What You Need to Know to Market
Appraisal Services to Attorneys
Presenters:
Curtis Graham, Esq.
Freeman Freeman & Smiley, LLP – Los Angeles, CA
 His clients include property owners, real estate brokerages,
property management companies, and others.
 His litigation and advisory experience includes development,
construction defect, and land planning challenges.
 He has been named a "Super Lawyer" in the field of Business
Litigation by Law & Politics and the publishers of Los Angeles
Magazine.
 Adjunct Professor at the Graziadio School of Business and
Management at Pepperdine University, and teaches courses
in business, business law and critical thinking.
Presenters:
Thomas R. Malapit, Jr., Esq.
Dennis Wenger & Abrell P.C. - Muncie, IN
 Graduated from the Indiana University School of Law in
Indianapolis in 1996.
 Admitted to practice as a member of Indiana Supreme
Court and U.S. District Court both the Northern and
Southern Districts of Indiana.
 Handles a variety of real estate matters including
eminent domain litigation, land use and others.
Presenters:
Stephen D. Roach, MAI, SRA
Jones, Roach & Caringella, Inc. – San Diego, CA
• Testified in over 300 depositions and in State and Federal Courts on
over 75 occasions.
• Serves the Appraisal Institute as Chair of the International
Relations Committee and as a member of the Strategic Planning
Committee and General Comprehensive Examination Panel.
• His appraisal assignments have included numerous incomeproducing properties, partial acquisitions, and other significant and
complex assignments.
• He has taught over 160 appraisal courses and seminars throughout
the United States, and in South Korea, China, Japan, and Taiwan.
• Has served as a visiting professor of litigation appraisal theory and
practice at the International Center for Land Policy Studies and
Training in Taipei, Taiwan since 2004.
Presenters:
Nick A. Tillema, MAI, SRA
Access Valuation, LLC and Nick A. Tillema, Attorney at Law
– Indianapolis, IN
• Appraiser, lawyer, and educator.
• His legal practice offers support for litigation cases, acting as an
expert witness or a legal consultant.
• Nick’s appraisal practice focuses on diminutive valuation analysis,
environmentally contaminated properties, litigation support,
residential valuation, commercial and industrial valuation, and
special purpose properties.
• He is a USPAP Certified Instructor and teaches continuing and
qualifying courses for appraiser licensing and certification.
• Past member of the Board of Directors of the Appraisal Institute,
and served as a member of the Appraisal Institute’s Audit
Committee. Currently Chairperson of the Appraisal Institute’s
Government Relations Committee.
Is litigation the only time you work with lawyers?
1. Estate and gift taxes.
2. Property taxes.
3. Bankruptcy (valuation, feasibility, fresh start
accounting, interest rates)
4. Workouts.
5. Litigation support – may or may not include expert
testimony.
6. Arbitration (party arbitrator, neutral arbitrator)
7. Real estate transactions - purchase price allocation,
fairness, and other purposes.
How do you select an appraiser?
FACTS
F = Factually Detailed
A = Articulate
C = Competent
T = Trustworthy
S = Support
FACTS
F = Factually Detailed – We look for appraisers
who pay close attention to the details in their
appraisals (i.e., no typos) and include factually
supporting details (i.e., the best comparative sales
available).
A = Articulate – We really appreciate appraisers
who can withstand a fierce cross-examination of a
crafty attorney, but yet can speak to a jury and
explain complicated appraisal lingo that can be
understood by your everyday layman.
FACTS
C = Competent – The competency of an appraiser is
especially important. We want appraisers who are
well-credentialed and have sufficient experience in
all appraisals, but sometimes we even need someone
who may have a specialty (i.e., appraising eminent
domain takings where minerals are involved)
T = Trustworthy – In a world where appraisers work
on both sides of the fence (government, financial
and private), it is especially important to find
appraisers who can be trusted that they are truly
working for you and giving their bet effort no matter
who is on the other side.
FACTS
S = Support – Attorneys need assistance in
preparing a case for trial. I have found that when
appraisers are involved they can legal support in
preparing cross-examination of opposing counsels’
appraisers. They can be very helpful in developing
a line of questions for their own testimony.
How do you market services to lawyers?
1. Remember, you are being hired and not the firm.
2. Take a lawyer to lunch or coffee.
3. Just because you meet one lawyer doesn’t mean you
have an introduction to firm. Meet others in same firm.
4. When you meet a lawyer, you will be undergoing
evaluation as an expert even though you may be in a
casual setting. Professional demeanor and appearance
are essential to a good first impression.
5. Be direct. Time is valuable. Let the lawyer know how
you can help them.
6. Be a good listener. It is much better to address a
concern that a potential client has rather than
addressing issues where there may not be a concern.
Exxon Mobil vs. Albright
1. Case where home owners sued Exxon over
contamination and impact on value and use of their
property.
2. The court ruled that “The effect of environmental
contamination upon a property’s value must be
determined on the basis of expert appraisal evidence.”
3. An appraiser must use recognized methods. Court
excluded testimony of an expert because it was not
based on valid methods.
4. The court stated that “a real estate appraisal expert must
proffer a reasonable justification for ignoring market
data where it is available.
Boltar LLC vs. Commissioner of Internal Revenue Service
1. Case was a conservation easement donation, but
impacts on valuation profession were far-reaching.
