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IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE COUNTY OF SANTA CLARA
UNLIMITED JURISDICTION
RALPH SIMPSON,
Plaintiff,
vs. Case No. 1-05-CV-053398
LOU RAE KAGEL, LYNN O'BRIEN,
JAMES O'BRIEN, STONEHENGE
PROPERTIES, INC., VALLEY OF
CALIFORNIA, INC., dba COLDWELL
BANKER, and DOES ONE through
TWENTY, inclusive,
Defendants.
_______________________________/
AND RELATED CROSS-ACTIONS
_______________________________/
DEPOSITION OF BRIAN T. GREY
Tuesday, January 9, 2007
951 Mariner's Island Boulevard, Suite 630
San Mateo, California
MADELEINE M. FREDA, INC.
Certified Shorthand Reporters
Reported by: 2000 Broadway
Joanne Haag P.O. Box 3119
CSR No. 4716 Redwood City, CA 94064
Our File No. (650) 365-6152
MADELEINE M. FREDA, INC. 1
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1 A P P E A R A N C E S
2 For the Plaintiff: GREENE, CHAUVEL, DESCALSO &
MINOLETTI
3 Attorneys at Law
951 Mariner's Island Boulevard
4 Suite 630
San Mateo, CA 94404
5 BY: PAUL G. MINOLETTI, ESQ.
6 For the Defendant GAGEN, McCOY, McMAHON & ARMSTRONG
Lou Rae Kagel: Attorneys at Law
7 279 Front Street
Danville, CA 94526
8 BY: CHARLES A. KOSS, ESQ.
9 For the Defendant LAW DIVISION OF NRT INCORPORATED
Valley of California WESTERN DIVISION
10 dba Coldwell Banker: 12657 Alcosta Boulevard, Suite 500
San Ramon, CA 94583
11 BY: STEPHEN W. THOMAS, ESQ.
12
13
14
15
16 BE IT REMEMBERED that, pursuant to Notice and
17 on Tuesday, January 9, 2007, commencing at the hour of
18 10:19 a.m., at 951 Mariner's Island Boulevard, Suite
19 630, San Mateo, California, before JOANNE HAAG, CSR No.
20 4716, personally appeared
21
22 BRIAN T. GREY
23
24 who was produced as a witness under the provisions of
25 Section 776 of the Evidence Code.
MADELEINE M. FREDA, INC. 2
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1 I N D E X
2 Examination by: Page
3 Mr. Koss 4
4 Mr. Thomas 75
5 Further Examination by:
6 Mr. Koss 82
7
8
9 EXHIBITS
10
11 Defendant's Exhibits:
12 1 Curriculum vitae 6
13 2 Master file 83
14 3 Client Contact file 83
15 4 Subject file 83
16 5 Data file 83
17
18
19
20
21
22
23
24
25
MADELEINE M. FREDA, INC. 3
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1 BRIAN T. GREY
2 being duly sworn, was examined and testified as follows:
3 EXAMINATION BY MR. KOSS
4 BY MR. KOSS:
5 Q. Sir, could you please state your name and
6 business address.
7 A. My name is Brian, B-r-i-a-n, Grey, G-r-e-y. My
8 business address is 1221 Palmetto, P-a-l-m-e-t-t-o,
9 Avenue, Suite D, in Pacifica.
10 Q. Good morning. We didn't have any introductions
11 before the deposition so allow me to introduce myself.
12 My name is Charles Koss, I represent Lou Rae
13 Kagel in a lawsuit brought by Ralph Simpson. And you
14 didn't meet Mr. Thomas who's here to my right, he
15 represents Valley of California, dba Coldwell Banker.
16 I want to ask you some questions today about
17 the real property that's the subject of this lawsuit
18 located on Blanchard Drive in Monte Sereno. And I
19 understand, sir, that you've been retained as an expert
20 to provide certain opinions regarding the value of that
21 property?
22 A. That's correct, generally.
23 Q. Have you acted as an expert witness prior to
24 this case?
25 A. Yes.
MADELEINE M. FREDA, INC. 4
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1 Q. On how many occasions have you been retained as
2 an expert witness?
3 A. I really couldn't count them. I've been an
4 expert witness for the past 10 years in a variety of
5 cases.
6 Q. I asked you to bring some documents with you.
7 One of the things I asked you to bring was a CV. Did
8 you bring that?
