Dave Hohman, ASA, president of Dave Hohman Associates Inc., and his wife, Gail Hohman, vice president, share their first-hand account of the real estate appraisal business following a trio of hurricanes that struck Central Florida in Sept. 2004. Their office is based in Winter Haven, where Hurricanes Charlie, Frances and Jeanne crossed the state. During the timeframe that the article covers, Dave Hohman Associates was comprised of only Dave, Gail and their daughter, Erika Hohman.

IN THE SUMMER OF 2004, three hurricanes crossed Central Florida causing substantial damage to real property in the region. Hurricanes Charlie, Frances and Jeanne came on shore within a six week period beginning August 13. Charlie made landfall in Punta Gorda, on the Southwest Coast. He followed the US 17 corridor through the central part of Florida and exited the state around Daytona Beach. Frances and Jeanne followed similar paths. They choose to make landfall near Vero Beach on the East Coast, crossing the state just north of Lake Okeechobee and entering the Gulf of Mexico north of the Tampa Bay area. The eye of all three storms crossed Polk County, which is an inland county between Tampa and Orlando. The damage to residential and commercial property caused real estate transactions and refinancing activity to diminish. This caused reduced orders for financially related appraisal reports for the next three to four months. People were busy getting their homes and businesses repaired. Workers and building materials were in short supply. Power and telephone service were unavailable for several weeks. Homes were without telephone service for six weeks. Roof cover damage (shingles and tiles) was the most obvious type of property damage. It is beyond the scope of the appraisal to discover if structure damage had occurred to other parts of the roofing system or the remainder of the building. As a result, we include the following disclaimer in all reports:

Extraordinary Conditions

“On Aug. 13, 2004; Sept. 4, 2004; and Sept. 26, 2004, the State of Florida, including the Winter Haven area, was struck by Hurricanes Charlie, Frances, and Jeanne, respectively. The current inspection of the subject did not reveal damage to the improvements as a result of the storms. The appraiser is not a home inspector, roofing contractor or structural engineer and is not qualified to report on any hidden damage. If a more thorough inspection is required by the client, it is suggested that an applicable professional be hired.”

While these storms caused a decrease in some appraisal activity, they created business with other clients. In Spring 2005, the Polk County Engineering Division asked Dave Hohman Associates Inc. to appraise 19 single-family residences and a vacant lot that were under consideration for purchase. These properties had been flooded in the past and were again by the 2004 hurricanes. Polk County was working with the Federal Emergency Management Agency (FEMA) on a buyout program. We were asked to value the properties as of August 12, 2004, which was the day before Hurricane Charlie affected the area.

Most of these properties were only accessible by boat for three months after the storms. One property still has water inside the house and over most of the site two and a half years after the hurricanes of 2004. For that property, it was not possible to make an interior inspection. All had mildew and mold infestation at a variety of levels. It was necessary to wear particulate respirator masks while conducting the interior inspections. We assumed that all the properties were in average condition as of the date of value. Sales that occurred prior to the Aug. 12, 2004, date of value were used in order to avoid the effect of the storms on the real estate market. Using our appraisals, the county has purchased all of the properties. In January 2007, the county announced that it had demolished the last residence. The land will be used as a passive park. The terms of FEMA’s participation in the buyout included that no structures may be constructed on the property.

Another portion of the real estate market that came to life in the spring of 2005 was the investor/ speculator segment. We found opportunity in providing appraisals to investors who were interested in purchasing damaged properties and repairing them for resale. They needed to know what the property might sell for after the repairs were completed. In some cases, they needed a construction contractor’s estimate for the cost to cure in order to determine an amount to offer.

By late spring and early summer of 2005, the housing boom had taken over. Investors/speculators and Florida newcomers had forgotten about the 2004 hurricanes. Approximately 1,000 people a day were moving to Florida and the appraisal business was flying high once again. We were attempting to hire additional experienced appraisers. Experienced appraisers had more work than they could handle, so they were not interested in changing offices and we didn’t have time to train someone just out of licensing school. So we rode the wave, increased our fees and completed assignments as quickly as possible.

By the end of 2005, another hurricane season came and went without a major storm in Polk County. Because of increased demand from investors/speculators, we saw housing costs increase an average of 33 percent for single family residential properties. New subdivisions were popping up all over Polk County and neighboring counties to the north and west. Investors/speculators were purchasing new homes and selling them within very short periods of time.

However, late in the year those investors/speculators were beginning to exit the market. Those market participants that entered the market late in the year paid a premium for their homes but were not able to turn the properties. As a result, we are now experiencing an oversupply of homes on the market for inflated prices. Recent indications are that the current market conditions will continue until approximately 2009. That is, unless we once again have a summer like 2004!

An additional niche that has resulted from the hurricanes is the increase in appraisals for insurance policy renewals. Many of the local condominium associations and homeowner associations are being required to obtain an insurable value appraisal before their real property policy will be renewed. As a result, we are providing insurable estimates to insurance agents.

It is never pleasant to go through a summer like we experienced in 2004 in Polk County, Fla. We had our ups and we had our downs in the real estate appraisal business. We could have retired from the business and moved on to something less vulnerable. It was our decision to take the knowledge that we have of real estate appraisal and make it fit the new challenges that have been put before us. If you never take that step forward, you are in reality, walking backwards.

Submitted by Dave Hohman, ASA, State Certified General Real Estate Appraiser, Lic. No. RZ460, President Dave Hohman Associates Inc., Winter Haven, Fla.; and Gail Hohman, GRI, State Certified General Real Estate Appraiser, Lic.No. RZ2070, Vice President Dave Hohman Associates Inc., Winter Haven, Fla.