REAL ESTATE APPRAISAL FILE #13104

Transcription

1 REAL ESTATE APPRAISAL FILE #13104 Update to File#12237 Project # UM University of Montana Residential Real Estate 1519 Woodland Avenue Kalispell, MT PREPARED FOR: University of Montana Facilities Services c/o Hugh Jesse 32 Campus Drive #9360 Missoula, MT, Woodland Avenue, Kalispell, MT May 10, 2013

2 University of Montana Facilities Services c/o Hugh Jesse 32 Campus Drive #9360 Missoula, MT, RE: Project # UM Dear Mr. Jesse, May 14, 2013 In accordance with your request dated April 29, 2013, I have personally viewed and prepared an appraisal valuation report of the real property identified as: 1519 Woodland Avenue Kalispell, MT The valuation assignment is to provide an update to a previous assignment. I referenced USPAP for clarification. The appropriate term for this assignment is an Update, which reflects a current market analysis. The term Update is often used by clients when they are seeking a current appraisal of a property that was the subject of a previous assignment. [USPAP , AO3, page A- 7]. The reporting requirements are met via the attached summary report and incorporate by reference the original appraisal #12237 dated October 17, 2012, which my client has on file. The report presents a summary of my analysis and states the integral facts, reasoning and conclusions regarding the appraisal process to develop an opinion of market value as defined herein. I am responsible for all the conclusions set forth in the report. The function and intended use of the appraisal is to provide my client, Mr. Hugh Jesse, with a current opinion of market value of the real estate for asset valuation. The valuation assignment, development and report are in compliance with the Uniform Standards of Professional Appraisal Practice [USPAP ]. The effective date of appraisal is May 10, 2013, the date of viewing and photographs. I have provided appraisal services regarding the subject real estate within the three year period of the effective date of the appraisal. The opinion of value is subject to the attached assumptions and limiting conditions contained in the appraisal report. The as-is market value is based upon a marketing time of one year and an exposure time of one year. Based upon the assumptions and limiting conditions presented in this report I have formed an opinion of the as-is market value of the subject property in fee simple estate as of the effective date of the appraisal remains at: AS-IS FAIR MARKET VALUE: $90,000 It has been a pleasure to assist you. If I may be of further service to you in the future, please let me know. Best Regards, William R. Frazier REA-RAG-LIC-401 MT Certified General Appraiser ~ Frazier Appraisal Services, Inc. ~ 2

3 TABLE OF CONTENTS COVER... 1 TRANSMITTAL LETTER... 2 TABLE OF CONTENTS... 3 REPORTING REQUIREMENTS... 4 CERTIFICATION... 5 EXECUTIVE SUMMARY... 6 SCOPE OF WORK... 7 IDENTIFICATION OF THE PROPERTY... 8 STATEMENT OF OWNERSHIP... 8 DEFINITION OF FAIR MARKET VALUE... 9 MARKETING & EXPOSURE TIME... 9 DESCRIPTION OF THE PROPERTY... 9 MARKET DATA SUMMARY VALUATION CONCLUSION TO SALES COMPARISON ANALYSIS STATEMENT OF LIMITING CONDITIONS PRIVACY NOTICE ~ Frazier Appraisal Services, Inc. ~ 3

4 REPORTING REQUIREMENTS The following is required reporting for all real estate appraisals: 1. Clients and Intended Users: Mr. Hugh Jesse as a representative of the University of Montana Facilities Services ordered the appraisal update and is thus my client. Mr. Jesse and un-named representatives of the University of Montana are the intended users of the appraisal. No other intended users are noted by the client or appraiser. 2. Intended Use of the Appraisal: The intended use of this appraisal is to provide my client with a current opinion of the current market value of the identified real estate for asset valuation. 3. Identification of the Real Property: See Report: Attached Maps and Photographs 1519 Woodland Avenue Kalispell, MT Real Property Interest Appraised: Fee Simple Title 5. Purpose of the Appraisal: The function and purpose of the appraisal is to develop an opinion of the as-is fair market value as defined by the Federal Treasury Regulation. 6. The effective date of the appraisal: The date of viewing, the effective date of the valuation, is May 10, Reporting date is May 14, Scope of Work: See attached report. 8. State assumptions and limiting conditions: See attached addenda. 9. Summarize the information analyzed, the appraisal procedures followed and the reasoning that support the analyses, opinions and conclusions: See attached 10. State the use of the real estate existing as of the date of value, and the use of the real estate reflected in the appraisal; and when the purpose of the assignment is market value, summarize the support and rationale for the appraiser s opinion of the highest and best use of the real estate: Current use, highest and best use and use reflected in the appraisal are as-is, single family residential on a larger than typical site. 11. Personal property, trade fixtures and equipment. The appraisal assignment is to provide an opinion of the market value of the real estate only. All sales and the subject property include personal property, fixtures or equipment typical to the function of a single family residence as in appliances, HVAC, etc. 12. Include a signed certification: See following ~ Frazier Appraisal Services, Inc. ~ 4