9 A. Yes.
10 Q. Why don't we get to that in a minute. What I
11 really want to do is understand your familiarity with
12 the deposition process, and I suspect you've been
13 through this many, many times?
14 A. I have been.
15 Q. And you've testified in court on a number of
16 occasions?
17 A. I have.
18 Q. Do you have any questions about the deposition
19 process before I get going?
20 A. No.
21 Q. Do you need me to go through ground rules or
22 anything like that?
23 A. Only if you'd like to.
24 Q. I don't think I need to do that. Why don't we
25 start out with your CV, and I'll get a little bit of
MADELEINE M. FREDA, INC. 5
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1 your background.
2 You've handed me a one-page document, up at the
3 top says Grey Appraisal Associates, Brian T. Grey, SRA -
4 Qualifications. Is this a copy I can keep?
5 A. Yes, sir.
6 MR. KOSS: Why don't we mark this as Exhibit 1.
7 MR. MINOLETTI: Okay.
8 (Whereupon, Defendant's Exhibit 1 was
9 marked for identification.)
10 BY MR. KOSS:
11 Q. Let me go through some of your employment.
12 First of all, looks to me like you graduated from
13 college in 1977 from St. Mary's College.
14 A. St. Mary's College in Moraga, that's correct.
15 Q. Okay. And then your resume describes some work
16 experience starting in 1985. What did you do between
17 1977 and 1985?
18 A. I was a nightclub manager.
19 Q. And then you became a manager at
20 TRW/Residential Research?
21 A. Well, I was hired by a company called
22 Residential Research in '85 as an appraiser trainee.
23 After a couple of months of training I was an appraiser
24 with that company. Shortly thereafter, a year or so,
25 Residential Research was purchased by TRW Real Estate,
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1 and during the course of their purchase and subsequent
2 to their purchase of their ownership of that company, I
3 became the office manager of the San Francisco office of
4 TRW Residential Research.
5 Q. Generally what were your duties at
6 TRW/Residential Research?
7 A. Well, I was the lead appraiser who handled the
8 more difficult properties. I hired appraisers, I
9 trained them or caused them to be trained; managed the
10 files, in terms of making sure that they were done
11 properly by reviewing them, making sure that they were
12 done on time by assigning time guidelines and these
13 shorts of things.
14 Q. During the time you were with TRW and
15 Residential Research, was there generally a -- how many
16 appraisers were there?
17 A. It started out with myself and two other
18 appraisers in that office, and by the time I left
19 Residential Research I think that I had hired an
20 additional 10 appraisers or so.
21 Q. So you had a staff of about 12 including
22 yourself at the time you left?
23 A. Yes.
24 Q. Why did you leave?
25 A. I became an appraiser for several reasons. One
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1 of them was for a certain degree of independence, and
2 TRW was a corporate entity which was, let's say I was
3 not in harmony with corporate entities and sought to
4 open my own company and run my own business.
5 Q. And you did that in 1988 with a company called
6 Kelley, Dunlop & Grey?
7 A. That's correct.
8 Q. And you were with that company from 1988
9 through 1995?
10 A. That's correct.
11 Q. How many appraisers were there at Kelly,
12 Dunlop & Grey?
13 A. Well, it varied. At the beginning it was just
14 the three of us, Kelley, Dunlop and Grey. As time went
15 on we hired other appraisers to the point where at a
16 certain point in 1992, 1993, that sort of thing, we
17 probably had about a dozen appraisers altogether,
18 including ourselves.
19 Q. And why did you leave that company?
20 A. I had a falling out with my business partners.
21 Q. So you decided to go out on your own and form
22 Grey Appraisal Associates in 1995?
23 A. That's correct.
24 Q. Do you have any appraisers that work with you
25 in that business?
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1 A. Through the years I've had a number of
2 appraisers, and that number has varied from three or
3 four or five appraisers to the current two appraisers.
4 Q. Yourself and one other person?
5 A. That's correct.
6 Q. Why don't I cover this while we're at it. With
7 respect to the work you did on the Blanchard property,
8 did anyone assist you with that work?
9 A. No -- well, I should clarify that. My office
10 manager took phone calls from Mr. Minoletti and passed
11 them along to me, but if you're asking about substantive
12 work on value issues the answer is no.
