The Chapter is privileged to have as our February guest speaker Gary C. Zimmerman, a Senior Economist with the Federal Reserve Bank of San Francisco who will present the Regional Economic Outlook. Mr. Zimmerman's presentation will address various markets, and should be of interest to all appraisal disciplines, particularly now as the economy reels from the market collapse and proposed multi-billion dollar bail-outs. We had a sold-out crowd at Mr. Zimmerman’s presentation last year, and we only have room to seat 50, so please RSPV right away!

Gary Zimmerman joined the Federal Reserve Bank of San Francisco in 1973. From late-1996 to mid-1999 he served as the FDIC’s San Francisco regional economist.

SF Federal Reserve Bank

As an economist, his analyses have focused on regional economic and banking topics. These include Japanese banking activities in California; the high technology slow down in the western states; the effects of the Asian Crises on the western economy; and the cyclical behavior of the hi-tech, aerospace, and construction industries.

Gary Zimmerman is among the top 5% authors according to these criteria:

· Number of Distinct Works

· Number of Distinct Works, Weighted by Number of Authors

Many of his research papers are published in the Bank’s Economic Letter and Economic Review, and are available on the Bank’s website - www.frbsf.org.

Mr. Zimmerman earned his B.A. and M.A. in Economics from California State University, Hayward. Recently, he taught courses on the U.S. economy and financial system at the Economics University of Vienna in Austria. Prior to that, he lectured on banking and financial institutions at the Graduate School of Business at California State University, Hayward.

Thursday, February 12

2008 6:30 pm (mixer)
7:00 (dinner)
Board Meeting 5:30 all members are welcome to attend

Place: L’Olivier Restaurant, 465 Davis Court, San Francisco in the main dinning room. (415-981-7824) The restaurant is easily accessible via BART (Embarcadero Station) and $5 valet parking is available.

NOTE: The dinner is being partly subsidized by the chapter, so the cost is a low $37. RSVP please by February 4 to Secretary Gil Mitchell at gil.e.mitchell@gmail.com and let him know you are coming. Do not reply to the email address—Gil is the one who needs to know!

March 12^th Meeting: Program to be announced

Filoli Visit Scheduled – Mark Your Calendar!

The Personal Property Filoli program is scheduled for June 4, 2009. Put it on your calendars! Volunteers to assist with the program are welcome, please contact Emily Newell elnewellappraise@pacbell.net.

Designed by Willis Polk and noted for its elegant interiors, the House is an interpretive museum exhibit for an extensive collection of 17th and 18th century English antiques. Special rooms of interest include the Butler's Pantry and Kitchen with the walk-in safe, the wood paneled library and the 1925 Ernest Peixotto paintings in the Ballroom. http://www.filoli.org/explore-filoli/the-house/

President’s Message

Presidents Message: January, 2009

Robin J. Erdmann, ASA MRICS MAI

Welcome to the New Year! 2008 was a doozy, wasn’t it—politically, economically, psychologically! 2009 is new beginnings, starting with a new administration in Washington that will certainly be interesting to follow. It’s also the second half of my year as your chapter president. While the 2008 portion was a year of organizing, the 2009 portion of my remaining tenure is intended to be packed with more substance and action-oriented programming.

The crowning event of 2008 was Candidates Night in June. A sold out event. It was Will Schnitzer ASA’s final event during his tenure as chapter president, and a fitting tribute to his passage to ex-officio. Of course, credit goes to Gil Mitchell ASA, our current Secretary, for organizing the event. We had 51 members and candidates show up. The room was literally packed to overflowing.

During 2008, I had the privilege of attending the National ASA Conference in Minneapolis, and learned some of the inner workings of this organization, as well as meeting some really terrific people.

The chapter held its first ever board retreat at Karen Mann ASA’s, house, in Discovery Bay. Karen is a Past President from what was then the San Jose Chapter (now NorCal branch chapter). We began to focus on strategic planning for the long term success of this chapter.

Many of us traveled down to Monterey to staff the ASA booth at the California Bar Association’s annual meeting. James McCann ASA, and Ray Mattison, ASA, have continuously over the years been key to this chapter’s representation. My apologies to all those whose names I can’t remember who also contributed this past year.

Of course, Ray Mattison ASA, did yeoman’s work putting together a USPAP seminar earlier in the year, with the help of Dave Lewis ASA, and others, such as Paul Rowan ASA.