5 CERTIFICATION I certify that, to the best of my knowledge and belief: the statements of fact contained in this report are true and correct. the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. I have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved. I have performed services as an appraiser regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment as known to my client prior to accepting the assignment. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. my engagement in this assignment was not contingent upon developing or reporting predetermined results. my compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. my analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. I have made a personal viewing of the property that is the subject of this report. no one provided significant real property appraisal assistance to the person signing this certification. William R. Frazier, MT Certified General Appraiser #401, have personally prepared all conclusions and opinions about the real estate that were set forth in the appraisal report. I have not authorized anyone to make a change to any item in the report; therefore, if an unauthorized change is made to the appraisal report, I will take no responsibility for it. May 10, 2013 William R. Frazier REA-RAG-LIC-401 MT Certified General Appraiser ~ Frazier Appraisal Services, Inc. ~ 5

6 File #13104: Update to File #12237 Property Address: EXECUTIVE SUMMARY 1519 Woodland Avenue Kalispell, MT Legal Description: Property Description: Client: Recorded Owner: Intended User: Intended Use: Property Interest: Tract 1 of Certificate of Survey #19324 located in NE1/4 SE1/4 Section 17, Township 28 N, Range 21 W, P.M., M., Flathead County, MT Flathead Assessor Tract 6D Flathead County, Montana University of Montana Facilities Services, Mr. Hugh Jesse University of Montana Representatives of the University of Montana Asset Valuation Fee Simple Title Assessor Number: RE Taxes: 2012 $80.73 [note change: Exemptions] Census Tract Number: Site Data: 0.79 Acre per Survey Flood Map: 30029C1820G & 1810G Zone X & AE [slough] 9/28/2007 Improvements: Single family residence: c. 1930, one level, 1,254 sq ft [+/-] above grade, 698 sf detached garage [2-cars], 199 sf shop, wood deck, patio, well, septic, etc. Current Use: Highest and Best Use: Zoning: Effective Date: Residential As-Is R-2 [Flathead County: One Family Limited Residential] May 10, 2013 [Viewing Date] MARKET VALUE CONCLUSION: $90,000 ~ Frazier Appraisal Services, Inc. ~ 6

7 SCOPE OF WORK For each appraisal or consulting assignment, the appraiser must; 1) Identify the problem to be solved. The appraisal problem, as discussed with my client, is to provide a current opinion of the market value of the real estate identified herein for asset valuation as an update to a previous assignment. 2) Determine and perform the work necessary to develop a credible result. The scope of work is to recognize the specific conditions set forth in the definition of market value. These conditions require a specific knowledge of the subject property, knowledge of the real estate market and marketing area, an understanding of market behavior, conditions of sales and the subject s history, contracts and other sales history that can be reconciled to the general market conditions. The appraisal considers socio-economic conditions as they affect the property appraised. This encompasses the national, regional, local and all other external factors that affect the subject real property. A physical inspection of the property, neighborhood and local area is made as a basis for the analysis and application of the three recognized approaches to real property valuation; Sales Comparison Approach [SCA or Market], Cost and Income. In arriving at a value estimate, the appraiser reviews all approaches to value and applies those approaches that are applicable to the assignment. In this appraisal, sales comparison methodology is the most applicable for providing a market value estimate for a single family residential property. Income analysis is considered but not used in the valuation process because the subject and comparable properties are typically owner occupied and rarely purchased in the open market for income investment. Cost analysis is considered but not used because the subject improvements are over 5-years of age, and depreciation in all forms can be difficult to measure and present unreliable estimates than can impact the value conclusion. 3) Disclose the scope of work in the report. Preparation of this assignment included: viewing the subject properties; a viewing of comparable sales and the neighborhood defined as residential properties with similar market characteristics and appeal to the subject property; gathering, confirming and analyzing land sales, improved sales, MLS reports and courthouse records, applicable to the subject property; applying the sales comparison approach as the appropriate valuation methodology to arrive at an indication of value for the subject real estate. The following sources were contacted regarding information utilized in the process: Source NMAR / MLS Local Brokers/Agents Property owners, buyers, sellers In House appraisal files Flathead County Clerk Flathead County Assessor Information Market Sales Data Market Sales Data Market Sales Data Market Data Subject & comparable data Tax Records To develop the opinion of value, I performed the real estate appraisal process, as defined in USPAP This document is categorized as a Summary Report. ~ Frazier Appraisal Services, Inc. ~ 7

