2 of the 3 tenants who want to develop buildings on the property that he leases from the Reservation. It was a very profitable arrangement.

The Reservation changed their mind and broke their contract after my client had spent 5 years and over $2 million assembling this deal. Contract disputes with Indian reservations are typically handled by Arbitration as typically established in contracts such as these.

I was hired to estimate the value of the leasehold interest as of the date of the breach of contract in August 2020. Tens of millions of dollars were already expected in rents. The irony of this breach of contract is that my client agreed to divide profits with the reservation at 50%.  At present, no one is making any money except lawyers and me.

My client has won the arbitration but is now awaiting the computation of the award and damages.

P.S.  Here is my Oklahoma grandfather, who I am named after, who claimed to be part Cherokee. That is a Kiowa war bonnet that he is wearing. The Cherokees renounced war in their treaty with President George Washington, in turn for his declaring them a "Civilized Tribe".

What Isn't Said About Living and Owning Real Estate in Costa Rica

 I have been appraising in Costa Rica since 2009, and have usually found myself appraising failed residential subdivisions meant for affluent immigrants from North America.  Then there were teak farm scams, too. 

There is a huge industry aimed at selling Costa Rican real estate to North Americans, exemplified by such publications as International Living and Real Estate Trend Alert [Ronan McMahon]. It is important to remember that these are sales organizations which present only the positives of living in Costa Rica, a land of natural beauty sometimes described as "the land of rainbows and unicorns". And it is not true, despite what Ronan says, that Costa Rica is running out of land.

Yet many Americans return disappointed from Costa Rica.  There are no official numbers.  Unofficially, I have heard estimates that between one-third and one half of American immigrants return home from Costa Rica. There are an estimated 120,000 Americans living there now.

Yesterday I watched a podcast on MSN.com by Kristin Wilson, an international realtor who lived in Costa Rica for 8 years and only recently came back home, and she compiled a list of 8 reasons why Americans return, and some of these reasons I have also observed, but I haven't actually lived there so I encourage you to watch the podcast. You can find her full report at: 

https://www.bing.com/videos/riverview/relatedvideo?q=kristin+costa+riica&mid=9D793F3EED243527C1269D793F3EED243527C126&FORM=VIRE

Here are some added comments of my own on the reasons Americans leave:

1. Cost of living. First of all, living in tropical lowlands requires year-round air conditioning if one wants to live in American-style comfort, costing several hundred dollars per month. Most goods also have to be imported and Costa Rican tariffs are high. It will cost more to own a car in Costa Rica than in the U.S. If wants to live the US standard of living, there may be no cost savings and perhaps even some cost surprises.

Costa Ricans often live a lot more cheaply by living in small homes at higher elevations.  Below, for instance, is a realtor ad for a "Tico Home" in the uplands of Guanacaste, perhaps the physically hottest area of Costa Rica (temperatures near 100 degrees F when I visited in February).  These are simpler homes that are built from local materials and don't typically have air conditioning or heating, but at higher elevations, such utilities might not be necessary. But it might be a long walk to the beach, and where will you find a Wal-Mart?

2. Crime. Official crime statistics suggest that Costa Rica is a nation with a low crime rate, but one forgets that being a rich gringo can make one a target. Reading expat forums, I sometimes read alarming things like "I got robbed at gunpoint in broad daylight on the National Highway!", police shakedowns of tourists, and there have been many reports of how gringos are followed by robbers after renting their car at the airport, particularly after dark. Kristin also chronicles her many car break-ins and one or more home burglaries, and carries around a decoy wallet.

3. Health issues.  This seems surprising when one sees the number of hospitals near the Liberia and San Jose airports, hospitals built for North Americans wanting to save money on medical or even dental procedures, and I have been assured that most of the doctors are English-speaking and U.S.-trained. One notices, though, that these hospitals often focus on elective surgeries, those not covered by insurance, such as cosmetic surgery.

Considering that many of the expats are retirees, though, one has to plan for increasing health problems in the future.  U.S. Medicare is not available down there, and end-of-life health issues can force Americans to return home for seriously expensive situations such as cancer, heart surgery, etc.  I went through cancer last year and was glad for my Medicare here in the U.S.. 

4. Unstable infrastructure.  This may include power outages, cable outages, water outages, and impassable roads during rainy months.

5.  Property scams.  The first time I heard about this, it was a friend of mine who sold his business and arranged to purchase a cliffside home and restaurant through a local lawyer. The lawyer was corrupt and was working a scam with someone who didn't even own the property. In another instance, I had an American absentee landowner find his properties occupied by squatters, and he spent several years fighting to get his property back in the Costa Rica courts, which often honor squatter's rights over the rights of foreigners who are not even using the land. The squatters' lawyer was allegedly building and renting billboards on the land.