13 Q. That was indeed my question. You're an SRA?
14 A. I hold an SRA designation from the Appraisal
15 Institute.
16 Q. When did you obtain that?
17 A. 1992, I believe.
18 Q. And you're also a certified residential
19 appraiser, that's the license that you have to hold to
20 be an appraiser?
21 A. That is a state-issued license. There are
22 three classifications of residential appraisal licensing
23 in California: the trainee license, a regular license,
24 and a certification. And the certification that I hold
25 is the highest of the three levels.
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1 Q. Have you held each license?
2 A. No. When certification or licensing came into
3 effect in 1992, I had been an appraiser for
4 approximately seven years at that point, and simply took
5 the test for certification rather than going through the
6 other steps that were unnecessary.
7 Q. So you've been a certified residential
8 appraiser since 1992.
9 A. That's correct.
10 Q. Are you also a licensed real estate broker?
11 A. I am not a licensed real estate broker.
12 Q. Are you a licensed agent?
13 A. I am not a licensed agent.
14 Q. When you say a member of various boards of
15 realtors, is that as an associate member of some kind?
16 A. It is an associate member of some kind as an
17 appraiser, yes.
18 Q. When did you first begin doing work as an
19 expert witness?
20 A. Approximately 10 years ago.
21 Q. And currently what percentage of your practice
22 involves work as an expert witness?
23 A. I would estimate 90 percent of my work.
24 Q. Have you done expert work for Mr. Minoletti's
25 firm on prior occasions?
MADELEINE M. FREDA, INC. 10
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1 A. No.
2 Q. Do you know how you came to be retained as an
3 expert in this case?
4 A. I don't, as a matter of fact. Mr. Minoletti
5 called my office, he said that he had a case, we
6 discussed, and he engaged me.
7 Q. What was the date of that phone call?
8 A. I believe it was October 11, 2006.
9 Q. During that first phone call did Mr. Minoletti
10 ask you to undertake any work on his behalf or on behalf
11 of his client?
12 A. Well, he explained to me the nature of the
13 case. He did not ask me to undertake work at that time.
14 He asked me to convey to him a CV.
15 Q. What did Mr. Minoletti tell you about the
16 nature of the case?
17 A. He told me that his client had purchased a new
18 home in Monte Sereno, that the case involved false
19 advertising, that one of the claims involved a so-called
20 city-approved 800-foot structure, home equipped with
21 fiberoptics, claimed a swimming pool could be built.
22 He said that when an application was made to
23 the city of Monte Sereno for the installation of an
24 in-ground pool that the owner of the house was told that
25 he was way over the floor area ratio.
MADELEINE M. FREDA, INC. 11
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1 He told me that when his client, Mr. Simpson,
2 applied to the city, they told him that in order to have
3 a pool he would have to remove his impermeable driveway
4 and replace it with cobblestone or some kind of
5 semi-permeable material, and that that was a cost that
6 Mr. Minoletti said of approximately $60,000. And that
7 there were other facets of the case that those were
8 in -- that regard the main points of the case.
9 Q. Okay. At this point maybe it would be
10 productive to have me look at your file. Are you
11 looking at notes to help you remember the conversation?
12 A. I'm looking at one page of handwritten notes
13 that were taken during my conversation with
14 Mr. Minoletti on October 11th, 2006.
15 Q. Thank you. What you've handed me is your
16 original file?
17 A. That is my original file.
18 Q. And you didn't bring copies of the file with
19 you?
20 A. I did not.
21 Q. I'm looking at your notes, and at the bottom it
22 says, get standard of care. Do you recall a discussion
23 about that?
24 A. Mr. Minoletti asked me if I was familiar with
25 any standard-of-care experts in the real estate field,
MADELEINE M. FREDA, INC. 12
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1 and I told him that I had worked with one or two in the
2 past and that I would try to find their name and
3 telephone number.
4 Q. Did you do that?
5 A. I believe I found the name of one
6 standard-of-care expert and telephone number and
7 conveyed it to Mr. Minoletti.
8 Q. Do you remember the name of that person?
9 A. I don't offhand.
10 Q. Is it in your file?
11 A. I don't believe it is.
12 Q. So it appears to me you actually have handed me
13 three files, correct?
14 A. Well, it's one file with three different
15 folders within that file and a CD disk.