8 MT. IDENTIFICATION OF THE PROPERTY The subject property of this appraisal assignment is located at 1519 Woodland Avenue, Kalispell, Flathead Assessor Tract 6D SUBJECT Certificate of Survey #19324 SUBJECT STATEMENT OF OWNERSHIP According to Flathead County Courthouse records, the subject property has recorded ownership to the University of Montana via a Deed of Distribution; Doc# recorded September 7, A boundary line adjustment to the site was surveyed, recorded and transferred to the U. of MT via Quit Claim Deed, Doc# recorded May 31, ~ Frazier Appraisal Services, Inc. ~ 8

9 DEFINITION OF FAIR MARKET VALUE According to Treasury Regulations section (b), and as restated in Revenue Ruling 50-60, fair market value is the amount at which the property would change hands between a willing buyer and a willing seller when the former is not under compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of the relevant facts. "A term that is, in concept, similar to market value in general usage; used mainly in condemnation, litigation, income tax and property tax situations. When an appraisal assignment involves developing an opinion of fair market value, the appropriate, requisite, and precise definition of the term depends on the use of the appraisal and the applicable jurisdiction. MARKETING & EXPOSURE TIME Sales comparison analysis data is utilized to estimate marketing and exposure time. Marketing time is assumed to be the expected listing period prior to the closing of a sale and is viewed from an historical perspective. The exposure period is related to the appraisal value conclusion and reflects the estimated period of time on the market to produce the sale at that price. The value conclusion assumes a reasonable marketing period for the subject property, which is estimated at one year. The appraisal analysis and value indication assume a similar exposure period. While sales data shows marketing periods can extend beyond a reasonable time frame, value conclusions are reconciled to a one year period. DESCRIPTION OF THE PROPERTY ***My May 10, 2013 viewing was from the exterior only. The property appears to be in similar condition to my previous viewing. The subject site is non-typical as it includes a small level building site fronting Woodland Avenue, approximately 104 x 82 to the top of a steep bank. The remainder of the site falls to a wooded creek or drainage bottom. There is a well on this portion of the site. As the site progresses to the east, above the slough bottom, it rises to an area that includes a 20 pedestrian/bike path easement. The site is irregular in shape and terrain. The site is adjacent to but not within the Kalispell City Limits. It appears the only reasonable building site is the level portion along the road due to flood zone and easement. According to the Department of Revenue [DOR], the subject residence was originally constructed in The residence appears to be wood frame, on a concrete perimeter foundation. I did not view the crawl space. The residence is one-level and appears to have additions to the original structure. The building exterior has a metal roof surface over wood frame and roof structure. The siding surface is vinyl lap siding. Windows are a mixture of aluminum and vinyl clad. The building has an air-lock front entry with an additional entry to the north bedroom. There is a small, 5 x 18 exterior wood deck at the rear in addition to a block patio riding along the edge of the drop off. Heating is by a gas forced air furnace with no air conditioning. Domestic water appears to be via a shared, private well and domestic sewage is via a private septic system. City services [water/sewer] are located along the roadway but would require annexation into the Kalispell City. A gravel driveway provides entry to the detached garage along the road. There is fencing around the front yard. There is a small, 12 x 16 shop area attached at the west elevation with an exterior entry and an entry from the south bedroom. The interior is noted by obsolescence in ceiling height, which is 81 [6 9 ] with some vaulted areas providing less clearance. Room layout and overall design also have features of obsolescence. The floor plan consists of two bedrooms, living room, kitchen and dining area and one full bath. There is carpet, vinyl and laminate flooring, drywall and wood paneling. There is a storage area east of the north bedroom. Overall quality rating of the improvements is average for its age. ~ Frazier Appraisal Services, Inc. ~ 9