One of the very special events that I was fortunate to participate in was traveling to Napa Valley to assist Nancy Stacy ASA, and Roger Rapport ASA, make presentations to the Napa Valley Cruisers, an auto club with some very special collectible cars.

A key outcome of our BOD retreat was scheduling dinner speakers. We have had three speakers that covered the various disciplines. More are scheduled for the coming year, so stay tuned!

Nancy Stacy ASA has really been the backbone of this chapter. Not only has she undertaken the thankless task of putting out a newsletter every month, sending upcoming meeting notices, and keeping me focused, but she also presented a very successful Gems & Jewelry seminar which netted additional resources for our chapter.

Robert Lentz, III, ASA has created a PayPal account for us so that signing up for dinners and seminars can be done on-line, without having to write a check. Please make use of this mechanism as much as possible.

Chuck Warren, ASA, has also done a great job of keeping the chapter informed about lobbying issues in Sacramento on behalf of ASA.

With the Memorandum of Understanding (MOU) signed both in Minneapolis and San Antonio between ASA, the American Society of Farm Managers and Rural Appraisers (ASFMRA), and the Royal Institute of Chartered Surveyors (RICS), efforts to create stronger linkages are beginning to see signs of success. Our chapter has begun to market CA ASFRMA chapter events (and if you didn’t see it, they have a semi-annual meeting coming up in April in Sacramento that includes a water tour of the Delta, a not to be missed event. I was lucky to ride along on the 2-day water tour in Kern County last year to learn about how California manages our water resources. Impressive and amazing!) And CA ASFMRA is doing the same for us. I have also had contact from the local RICS chapter about moving in the same direction.

We have more programming coming up in the first half of this year. Our featured February dinner speaker is Gary Zimmerman, who will provide a forecast of the economy for 2009. We were fortunate to have Gary last year, too. This is not an event to be missed, no matter what your discipline. Seriously, folks, get your reservations in early for this event. It WILL be sold out!

Thank you to Doug Baxter, VP. He chaired the January board meeting in my absence, and also organized the Silver Workshop to much success according to my spies. It was another sold out event, which means we are going to have to offer it again sooner than later.

February also is the month in which we will be offering another one-day seminar, this time on Report Writing. Our very own Bob Podwalny FASA, who is known more for his teaching in Russia and other parts of the world, has been coaxed into staying home just long enough to offer this seminar.

To top it off, we also have Dave Lewis ASA, one of the premier specialists in easements, offering a seminar on Zoning & Site Analysis in May. Dave works for Sonoma County. This will be a sell-out seminar with over 100 expected to attend. Stay tuned for more details. The location will probably be in Petaluma.

Emily Newell AM, and Doug Baxter have been working tirelessly over the past year to secure a date for a seminar on personal property at Filoli Gardens. Look for June 4 as the most likely date for this seminar. Details to come.

I’ve tried to touch on just a few of the many things this chapter has accomplished in the past 6-12 months, and I have tried to highlight things to come. I’ve probably missed a few. Also, I haven’t talked about the new members that have come into the chapter, or our newly accredited members.

However, I do want to tell you how very honored I am to have served you as president for the past six months, and the six months yet to come. It’s very rewarding, and to see this chapter moving forward on the goals and objectives we outlined at our August retreat is very satisfying. This is not to say that we don’t have a lot of work to do. But, we have created a momentum that continues to build on itself, thanks to the motivation and initiative of our volunteer members. However, we still need more help.

Our chapter is only as good as the volunteers serving it. No one person can do it all. We still cannot afford a part-time administrator, which means more work is put on the backs of our volunteers. Nevertheless, the accomplishments this chapter has made in the past six months is amazing, and my hat is off to all of our members who have actively participated during this past six months, and the 2009 year to come.

One final note. We are in the process of searching for a new BV Discipline Director. Anyone interested should contact Robert Lentz, III, ASA.

Thank You! May this be a very productive, profitable, and successful year for all of us.

Upcoming Events

Appraisal Report Writing Seminar

WHEN: Thursday, February 19, 2009 8:00 am – 4:00 pm

Why not extend your stay a little and enjoy all that is San Francisco for a couple of days?

Instructor: Robert B. Podwalny, FASA

WHERE: at L’Olivier Restaurant, 465 Davis Court, San Francisco, CA in the main dinning room. (415-981-7824) The restaurant is easily accessible from the SFO airport via BART (Embarcadero Station) and $5 valet parking is available. $225 non-members, $195 members (includes lunch)

Seminar Description

Appropriate for Personal Property, Business Valuation and Machinery and Technical Specialties disciplines.