Get a title insurance policy if you possibly can, too. My friend lost over $100,000 and had to go back to work in the U.S.

6. The climate speaks for itself. These are the tropics and there can be plenty of heat, humidity and rain which some Americans don't care for. Costa Rica is outside the hurricane region, however.

7. Finally, some expats just feel the isolation from family and loved ones living so far from the U.S. and reprioritize what they find more important in life -- family or beaches?

Depth Matters: Appraisals of prospective ports

Bahia de Mariel, Cuba

Over the years I have sometimes been sent to the Caribbean to appraise proposed ports for cruise ships or container ships. Other appraisers failed to pursue feasibility studies, but there are some basics that need to be considered.

First and foremost is the depth of the water.

Today’s cruise ships have drafts (distance below the water) of up to 33 feet. Think Royal Caribbean.

Container ships are much heavier (due to cargo rather than vacationers) and have drafts up to 50 feet.

Then one must consider obstacles on the sea surface, such as boat wrecks or just abandoned refrigerators. American shippers estimate an extra 6 feet for these obstacles. Russian sailors recommend 7 feet.

When I worked for hard money lenders, I sometimes had to deal with jokers who pretended that their bays could be converted to world class cruise ship ports or even cargo ship ports, with accompanying warehouses or luxury resorts.

One particular memory was Guanica Bay, Puerto Rico. Read the original blog post here:

https://www.internationalappraiser.com/search?q=puerto+rico

The gist of the story is that Guanica Bay had a depth of only 29 feet, which was an obstacle to the larger cruise ships. Subtracting 7 feet reduces maximum draft to just 22 feet. The turbidity of the water, furthermore, reduced the attractiveness of the proposed beach resort.

Cuba recently renovated its Mariel Bay (remember the Marielitos emigration of 1980) at a cost of more than one billion dollars (financed by Brazil) to create an internationally competitive port, so near the U.S., with a minimum depth of 58 feet.  A century ago this bay had an average depth of less than 20 feet.

In summary, depth matters, water quality matters, and be sure that all the required permits are in place, no matter what country you are in.

Update on the New South China Mall

I do see one person now, who appears to be a groundskeeper, standing to the right of a yellow object.

In the 15-year history of my blog, my previous post from May 2011 on this mall https://www.internationalappraiser.com/search?q=china+mall has been read more than 50,000 times.  The gist of the story was that a Chinese instant noodle billionaire decided to build the world's largest mall outside Dongguan, China. With over 9 million square feet of building area, he was planning on placing 2350 tenants. At the time of my arrival on 5/13/11, there were three tenants: KFC, McDonalds, and Kung Fu, a Chinese fast food franchise. There was also an amusement park set among hundreds of meters of canals, and on the day of my visit, it was filled with several dozen friendly secondary school students.

As I explained then, the mall was built on farmland near a city composed mainly of poor migrant laborers who built cheap cabinets, shelves and furniture, people who did not have the time or money to be mall shoppers. Access was inadequate. The Dongguan rail station was 55 minutes away and the closest bus station was one mile away.  There were tollways leading here, but the local residents could not afford the tolls or even cars. A recent YouTube video (shot in 2024) by a charming British couple (aka NICO), confirmed that there is still no public transportation to this mall. See their guided tour at https://www.youtube.com/watch?v=gyS_ZNkSTOA .

The mall has suffered for years. Once adorned with beautiful canals reminiscent of the San Antonio RiverWalk in Texas, the inability to control algae growth forced the decision to fill in the canals with concrete.

Development continued in 2015 and then 2018, and the mall was able to achieve greater than half occupancy on the ground floor:

On the other hand the upper floors continue to fail to lease up:

And the amusement park that attracted so many middle class Chinese customers has recently shut down:

Now that local factories are closing due to economic reasons (cheaper competitors and Trump tariffs), there may be more headwinds against this enormous shopping mall.

Mall management claims an occupancy rate of 98%.  Based on the photos my estimate is 15%.

Expert Witness Testimony on Foreign Real Estate

 

US citizen resists Korean eminent domain

Why does an American real estate appraiser like me get hired to testify on foreign properties?  The answer is the U.S. Court System.  They don’t require American appraisers, but they need English-language testimony for a legal action in a U.S. court or arbitration, testimony supportable by the Uniform Standards of Professional Appraisal Practice (USPAP). Nowadays there is new technology like Zoom that allows foreign appraisers to testify from afar, but a foreign appraiser might need a translator and may not have the English language skills to testify in a U.S. court and survive “Cross Examination”, nor might they have a solid understanding of USPAP.