10 MARKET DATA SUMMARY A summary of Kalispell Area market data follows total $211,722, total $217,239, total $170,743, total $125,317, total $102,899, total $112,794, total $96,014, total $129,344,974 Kalispell area residential sales volume increased in 2012 over 2011 by approximately 35%. The number of transactions increased by 26% [YOY]. MLS reports 186 REO [Bank Owned] sales reflecting 29% of the Kalispell residential market, similar to the last few years. MLS reports 27 active listings out of 546 active listings or approximately 5%, suggesting this segment of the local market is rapidly declining. The next data set illustrates residential sales and listing by price, again, illustrating that the segment of the local market with the greatest number of sales is quickly running out of inventory. ~ Frazier Appraisal Services, Inc. ~ 10

11 In calendar year 2012 there were 411 reported sales in the Kalispell marketing area less than $200,000 which is considered by many to be affordable housing. There are currently 205 active listings in this price range or less than one-half the inventory available for sale. The next data set subdivides the local Kalispell real estate market by market category to compare trends year-over-year [YOY] Residential: 510 $96,014,616 Residential: 643 $129,344,974 Land: 42 $7,075,500 Land: 105 $10,938,234 Commercial/Ind: 18 $7,119,900 Commercial/Ind: 27 $13,602,500 Multi-family: 16 $3,501,986 Multi-family: 14 $3,389,810 Agriculture: 0 units Agriculture: 0 units Business Op: 1 $33,000 Business Op: 3 $122,500 The local real estate market is clearly improving based on the illustrations above. Only the Multi-family segment of the market shows a small decline YOY. All other segments of the Kalispell real estate market show increases. The next data set illustrates absorption estimates based on sales and active listings per market segment. Property # Sales Listings Years of # Sales Listings Years of Category /1/2012 Supply /14/2013 Supply Residential Land Commercial Multi-Family The residential market is heading for a healthy supply demand relationship, typically noted as a 6-month inventory in relation to historic sales. All other segments of the market continue with an oversupply of current inventory. Vacant land continues to be a segment of the local market that is clearly troubled due to the over-supply of inventory for sale, which continues to put pressure on pricing in the market. The subject property value should reasonably benefit from the reduction in inventory at the lowerend of the Kalispell market. While this may not reflect a dramatic price increase over time, it may reduce the marketing time required to produce a sale, particularly while interest rates remain low and there is financing available. ~ Frazier Appraisal Services, Inc. ~ 11

12 VALUATION The subject property s market value has been determined according to residential guidelines of highest and best use as of the effective date of the appraisal. All the value conclusions herein reconcile price with a marketing and/or exposure period of approximately one year based on market sales. Sales comparison analysis or the Market Approach to value is the primary methodology utilized to estimate the market value of residential oriented properties. The Northwest Montana Association of Realtors MLS is the primary source of sales data. Sales are verified by market participants when possible. Other sources of data are the Montana Department of Revenue, physical viewing and inspection of the sales and local appraisers and my existing appraisal files. A summary of my analysis follows. Sales Comparison or Market analysis is the most commonly accepted valuation methodology for single family residential properties. NMAR/MLS is the primary source of market sales. MLS reports 92 residential sales in Kalispell [twice the number from the previous appraisal] from Jan 1, 2013 through May 10, 2013 with search parameters as single family residences less than 2,000 sq ft, sites less than 1- acre. The average site area is 0.29-acre vs. 0.27, previous. The sale price range is $40,000 [vs. $18,000] [low] to $316,000 [vs. $239,000] [high]. The average sale price is $155,000 [vs. $113,902] and the median sale price is $159,460 [vs. $128,500]. The average residence [GLA] is 1,357 sq ft [v. 1,197 sq ft]. The average unit price is $116.26/sf [vs. $93.73/sf]. Twenty (20) of the 92 sales are reported as Bank Owned or REO sales, which equates to 22% [vs. 33% in previous]. The average days on market for the 92 sales is reported at 178 days; however, this statistic is not weighted and requires further research as listings are commonly contracted every 6-months. I researched and gathered information on the following residential sales within the Kalispell marketing area. Sales are chosen first by location and followed by specific characteristics to produce recent sales that appear to bracket the subject in primary components of value. A summary of the adjustment process follows. In sales comparison analysis, the comparable sales are selected and adjusted to the subject. Inherent to the sales comparison analysis is to attempt to bracket the subject property with sales that have superior characteristics and inferior characteristics. While none of the sales have sites as large as the subject; all the sales herein have significant site valuations due to locational amenities. Those factors inferior to the subject require a positive numeric adjustment while those factors superior to the subject require a negative numeric adjustment. A summary of my analysis follows. COMPARABLE SALES SUMMARY Date Sale Price Kalispell Location Lot Size GLA $/SF Sale #1 12/21/2012 $70,000 4 Woodland Avenue ,920 $36.46 Sale #2 1/17/2013 $130, Caroline Drive 0.6 1,408 $92.33 Sale #3 4/15/2013 $103, Maple Drive 0.7 1,058 $98.06 Listing#4 Active $129, S. Cedar ,056 $ *GLA is residential building area above grade. ~ Frazier Appraisal Services, Inc. ~ 12