Bullet-proof your appraisal report! This Report Preparation Seminar is designed to assist in preparation of appraisal reports to meet the requirements of the Uniform Standards of Professional Appraisal Practice, the requirements of the American Society of Appraisers and those specifically required by the Board of Examiners.

This seminar will also cover some of the most common problems with reports and some of the probable causes of their rejection by the Board of Examiners. This is an interactive seminar where participants are encouraged to bring up issues for discussion. There will be a sample report that will be analyzed by the group. A typical report format will be presented and discussed. Finally, participants will receive a suggested self-audit that can be used when reviewing your reports.

Topics

Discussion of Report Objectives

Discussion of USPAP Requirements

Discussion of ASA Requirements

Discussion of Report Reviewers Requirements

Discussion of Typical Problems with Reports

Guide for Report Preparation

Report Self Audit

OREA credit approval pending

Register with Jack Young, ASA.NorCal@gmail.com

Phone: Jack (530) 219-7900 Gil (707) 342-4223

ABOUT THE INSTRUCTOR

Bob Podwalny, FASA has been an appraiser for over 30 years and has been inducted into College of Fellows with the American Society of Appraisers. He is the past International Education Committee Chairman, Emeritus Member and Past Chairman of the Machinery and Technical Specialties Committee, Past Regional Governor for Northern California, Past President of the San Francisco Bay Area Chapter, contributing author to two “Valuation of Machinery and Equipment” textbooks, course developer and senior instructor of “Machinery and Equipment Principles of Valuation” Courses taught through the American Society of Appraisers.

Bob is Past Vice Chairman of the Board of Examiners for Machinery and Equipment for the American Society of Appraisers for 14 years. He is a court designated expert witness by the Oakland Superior Court and the Administrative Board in Maryland. He has taught valuation courses throughout the United States as well as in Mexico, Romania, Slovenia, Canada, Russia, Kazakhstan and China. Bob developed and taught courses for the World Bank Economic Development Program as well as for the American Society of Appraisers. He is also a frequent author of articles on valuation speaker and at various conferences and meetings.

Fair Value Accounting ASFMRA Seminar in April

California Chapter, ASFMRA to present NEW Fair Value Accounting and the Appraisal Profession Seminar…

In conjunction with its annual Spring Ag Outlook Conference, the California Chapter, ASFMRA will present the NEW Fair Value Accounting and the Appraisal Profession Seminar in Sacramento in April. The full day course has been developed as a collaborative effort between ASFMRA, ASA and RICS and will present important and timely information on the valuation for financial reporting.

Description: Over the next five years, U.S. public corporations will move to “Fair Value” accounting under the International Financial Reporting Standards (IFRS). Under the IFRS, these companies will be required to report assets and liabilities at the fair market value as of the date of the report, or “marked to market” value. The objective of Fair Value accounting is to provide investors with greater transparency as to the value and the management of assets and liabilities.

Fair Value accounting promises a significant opportunity for the valuation profession…but that opportunity will come with a series of challenges. This seminar will provide the background on fair value accounting, and then will look at how appraisers might benefit from the shift to international standards for financial reports. At the same time, the seminar will also review the steps that appraisers will need to take in order to be in a position to provide valuation services for financial reporting.

The seminar will be instructed by Tony Correia, ARA and John Ross and will include examples of fair value accounting and the valuation issues that appraisers will have to deal with, including those that may be unique to agricultural properties.

Date: Thursday, April 23, 2009

Location: Hilton Arden West Hotel, Sacramento

To receive information on registration for the seminar, contact the California Chapter, ASFMRA office at 209.368.3672 or secretary@calasfmra.com. Registration will soon be available at www.calasfmra.com.

Suzie Roget

T 209.365.1657

F 209.368.3602

C 209.601.0830

Report from the Silver Seminar

The NorCal Chapter enjoyed a fascinating two hour presentation “Silver in the Modern Era: Georg Jensen to the Present Day” on January 8^th at The Silver Fund and Argentum-The Leopard’s Head. Together, these showrooms boast one of the largest collections of silver in the world and they are right in our own backyard!

The sold-out event brought members from various disciplines together in a workshop that featured three speakers and plentiful refreshments.

$100,000 Jensen Ice Bucket

Rachel Prater, the West Coast representative of The Silver Fund shared her knowledge of the market, maker’s marks and pricing of their vast inventory. Ruth Rhoten, a Bay Area master silversmith and conservator, described the labor intensive nature of Jensen hollowware and the tools and methods of manufacture.

