Share with others

Posted by & filed under Appraisal News.

I receive emails from all over the country almost on a daily basis.

This inquiry was sent to me a couple of years ago via email. It was such a good question that I passed on the dialogue to the other professional Members of the Richmond Chapter of the American Society of Appraisers and to the Regional Governor for the Chapter at that time. The answer was an excellent example of professional networking.

Question: “I am a consulting arborist. I sit on the Council of Tree and Landscape Appraisers, a council of representatives from the “green industry” that writes guidelines for the appraisal of trees and landscapes. We are currently working on the 10th edition of our Guide for Plant Appraisal. The primary thrust of tree appraisal is to treat trees as personal property, when appropriate, and appraise with a cost approach. A depreciated replacement cost method is most used. We have the mechanics down pretty well after nearly a century of progress. The Council is now trying to get arborists to understand more about the greater world of appraisals. My question regards the use of premiums. Can we assign premiums to the appraised property to raise the opinion of value? For example, I appraise a tree in Mrs. Jone’s front yard, and determine a value based on the usual characteristics. Across the street is an identical (for purposes of discussion) tree in a city park. The park tree has local historical significance. Local residents regard it highly. Not so for Mrs. Jone’s tree. If I use the same approach and method to appraise for each tree, I will get the same result. Yet the park tree would seem to carry a higher value. I recognize that “value to whom” comes into play, but I’m not sure how I would factor that in. So back to the question: is there a way to add a premium for some special significance?”

Answer: This is an interesting valuation question, one that I haven’t been asked before, but not unlike those asked before pertaining to the value attribute celebrity.

To illustrate the attribute of celebrity let’s use two physically identical cookie jars. One jar is offered at auction without provenance. The other is offered at the same auction house at the same auction sale but with an Andy Warhol provenance (this scenario really happened!). The difference in the two hammer prices would be the “celebrity” premium if indeed there is a difference (and we know there would be), if argued clearly to a reasonable mind. One such example would not be enough to draw a conclusion. The “premium” will vary between cookie jar forms (e.g. plain, figural, etc.), between cookie jars and other types of Warhol properties (e.g. furniture, etc.). With persistence one might eventually collect enough data to draw a conclusion as to the average percentage Warhol-anointed properties have; however that percentage would not be universal. Other celebrities will have a different perceived premium. Furthermore, each celebrity premium will fluctuate due to market forces the very same way that the stock market fluctuates, both up and down.

I cannot imagine that the Replacement Value of a park tree would be anything other than the total cost to buy and plant a new replacement tree of the same species, age, size, gender, etc., including, of course, a continued maintenance policy (watering, fertilizing, etc.) to assure that the tree survives for a realistic duration (five years?).

But, if an individual park tree were associated with and was benefited by a provenance that lent added value, then one might successfully argue that the tree’s interesting past provided celebrity (and added value) to the tree, as with the Warhol cookie jar. Perhaps the subject tree was once attacked by a future politician or maybe it provided a platform from which was hung a notorious ruffian. If a tree of such notoriety were damaged or removed, then an argument might be formulated to suggest added value. Whether the argument prevails or not is a matter for a Court to decide if there is a dispute. I suspect that the opposing side would argue that the tree is an element of the real property upon which it lives, and thus, is in effect real property. Or, it might be argued that a tree conveys with the real property, as would a major appliance.

I am afraid my mind is much too practical a muscle for me to be able to stretch it in the manner lawyers extend the boundaries of reason.