13 COMPARABLE SALE #1 4 Woodland Avenue, Kalispell, MT Comparable Sale #1 was used in the previous appraisal as Active Listing #4. It is included as an inferior property in the neighborhood but with similarities in functional utility, primarily due to overall age and condition. The property is listed via MLS# for $98,500 and sold via a cash transaction after only 88 days on market. I included this listing as an inferior property within the subject s neighborhood. Description Adjustment[+/-] ITEM SUBJECT COMP #1 Address 1519 Woodland Ave 4 Woodland Avenue Kalispell, MT Kalispell, MT Sale Price N/A $70,000 $/GLA [Above Ground] N/A $36.46 Sales/Financing N/A Cash Concessions N/A None noted Date of Sale Appraisal Date 10/15/12 12/21/2012 Location SE Kalispell SE Kalispell Leasehold/Fee Simple Fee Simple Fee Simple Site 0.79-ac 0.24-acre View Residential / Woods Residential Design & Appeal Ranch 2-Story Quality of Construction Average for age Average Age [Effective Age] 1930 [Eff 60 yrs] 1898 [Eff 70] $6,000 Condition Average for age Inferior / 15% $10,500 Room Count 5/2/1 8/4/2 Gross Living Area 1,254 1,920 ($26,640) Basement & Finish None None Rooms Below Grade Crawl Space None Functional Utility Fair: Ceiling Ht, Layout Fair / Age / Condition Heating / Cooling GFA / None GFA / None Garage/Carport 2-Car detached None $15,000 Porch / Patio, Deck Deck, Patio Small Deck Fireplace/etc. 1-FP None Other Improvements Fence, Shop Old Shed $5,000 Net Adjustments[total] $9,860 Value Indication to Subject $79,860 ~ Frazier Appraisal Services, Inc. ~ 13

14 COMPARABLE SALE #2 238 Caroline Drive, Kalispell, MT Sale #2 listed via MLS# for $169,000 and was subsequently reduced to $134,000 prior to selling as a reported short sale after 699 days on market. This residence was constructed in 2006 and is included as a superior property in direct competition with the subject. Description Adjustment[+/-] ITEM SUBJECT COMP #2 Address 1519 Woodland Ave 238 Caroline Drive Kalispell, MT Kalispell, MT Sale Price N/A $130,000 $/GLA [Above Ground] N/A $92.33 Sales/Financing N/A Cash Concessions N/A None noted Date of Sale Appraisal Date 10/15/12 1/17/2013 Location SE Kalispell SE Kalispell Leasehold/Fee Simple Fee Simple Fee Simple Site 0.79-ac 0.6-ac View Residential / Woods Residential Design & Appeal Ranch Ranch Quality of Construction Average for age Average + Age [Effective Age] 1930 [Eff 60 yrs] 2006 [Eff 5] ($30,000) Condition Average for age Average + Room Count 5/2/1 6/3/1 Gross Living Area 1,254 1,408 ($6,160) Basement & Finish None None Rooms Below Grade Crawl Space Crawl Space Functional Utility Fair: Ceiling Ht, Layout Average ($13,000) Heating / Cooling GFA / None GFA/ None Garage/Carport 2-Car detached 2-Car+ detached ($2,500) Porch / Patio, Deck Deck, Patio Deck Fireplace/etc. 1-FP None Other Improvements Fence, Shop None $5,000 Net Adjustments[total] ($46,660) Value Indication to Subject $83,340 ~ Frazier Appraisal Services, Inc. ~ 14

