by Melvin Ngayan, Director of Appraisal Services East
When it comes to appraising unique properties for insurance replacement cost —like zoos, historical buildings, arenas, monuments, statues, and one-of-a-kind architectural marvels— the process can be intricate and demanding. As a risk manager for the insured organization, you become a guardian of these historically-, functionally- or architecturally-important structures. This makes it critical to secure thorough insurance coverage for these properties, in case an unfortunate loss occurs.
If you’re seeking one of these specialized appraisals, you have a lot to gain by understanding the appraisal process and the steps your valuation firm should take for the greatest success. Today, we’ll talk about these best practices for both appraisers and their customers, so you have the guidance you need to feel uniquely confident in your completed appraisal — no matter what type of property you insure.
3 Best Practices to Expect from your Appraising Firm
So, you’re selecting an appraisal firm to value your unique property for insurance replacement costs. Here are a few best practices that a thorough, knowledgeable appraisal partner should demonstrate:
1. Expertise in unique structures like yours is key
First and foremost, your appraisal project deserves real expertise. Your chosen appraisal firm should have a proven track record of evaluating unique structures like the ones in your property schedule, with specialists who understand the structures’ specific challenges and nuances. This is important because different unique structures involve different appraisal strategies to determine an accurate value. For instance, a zoo’s appraisal involves not just the physical structures but also specialized habitats. In contrast, a historical building requires knowledge of period-specific construction techniques and materials. Applying the same strategy to both these properties would omit important information the firm would need to determine the Total Insurable Value (TIV). So, before you engage an appraisal firm, feel free to request a list of projects they’ve completed that are similar to yours and discuss how they handled them. Expertise is key!
2. A comprehensive methodology should guide the process
A reputable appraisal firm will employ a thorough and systematic approach to determine the replacement cost of your unique property. This can involve a variety of techniques including:
A Detailed Site Inspection
Evaluating the physical condition and unique features of a structure while on-site helps appraisers gather information no desktop appraisal could replicate. As we examine the unusual features of a facility, decades of appraisal knowledge can lead us to dig further, asking the questions that lead to a more accurate value. At Centurisk, we often work closely with our customers on these projects because the structure is so unique, there’s nothing quite like it. One example of this is when we performed a valuation where we had to take a boat to the middle of a lake to appraise the water intake structure for a water treatment plant — definitely not your standard property! In cases like this, getting to interact with key customer contacts and draw on their institutional knowledge of the structure and its provenance can be vital to capturing important details about repair and replacement.
Time-Traveling through Historical Analysis
For historical buildings, it’s important to understand the original construction methods and materials used. In many cases, we will go to the local historical society to learn more about the building and its construction.
In the case of some historic statues for the City of Richmond, Virginia, we contacted the statues’ original foundry in Italy, chatting with the great-grandson of the works’ creator, who ran the family business over a century later. He kindly shared information with us about their creative process during that time, details which became invaluable for understanding what the reproduction costs would be. Such detective work leads to greater accuracy determining the value of techniques, time, materials, and more.
Bringing the Receipts
For newer unique structures, we at Centurisk sometimes go back to the original invoices for our data gathering. This documentation reveals the original contractors, materials used, labor costs and more. Invoices were particularly helpful when we appraised the International African American Museum in Charleston, South Carolina, a specialized building constructed on a pier over the water. That not only gave us information on the general contractor but the going rates for labor and materials, too.
Unrolling the Blueprints
Here at Centurisk, there are times we’ll track down the original architecture firm for the property and examine the blueprints, in our quest to understand a property’s original intention and document it. With dams, for example, blueprints are particularly helpful. They provide the structure’s actual dimensions, which you can’t derive from an onsite appraisal, because so much of the structure is either below water or underground. This helps us develop a more accurate replacement cost, taking into account the whole structure and not just the 15-20% above ground that we can see.
Market Analysis
Your appraisal firm should examine the costs for materials and labor on construction projects that are similar to your unique structure and then scale them for what’s applicable for today’s market. For example, in the case of that water intake structure we talked about earlier, it can help to break that value down to its elements, such as unique design and architecture, cost to deliver materials, staging area for construction, any specialized equipment needed for construction, and possible higher labor cost for this type of work.
3. Transparent communication keeps things on the right track
Throughout the appraisal process, your chosen appraisal firm should provide clear and open communication. You should receive regular progress updates and explain their findings to you in understandable terms. They should be available to answer any questions you might have during the project. Also, they should be willing to share both their methodology and the way they calculate your valuations. This helps build trust and ensures that you’re well-informed and on the same page.
5 Best Practices for You, the Insured Customer
As guardian of your organization’s insured unique properties, there are a few things you can do to make your appraisal process smoother and more accurate, too. Things like:
1. Prepare comprehensive documentation
Help facilitate the appraisal process by preparing and providing any available documentation about the structure to your valuation firm. This includes:
Original Construction Plans
Save your appraisers time by pulling together any blueprints, architectural drawings, renovation plans, and contractor’s construction invoices you might have on hand.
Historical Records
For historical buildings, be sure to share any documents that provides context about the building’s origin and changes over time.
Maintenance Records
Any information on repairs, renovations, and regular maintenance work done over the years can be very helpful to your appraisal team to determine construction or equipment dates, materials, past costs, etc.
Special Features Inventory
Compile a list of unique features or components of your property that may not be immediately apparent during an inspection. This helps ensure nothing unusual but important gets overlooked.
2. Engage with your appraisal experts early
Engaging with your appraising firm early in the process allows for a smoother workflow. It allows your valuation specialists to plan adequately for their site visits, understand the structure’s complexities, and gather necessary data without time constraints. Unique properties can be complex, so this helps everyone make the most of the project time.
3. Provide safe and easy access to the property
Your appraising team will need unrestricted access to the property. This can include convenient access for a detailed inspection, but also guided tours by knowledgeable staff, who can explain unique aspects of the structure. (Your internal insight can be invaluable!) Don’t forget to make sure the site is safe for your appraisers to conduct their work — especially in specialized environments like zoos.
4. Collaborate on gathering data
Clients should work collaboratively with the appraising firm to gather all relevant data. This collaboration can involve interviews with key personnel like architects, local historical society, historians, maintenance staff, or anyone else with valuable insights.
5. Review the final appraisal report
Once the appraisal is complete, make sure your key internal stakeholders review the final report. By understanding the details, assumptions, and conclusions of the report you not only help ensure accuracy. You have the power to make more informed decisions about the insurance coverage you purchase and the risk management tactics you have in place.
Uniquely Secure for the Future
Appraising unique structures for insurance replacement cost requires specialized expertise, thorough methodology, and transparent communication throughout the process. By applying the best practices discussed today, you and your appraisal partner unite for a more accurate appraisal, more secure assets, more thorough insurance coverage, and better peace of mind.
About the Author
Mel Ngayan, Director of Appraisal Services East, resides in downtown Philadelphia, PA, with his wife Carolyn. He has been with Centurisk for 27 years now, and in that time has successfully appraised a wide range of unique structures for risk pools and states. In his spare time, he enjoys a great cup of java, trying out new restaurants with his wife Carolyn, and quality time with friends on the golf course.