Much of my testimony has to do with estate or divorce actions, eminent domain or tax reasons. The question being asked is “What is the value of the property being litigated”?  USPAP is important in these actions in the U.S.

In my last testimony, back in April, for arbitration purposes, the defendant/opponent was an American Indian Reservation, not subject to U.S. law. Their lawyers were American but unfamiliar with USPAP.  When they cross-examined me they went straight to their perceived opinion of the character of my client.  I had to point out that USPAP requires me to estimate the price that the property would receive in an open market, what it would be worth to the next owner.  The present ownership is irrelevant, as I explained, but I disagreed with their assessment of my client’s character without stating it, because it was irrelevant, and he was an excellent client.

Four years ago I was testifying in a divorce trial for an American couple in which the husband developed luxury lodging in Costa Rica. I was hired by the wife’s attorney. The husband left her for a younger woman.  His defense was he didn’t even own the land that he was building the property on (leasehold interest), but I pointed out that that the property was located on highly desirable land in the Zona Maritima, the closest Costa Rican land to the publicly owned beach. These leasehold interests in Costa Rica have high value. I don’t think the husband could find a Costa Rican appraiser who spoke English.

Eight years ago, I was defending a naturalized U.S. citizen of Korean origin whose property was being seized by eminent domain by the Seoul Municipal Government. Seoul uses a CAMA (Computer-Aided-Mass-Appraisal) System as many American municipalities use. I went to a conference hosted by the Korean Association of Property Appraisers, whose proceedings were published in Korean, Japanese, Chinese and English and found an article quite explanatory of the flaws in the Seoul CAMA system.  The Korean lawyer who hired me also gave me an excellent book entitled “Eminent Domain: a Comparative Perspective”, written by three scholars, two of which are Korean: Iljoong Kim, Hojun Lee and Ilya Somin.

To be brief, the Seoul CAMA system is based on multiple regression analysis, as many CAMA systems are, and as a former statistician myself, I found myself confused that they seemed to be using one equation for the whole metropolitan area.  Real estate sales are public in Seoul, and I found that homes in this neighborhood had been selling for three times assessed value, but condemnation compensation was occurring at only one-third of market value as a result, because the taking was done at "announced value". 

Disputes by U.S. citizens against the Republic of Korea go to arbitration by treaty. I wrote a report that was supposed to be presented with my testimony at the Hong Kong International Arbitration Centre in Hong Kong (the closest English-speaking arbitration authority in Asia), but her case was thrown out on technicalities.  The Republic of Korea is a democracy that heavily favors it largest corporations and real estate developers. The bottom line was that she was offered about $700,000 for a home that would sell for $2 million. Most of her neighbors were treated the same. Because Korean appraisers are dependent upon government licensing, and the same agency that "announces" values is the agency that regulates appraisers, no Korean appraiser would take this case. That is why I was involved.

 

“Top Appraisal Blog” Award for “The International Appraiser” from Feedstock.com

 

I proudly present the medallion above, but to be honest, I was only really recognized for having one of the 10 best appraisal blogs on the Internet.  Feedstock collects them in one place, and some of their highest rated blogs I also recognize and should commend.

The vast majority of appraisal blogs I see are oriented to residential appraisers in the USA, and I generally ignore them for just reporting old news or whining about how life is unfair for residential appraisers who haven’t evolved beyond the URAR form or learned how to “support their adjustments”.

Here are the top 3 blogs I respect and honor:

Appraisal Today by Ann O’Rourke.  It presents a lot of useful information, and some of it is even oriented towards commercial appraisers like me. She is a highly seasoned appraiser and MAI.

WorkingRE, created by David Brauner, was the inspiration for my own blog, which I started 15 years ago. Even though WorkingRE is exclusively oriented towards residential appraisers, he advised me that creating a good blog would be good for increasing one’s own appraisal business.  In these last 15 years and 176 posts I have now gained worked on 6 continents. I also found my Errors and Omissions Insurance through them. I don't know what happened to David Brauner, but the new publisher is Isaac Peck who has seamlessly continued the good work of this blog.

Miller Samuel is oriented towards the New York City Metropolitan Area but provides comprehensive residential statistics for those needing such information.  I see them quoted in the press more often than any other appraisal blog. I've never met Jonathan Miller, but he sure knows how to blog.

For the full list of blogs, go to https://bloggers.feedspot.com/real_estate_appraiser_blogs/