15 COMPARABLE SALE #3 577 Maple Drive, Kalispell, MT Sale #3 is a recent sale of an older residence situated on a larger than typical site. The property listed as an REO via MLS# at $107,900 and sold after only 77 days on market. This sale is another property that appears to be within the subject s market appeal. Description Adjustment[+/-] ITEM SUBJECT COMP #3 Address 1519 Woodland Ave 577 Maple Drive Kalispell, MT Kalispell, MT Sale Price N/A $103,750 $/GLA [Above Ground] N/A $98.06 Sales/Financing N/A REO / Conventional $20,750 Concessions N/A Closing Costs [Typical] Date of Sale Appraisal Date 10/15/12 4/15/2013 Location SE Kalispell SE Kalispell Leasehold/Fee Simple Fee Simple Fee Simple Site 0.79-ac 0.7-ac ($10,000) View Residential / Woods Residential / Woods Design & Appeal Ranch Ranch Quality of Construction Average for age Average Age [Effective Age] 1930 [Eff 60 yrs] 1968 [Eff 30] ($23,000) Condition Average for age Average Room Count 5/2/1 5/2/1 Gross Living Area 1,254 1,058 $7,840 Basement & Finish None None Rooms Below Grade Crawl Space Crawl Space Functional Utility Fair: Ceiling Ht, Layout Average ($10,375) Heating / Cooling GFA / None GFA / None Garage/Carport 2-Car detached 2-Car detached Porch / Patio, Deck Deck, Patio Deck, Patio Fireplace/etc. 1-FP None Other Improvements Fence, Shop Fence $5,000 Net Adjustments[total] ($9,785) Value Indication to Subject $93,965 ~ Frazier Appraisal Services, Inc. ~ 15

16 COMPARABLE LISTING #4 Active listing #4 is included as a comparable property of an older residence with some features similar to the subject in market appeal. This is another REO that has some of the functional issues like the subject. For example, the upper level rooms have limited ceiling height. The property is listed via MLS# and has been on the market for 250 days. The residence has a partially finished basement. Description Adjustment[+/-] ITEM SUBJECT COMP #4 Address 1519 Woodland Ave 143 S. Cedar Drive Kalispell, MT Kalispell, MT Sale Price N/A $129,900 $/GLA [Above Ground] N/A $ Sales/Financing N/A Active Listing/REO See Comment Concessions N/A Active Listing Date of Sale Appraisal Date 10/15/12 Active Listing See Comment Location SE Kalispell SE Kalispell Leasehold/Fee Simple Fee Simple Fee Simple Site 0.79-ac 0.28-ac [see comment] View Residential / Woods Residential, Woods Design & Appeal Ranch 1.5-Story Quality of Construction Average for age Average Age [Effective Age] 1930 [Eff 60 yrs] 1940 [Eff 30] ($29,000) Condition Average for age Average Room Count 5/2/1 7/3/1 Gross Living Area 1,254 1,056 $7,920 Basement & Finish None 760' 70% ($15,200) Rooms Below Grade Crawl Space 4/0/0 Functional Utility Fair: Ceiling Ht, Layout Average (-12,990) Heating / Cooling GFA / None GFA / None Garage/Carport 2-Car detached Average Porch / Patio, Deck Deck, Patio 1-Car Detached $10,000 Fireplace/etc. 1-FP Deck, Cov Porch Other Improvements Fence, Shop Fence $5,000 Net Adjustments[total] (-34,270) Value Indication to Subject $95,630 ~ Frazier Appraisal Services, Inc. ~ 16