One spectacular Jensen ice bucket, priced at over $100,000, was examined in great detail revealing a wonderful decorative finial screw on the underside of the lid that reflected early Jensen craftsmanship and creativity.

Finally, Perry Foster presented a few rare highlights from Argentum’s collection, including a sterling sandwich box with vermeil interior and a very scarce pair of London sterling tea caddies dated 1709.

Our gratitude to both of these fine firms. Members who missed the seminar but would like to see this spectacular collection can find them at 472 Jackson Street in San Francisco. . The Silver Fund’s hours are 10am - 6pm Monday – Sunday (except holidays); phone number is 415 391 4151, website http://www.thesilverfund.com/company/gumps.html. Argentum-The Leopard’s Head can be reached at 415 296-7757 and info@argentum-theleopard.com. Hours are Mon.-Fri. 9:30 AM-5:00 PM; Sat. 10:00 AM-4:00 PM PST.

2009 Calendar of Events

JAN 2009

8^th (Thurs) Chapter Meeting – “Georg Jensen Silver”

FEB 2009

12^th (Thur) Chapter Meeting - Gary Zimmerman: “2009 Economic Outlook”

19^th Appraisal Writing for All Appraisers–Bob Podwalny, ASA

MARCH 2009

12^th (Thur) Chapter Meeting – Topic TBA

APRIL 2009

9th (Thurs) Chapter Meeting – Gems & Jewelry topic

23^rd ASFMRA Fair Value Accounting seminar

MAY 2009

14th (Thur) Chapter Meeting – “Appraising Yachts”

19^th Dave Lewis’s, ASA, Zoning & Site Analysis seminar

JUNE 2009

11^th (Thur) Chapter Meeting – “Candidates’ Night”

4^th ASA Filoli Program Visit to Filoli (tentative)

JULY 2009

ASA Conference, Orlando FL

9-11^th ASA Executive Meetings

12-15^th Conference Ed Sessions

No Chapter Meeting

AUG 2009

14^th (Thur) No Chapter Meeting

TBA Leadership Retreat

SEPT 2009

10^th (Thur) Chapter Meeting

Legislative Corner

We have just experienced the Mother of All Mortgage Point Pyramid Schemes. The cast of characters is fairly well known. The major players have mostly been folded, merged or taken over. The exception is Congress, but let’s not goes there. Everybody thinks they voted for change, so maybe we'll get it.

Perhaps a mini-example of a mortgage point pyramid would be useful. Once upon a time I worked for a bank. I was transferred to a remote territory with the idea that my high productivity and proximity to the scene would help the gung-ho local branch manager do real estate loans. Makes sense.

It took a while to understand that the gung-ho branch manager had a bigger plan.

To begin with, there is only so much good business out there. There are two ways to get more business. One is to give cheaper prices and better service to the good customers. Another, and superficially attractive, technique is to go after the customers nobody else wants. The margins look good, high fees and interest rates, and there are always lots of marginal customers. In the particular case the deal was even sweeter. . .

The people who wrote the loans and handled the disbursements were exempt from overtime. So, the branch manager could pump up branch income with lots of loan fees, paying no additional rent, no additional wages, with maybe a couple bucks more heating and lighting expense.

Now, the manager did have a few problems. The first was that the branch had loans way in excess of its deposits and had to borrow the money from the larger bank. She was not at all happy that the transfer price was equal to the market rate, rather than the bank's cost. The higher rate pinched the margins. Another thing that irked was that the whole principal and interest due on defaults was charged against branch profits. That was a real reality check.

One of the ways out was not to recognize default events. This is one place where the appraiser was supposed to help out. Construction loans, of which there were many, are disbursed depending on stage of completion. The bank had a simple check-off form. Well, the first place I got in trouble was in not checking off work that wasn't there. Finally, head office came up with a compromise. I would sign the form and write such comments as necessary to describe the actual stage of completion.

If the branch wanted to disburse anyway, well, they had the authority.

But at least there was a paper trail.

The second bone of contention, of course, was value for said construction loans. After a while I kept an ongoing log. The parameters were: value for sold properties, value for new construction, and value for refinances. Naturally value is value and the comparison of values for each category of loan was pretty uniform depending on the property.

Unfortunately the loan requests for each category were not so uniform.

Purchases were pretty straightforward and normally no problem.

Refinances in that time and place were usually at a low loan to value ratio. Unsurprisingly construction loan requests averaged about 100% of value, thus requiring values well in excess of market.

