“The appraiser can predict the general real estate market with much greater certainty than he can the value of a specific piece of property. Real estate appraising is an art, not a science,” said Joe Patterson, who heads Aguirre & Patterson, Inc., Hidalgo County’s largest appraisal company. He explained that an appraisal applies the laws of probability to real estate transactions. “An appraiser estimates the market value of a property based on how much it will most likely bring if it is exposed for sale on the open market allowing a reasonable time for buyers to inspect and investigate before making their offers.”
Not everyone agrees with an appraiser’s opinion, of course. “If both sides are mad at me, I know I’ve done a good job,” Patterson said, who has had bank presidents question his numbers. “I can’t take it personally or I’d never work.”
The Baylor graduate, who has over 41 years in the field, now spends much of his time as an expert witness in the courtroom and in arbitration hearings. Those primarily involve commercial properties whose valuation is contested during eminent domain condemnations, foreclosures, estates in probate and divorces.
Patterson credits his first years as an appraiser, when he worked with a Baylor law professor-appraiser, for giving him a remarkable grounding in the industry. In 1986, Patterson opened his office in McAllen. Today Patterson is the sole proprietor of Aguirre & Patterson (Adelberto Aguirre opted out of an ownership stake) which employs 14 appraisers.
Patterson defined market value as the price of a property when the seller is not under any stress to sell. But a wait-and-see perspective is not common. For example, a relocation company will purchase a home with the condition of selling it in 60 to 90 days, Patterson explained. “We determine what will motivate an unmotivated buyer to buy within 90 days.” That is where the appraiser’s art comes in as Patterson applies what is called forecasting, giving this scenario: “For a $1 million house, it’s going to take two years to sell. What is the cost of holding it for one year and nine months? Subtract that amount from the one million price.” The resulting number is the appraisal price in that case. Patterson is one of the few who use forecasting, although more companies are adopting his methodology.
“We do have to come up with an exact number. An appraisal does not necessarily set the price to be paid. It cannot be proven. It is not guaranteed,” Patterson has written in an often-cited article. Instead, an appraisal should form the basis of negotiation between the owner and the prospective purchases. Ultimately, the “prices paid often reflect sentiment, compassion, bias, politics, personal interest, specific needs, lack of understanding and other factors not considered by the impartial appraiser.”
For more of this story by Eileen Mattei, pick up a copy of the November edition of Valley Business Report, on news stands now, or visit the “Current & Past Issues” tab on this Web site.