17 COMMENTS ON ADJUSTMENTS All the comparable sales were transferred in fee simple title. Sale #3 is adjusted upwards by 20% of sale price to reflect the REO status of the sale based on broader sales analysis within the marketing area. Active Listing #4 is an REO but I did not adjust because the REO and active status of the property appears to balance out. That is to say I would expect a 20% discount off the list price [negative adjustment], which is the same as the 20% positive adjustment for the REO condition; thus no adjustment is made. Site: Extraction and sales analysis are utilized to make site valuation adjustments. Sale #3 has a similar site size but a negative adjustment as the entire site is level and functional, thus superior to the subject. No other site adjustments appear to be appropriate. Gross Living Area [above grade]: The GLA adjustment is applied at $40/sf to the difference in above grade building area between the comparable sale and the subject. The dollar amount [$40/sf] is the approximate average of the extracted unit price to the above grade gross living area of the comparables. Basements [below grade building area]: There are two primary factors in basement areas; the gross area and the amount of finished space [partitions, interior finish, fire access and overall functional utility of the space]. The adjustment reflects the difference in the contributory value of this building area to the subject. The adjustment ranges are approximately $20/sf. Effective Age of the Improvements: Extraction methodology is utilized to estimate the effective age differences between the comparable sales and the subject applied at a rate of 1% per year between the effective age estimates times the extracted contributory value of the improvements. Effective age or economic age reflects the effects of depreciation on improvements, which are typically, reduced due to high-quality, maintenance, and in Sale #3 a major renovation. Condition / Quality of Construction: Sale #1 appears to require a condition adjustment due to overall age and the condition of this older residence at the time of sale. Functional Utility: Functional utility is the ability of a property to function in the marketplace. The subject has [negative] functional issues due to low ceiling height, general room layout and to some extent the steep slope at the rear of the building, which could be considered a safety factor. Sale #1 is included as the most similar example of a building with functional issues. The other three comparables are considered superior in this regard and are adjusted downward by 10% of sale price. Other Adjustments: The other consideration in the analysis is to estimate the differences in the secondary improvements that the subject and comparable sales have, like the subject s fencing and shop area. CONCLUSION TO SALES COMPARISON ANALYSIS Overall market conditions are showing improvement and properties in direct competition with the subject at the low-end of the overall price range are dramatically reducing inventory. I attempted to bracket the subject property with properties that have both superior and inferior components of value in order to present a reasonable opinion of the market value of the subject property as of the effective date of the appraisal, May 10, When the three selected comparable sales and listing are adjusted to the subject, the range in market value indications to the subject property is from $80,860 [Sale #1] to $95,630 [Listing #4]. In my analysis, I found that while the site is larger than typical, most of the excess land is open space without significant impact to the overall value. Secondly, the subject s low ceiling height may restrict the marketability of the improvements. The subject competes with relatively typical residences of varying age and quality, noting locations differ from the subject. There are currently no listings or sales in the immediate neighborhood. Therefore, when these factors are considered, my final market value conclusion for the subject real estate is reconciled at $90,000 as of the effective date with consideration of the enclosed Assumptions and Limiting Conditions, weighting all four properties in the analysis. ~ Frazier Appraisal Services, Inc. ~ 17

18 COMPARABLE SALES LOCATION MAP ~ Frazier Appraisal Services, Inc. ~ 18

19 Flood Map 30029C1810 Flood Map 30029C2280G ~ Frazier Appraisal Services, Inc. ~ 19

20 Subject Site Illustration of Flood Area in blue, City Limits in pink SUBJECT According to Tom Jenz, Kalispell City Planner, there are Kalispell Water and Sewer services along Woodland Avenue that are available to the parcels, including the subject parcels, upon annexation into the City. That said, the subject residence at 1519 Woodland Avenue, highlighted in yellow above, is not within the City and utilizes private water well and septic system for domestic water and sewage. The shaded areas in pink above reflect the Kalispell City Limits. The shaded areas in blue reflect those sites within a 100-year flood zone. The residence is constructed above and out of the flood zone area. ~ Frazier Appraisal Services, Inc. ~ 20