Never been very good at complying with that sort of request! It finally got to the point that on one major loan my appraisal was returned without any of the carbon copies removed. A new out-of-area appraiser was assigned. Presumably his answer fit the need. The shopping center with no anchor, on a side street off a secondary state highway was built at the same time that another better located center with two anchors was built on the major state highway. The no-anchor project got to about 75% completion before going belly up.

I was transferred and shortly afterward included in the 90% downsizing of the department. The good news is that the branch manager was also let go. The branches were sold to a local start-up bank. One of the more ethical officers who had left the bank under a cloud took over one of the branches for the startup. Poetic justice.

What are the lessons here? One is that this sort of pyramid scheme needs ignorant, venal or frightened appraisers to generate the necessary paperwork. The last bubble probably took advantage of all three categories. The huge increase in the number of trainee licensees, and their wretched test-taking skills, though, suggests that ignorance may have been the dominant factor.

Other factors of note are that the ability to take all the loan fees as present profit is a problem. Properly pricing transfer funds is a check.

It didn't work last time because the transfer prices were more like T-bills than the credit card loans they more closely resembled. Fully charging defaults against profits is also a possible check.

Securitization probably went a long way to eliminating that risk for the originating lender.

Cheers,

Chuck

www.charlesbwarren.com

Fee Tips from S.E.A.K.

In the past few weeks we have received numerous requests from our clients regarding whether they should reduce their fees due to the ongoing recession.

We have researched this problem and the answer is empathetically no.

In response to these requests we have polled attorneys across the United States and found that there is no expectation of fee reductions from expert witnesses. While attorneys may try to control the engagement process a bit more, no attorneys are expecting expert witness fee reductions.

Here is a representative sampling of what trial attorneys have said in their own words in responding to our question, "What changes, if any, will you be making in 2009 in hiring expert witnesses?"

"No changes."
"No changes immediately come to mind. However, given the economy, I anticipate clients will want more detailed budgets for an expert's work, such that I may need to obtain detailed budgets from experts prior to their work in a matter."
"I'll be seeking a written estimate of all activities/projects that the expert or I believe will result in billing in excess of $2,000."
"Most critical analysis these days involves choosing the most qualified and knowledgeable expert, who has credibility with the governing body. Too often we see the retention of the same folks on each side which, in short, fails to fairly and effectively educate the parties and the courts."
"I'm not sure, frankly, but will say somewhat like the past, where I tried to hire the best academic and peer tested "resume" my client could reasonably afford, I am looking more and more to battle tested experts who are litigation savvy and who have actually been in trials before."
"I don't think I am making any changes in 2009 in hiring expert witnesses."
"No changes - However, I will continue to ensure that the expert I ultimately retain is deeply committed to the cause. An expert who gives a half-hearted but supportive position is as good as no expert at all. They usually cave on the stand."

If you have any questions or if we can be of any further assistance please feel free to contact either me or Jim Mangraviti (seakincjm@aol.com 978-276-1234).

Regards,

Steve Babitsky
President - SEAK, Inc.
Stevenbabitsky@seak.com
508-548-9443

NOTE FROM EDITOR: If you are interested in litigation appraisal, try to attend a SEAK seminar. They are top-notch attorneys and their expert witness seminars are invaluable. Several of Mangraviti/Babitsky are carried in the ASA Online Bookstore, and I highly recommend them as well. –NS

NorCal Officers

L to R: Bob Lentz, Treasurer, Gil Mitchell, Secretary; Robin Erdmann, Chapter President, Jim Brown, Region 5 Governor, Will Schnitzer, Immediate Past Chapter President, Doug Baxter, Chapter Vice-Chair

Chapter officers:

Chapter President Robin J. Erdmann, ASA (RP)

Chapter Vice President Douglas S. Baxter (PP)

Chapter Secretary Gil Mitchell, ASA (MTS)

Chapter Treasurer Robert P. Lentz III, ASA (BV)

Chapter Past Chair William C. Schnitzer, ASA (RP)

Discipline Directors and Associate Directors:

Business Valuation    Jim Schilt, ASA               /    Alan Karbousky, ASA
   Gems & Jewelry     Nancy Stacy, ASA          /              Maury Woulf
                             Master Gemologist Appraiser
                  MTS     Gil Mitchell, ASA             /                           tba
Personal Property     Roger Rapport, ASA         /                           tba
      Real Property     Will Schnitzer, ASA         /                           tba