2. Taxpayer’s appraiser was excluded from testifying under
Daubert Rule.
3. Case emphasized the Court’s role as a gatekeeper to
exclude faulty testimony.
Boltar LLC vs. Commissioner of Internal Revenue Service
» The Boltar case resulted in the taxpayer’s report being excluded by the Court.
» The property was a Conservation Easement. However, the lessons learned
here are valid in all types of work when dealing with the IRS. Careful
adherence to IRS rules and regulations are important. However, following
proper methodology and avoiding mistakes is also important.
» In the Boltar case, the IRS challenged the report of the Taxpayer. The IRS
“filed a motion in limine to exclude the petitioner's expert report and
testimony as neither reliable nor relevant under the Federal Rules of
Evidence and Daubert.
» The Tax Court determined that the Taxpayer’s expert’s report was “so far
beyond the realm of usefulness that admission is inappropriate and
exclusion” is proper. The Taxpayer had no other expert report, and the Court
relied only on the IRS valuation. The result was the Taxpayer lost a $3.0
million dollar deduction from the donation.
Boltar LLC vs. Commissioner of Internal Revenue Service
The Property:
»
The property was 8.5 acres in Lake County, Indiana. Part of
the land was wetlands. Part was in the City of Hobart and
part was in Lake County. The County portion was zoned for
low density single family development. The City portion
was zoned PUD. There were no utilities available to the
property and it was land locked with no legal access.
Boltar LLC vs. Commissioner of Internal Revenue Service
The Property:
Boltar LLC vs. Commissioner of Internal Revenue Service
The Appraisals:
•
The Taxpayer appraiser valued the property at $3,340,000 under the
highest and best use for development of 174 condominiums. This was
based on a site plan for a ten acre parcel (Scenario A). Scenario B valued
the property as vacant development land at $68,000. The Taxpayer
appraiser stated that the value of the easement was the difference
between the Scenario A and B values. It was not defined as a “Before
and After” analysis as required by the regulations. The value estimated
for the easement was $3,245,000 and also reflected mitigation costs.
•
The IRS appraiser concluded that the highest and best use was for low
density single family development. The easement was valued by the IRS
appraiser at approximately $30,000. This was based on a “before” value
of approximately $400,000 and an “after” value of about $70,000.
Boltar LLC vs. Commissioner of Internal Revenue Service
Problems:
» Appraiser assumed that all property was in City of Hobart which it was not.
» The Court indicated that the highest and best use established by the taxpayer
Report was not reasonable. The Court cited other court cases noting that
highest and best use must be “realistic” and reflect “objective potential uses,”
and such uses must be “reasonable and probable.”
» In establishing the highest and best use, the Taxpayer appraiser relied on a
ten-acre site plan even though the subject property was only 8.5 acres.
» The site plan ignored a 50 foot gas pipeline which crossed the property. The
plat map showed that 6 of 29 proposed buildings could not be built.
» The Taxpayer appraiser valued the property before the easement at $400,000
per acre. The Court noted that nearby land for similar development was
selling for $12,000 per acre. According to the Court, such “factual errors” defy
“reason and common sense” and “demonstrated [a] lack of sanity in their
result.”
Boltar LLC vs. Commissioner of Internal Revenue Service
Problems: (Continued)
•
The Court determined that the Taxpayer appraiser’s methodology was
flawed. Rather that stating the analysis was a “Before and After”
analysis, he stated the value was based on the “difference in two
scenarios” defined as Scenario A and B. While the actual process was
correct, the report used the wrong terminology.
•
Finally, before trial, the Taxpayer’s appraiser was given the chance to
revisit some of the issues like ignoring the easement, or correcting the
proper jurisdiction. The appraiser chose not to make any corrections
and stood by the faulty report. The Court noted that the Taxpayer
Appraiser “did not suggest any adjustments or corrections to their
calculations but persisted in their position that the original appraisal
was correct, even when admitting factual errors.”
Boltar LLC vs. Commissioner of Internal Revenue Service
Lessons Learned:
•
•
•
Make sure facts are correct.
Court will always look at highest and best use. Make sure it is
reasonable and well-supported.
When valuing a property and you are not preparing a Sales Comparison
Approach, it is always best to look at sales data in the area anyway. If
there is data, explain why it is not comparable and why adjustments
can’t reasonably be made. The Court understands a Sales Approach.
When sales are not addressed in a report they show up in other
evidence (like the IRS appraisal in this case). It could then appear that
the appraiser is not being objective. If there are sales nearby that might
in any way be considered comparable, they should be disclosed and
explained away.
Boltar LLC vs. Commissioner of Internal Revenue Service
Lessons Learned:
•
•
In this case, methodology was again an issue. Make sure you actually
state and describe the methodology. The math might be correct, but if
it is not described properly, the report may be rejected.
Final Note is actually a warning to the appraisal profession by the Tax
Court. As a closing comment, the Court explained that a Daubert gatekeeping role for the Court is required because “the cottage industry of
experts who function primarily in the market for tax benefits should be
discouraged.” The Court notes that all too often, “[t]he problem is
created by [expert’s] willingness to use their resumes and their skills to
advocate the position of the party who employs them without regard to
objective and relevant facts, contrary to their professional obligations.”
In this case, the faulty appraisal by a single individual led to a
condemnation of all valuation practitioners by a federal judge.
Questions & Answers
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