21 STATEMENT OF LIMITING CONDITIONS The appraiser's certification that appears in the appraisal report is subject to the following conditions: 1. The appraiser will not be responsible for matters of a legal nature that affect either the property being appraised or the title to it. The appraiser assumes that the title is good and marketable and, therefore, will not render any opinions about the title. The property is appraised on the basis of it being under responsible ownership. 2. The appraiser has provided a plat map in the appraisal report to show approximate dimensions of the site and is included only to assist the reader of the report in visualizing the property and understanding the appraiser's determination of its size. 3. The appraiser has provided a sketch in the appraisal report to show approximate dimensions of the proposed improvements and the sketch is included only to assist the reader of the report in visualizing the property and understanding the appraiser's determination of its size. 4. The appraiser has examined the available flood maps that are provided by the Federal Emergency Management Agency (or other data sources) and has noted in the appraisal report whether the subject site is located in an identified Special Flood Hazard Area. Because the appraiser is not a surveyor, he or she makes no guarantees, express or implied, regarding this determination. 5. The appraiser will not give testimony or appear in court because he or she made an appraisal of the property in question, unless specific arrangements to do so have been made beforehand. 6. The appraiser has estimated the value of the land at its highest and best use and the improvements at their contributory value. These separate valuations of the land and improvements must not be used in conjunction with any other appraisal and are invalid if they are so used. 7. The appraiser has noted in the appraisal report any adverse conditions (such as, needed repairs, depreciation, the presence of hazard wastes, toxic substances, etc.) observed during the inspection of the subject property or that he or she became aware of during the normal research involved in performing the appraisal. Unless otherwise stated in the appraisal report, the appraiser has no knowledge of any hidden or unapparent conditions of the property or adverse environmental conditions (including the presence of hazardous wastes, toxic substances, etc.) that would make the property more or less valuable, and has assumed that there are no such conditions and makes no guarantees or warranties, express or implied, regarding the condition of the property. The appraiser will not be responsible for any such conditions that do exist or for any engineering or testing that might be required to discover whether such conditions exist. Because the appraiser is not an expert in the field of environmental hazards, the appraisal report must not be considered as an environmental assessment of the property. 8. The appraiser obtained the information, estimates, and opinions that were expressed in the appraisal report from sources that he or she considers to be reliable and believes them to be true and correct. The appraiser does not assume responsibility for the accuracy of such items that were furnished by other parties. 9. The appraiser will not disclose the contents of the appraisal report except as provided for in the Uniform Standards of Professional Appraisal Practice. 10. The appraiser has based his or her appraisal report and valuation conclusion on the subject property As-Is as of the effective date of appraisal. 11. The Intended User of this appraisal report is Mr. Hugh Jesse, representing the University of Montana. The intended use is to estimate market value for the property that is the subject of this appraisal, subject to the stated scope of work. No additional intended users are identified or permitted by the appraiser. The appraiser's written consent and approval must also be obtained before the appraisal can be conveyed by anyone to the public through advertising, public relations, news, sales, or other media. ~ Frazier Appraisal Services, Inc. ~ 21

22 PRIVACY NOTICE Pursuant to the Gramm-Leach-Bliley Act of 1999, effective July 1, 2001, Appraisers, along with all providers of personal financial services are now required by federal law to inform their clients of the policies of the firm with regard to the privacy of client nonpublic personal information. As professionals, we understand that your privacy is very important to you and are pleased to provide you with this information. Types of Nonpublic Personal Information We Collect In the course of performing appraisals, we may collect what is known as nonpublic personal information about you. This information is used to facilitate the services that we provide to you and may include the information provided to us by you directly or received by us from others with your authorization. Parties to Whom We Disclose Information We do not disclose any nonpublic personal information obtained in the course of our engagement with our clients to nonaffiliated third parties except as necessary or as required by law. By way of example, a necessary disclosure would be to our employees, and in certain situations, to unrelated third party consultants who need to know that information to assist us in providing appraisal services to you. All of our employees and any third party consultants we employ are informed that any information they see as part of an appraisal assignment is to be maintained in strict confidence within the firm. A disclosure required by law would be a disclosure by us that is ordered by a court of competent jurisdiction with regard to a legal action to which you are a party. Confidentiality and Security We will retain records relating to professional services that we have provided to you for a reasonable time so that we are better able to assist you with your needs. In order to protect your nonpublic personal information from unauthorized access by third parties, we maintain physical, electronic and procedural safeguards that comply with our professional standards to insure the security and integrity of your information. Please feel free to call us at any time if you have any questions about the confidentiality of the information that you provide to us. ~ Frazier Appraisal Services, Inc. ~ 22