Construction Error Significantly Devalues Commercial Property

Case Overview

This case involves a nail salon that was being built. Over multiple revisions of the building plan, it was indicated that the floor was to be completely flat and have no grade. In the last revision, there included plans for a 2% grade. The nail salon owner didn’t realize this change, as the other plans had consistently indicated that the floor would be flat. The floor was eventually built with a 2% grade making it overly sloped. This lead to things rolling on the floor of the salon causing product and liquid spills as well as water leaks from pedicure machines. An expert in commercial property appraisal was sought to opine on the diminution of value in the property due to the sloped floor.

Questions to the Real Estate Appraiser expert and their responses

How would you evaluate the diminution of value of the property?

In a case like this, there are be 3 values: the first being the unimpaired value as though the salon had a normal slope, the second being the impaired value assuming the salon has a defective floor with the grade and other construction issues described, and the third, the difference between the two, which is the diminution in value.

About the expert

This expert has over 34 years of experience in real estate appraisal. He has extensive experience in appraising service stations, shopping centers, industrial planned communities, residential subdivisions, multifamily housing, single family homes, nursing homes, congregate care centers, special purpose properties, and vacant land throughout the Southwestern United States. He also has expertise in business valuation. He is an MAI, SRA, and AI-GRS designated member of The Appraisal Institute, and is a certified general real estate appraiser in California, Hawaii, and Nevada. He currently serves as an independent appraiser for an appraisal service in California.