16 Q. We have one file that's, or sub file if you
17 will called Subject. What sort of materials are
18 contained in that file?
19 A. There's a floor plan that I sketched when I did
20 my inspection of the subject property, and there's a
21 computer-generated floor plan from that. There are
22 listing sheets from the listing of the subject property
23 at the time of its sale. There's an NDC data sheet, a
24 public record of characteristics of the subject
25 property.
MADELEINE M. FREDA, INC. 13
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1 Q. And then we have another sub file called Data.
2 What sort of materials are in that file?
3 A. Those are conclusions of loss in value and some
4 support data for that.
5 Q. And then we have a sub file that says Client
6 Contact. What sort of information is in that?
7 A. In the client contact file, there is written
8 information that Mr. Minoletti conveyed to me about the
9 nature of the case, the complaint, correspondence
10 engaging me in the matter, and that sort of thing.
11 Q. And then we have, I don't know, what I might
12 suggest as maybe a master file?
13 A. I think that would be an appropriate term, yes.
14 Q. And on the cover is, looks to me like some kind
15 of preprinted form that your office uses to designate
16 the file?
17 A. Yes.
18 Q. And then there is a time record sheet, some
19 billing records, an Infolink printout, and looks like a
20 CD that says Photos 2006, that's what's in this file?
21 A. Yes. Let me clarify with regard to that CD
22 disk. I forgot to put the photos that I took as of my
23 date of principal inspection on a separate CD to bring
24 to you for your copy.
25 I've brought my master file of photos for 2006,
MADELEINE M. FREDA, INC. 14
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1 which I'm hoping Mr. Minoletti can have copied with the
2 appropriate photos so that you can have a copy of just
3 those photos.
4 Q. Okay. Let me start out with the client contact
5 file. In connection with your work in this case, were
6 you provided with any documents to review and consider?
7 A. Yes.
8 Q. What documents were you provided?
9 A. Well, of course there's the letter of
10 engagement from Mr. Minoletti. He also included a
11 mediation brief dated June 1st, 2006. He included a
12 two-page marketing brochure. He included an email
13 correspondence from Douglas Rea, the buyer's agent, to
14 Ralph Simpson dated September 10, 2001. He provided me
15 also with a declaration with regard to disclosure of
16 expert witnesses. And several different pages of
17 notices of taking expert depositions.
18 Q. Now, if we look back at the initial letter you
19 received from Mr. Minoletti, he asked you to do a number
20 of things, did he not, or consider a number of different
21 things is maybe a better way of phrasing it?
22 A. I think that that's probably accurate.
23 Q. Okay. If I could look at that for a moment.
24 First of all, Mr. Minoletti provided to you a marketing
25 brochure of two pages and you reviewed that, did you
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1 not?
2 A. I did.
3 Q. And he also provided to you a memorandum from
4 Douglas Rea to Ralph Simpson dated September 10, 2001.
5 Did you review that?
6 A. Yes.
7 Q. And Mr. Minoletti asked you to comment upon
8 that memorandum.
9 A. Yes.
10 Q. Did you do that?
11 A. I believe I made verbal comments to
12 Mr. Minoletti with regard to that memorandum.
13 Q. Did you come to any opinion or conclusion
14 regarding the statements made by Mr. Rea in his memo of
15 September 10th to Mr. Simpson?
16 A. I think that the overall comment that I made to
17 Mr. Minoletti with regard to that memorandum was that
18 the author is throwing out a great deal of data, that
19 that data is calculated almost exclusively on a
20 cost-per-square-foot basis, and that that is not an
21 accepted appraisal methodology for calculating value in
22 most cases.
23 Q. Any other opinions or conclusions you came to
24 after reading that memo?
25 A. No.
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1 Q. Did you go and attempt to verify any of the
2 information that Mr. Rea had in his memo?
3 A. No.
4 Q. In other words, you didn't go back to see if
5 this certain house he describes is actually sold at a
6 certain price or not.
7 A. I did not.
8 Q. Other than the inappropriate methodology that
9 you believe Mr. Rea used, do you believe there's
10 anything inaccurate about Mr. Rea's memo of
11 September 10th?
12 A. I did not review it for its accuracy.
13 Q. I take it from your testimony, then, in
14 appraising real property you would not simply look at
15 houses to find the square footage and apply that to
16 every house say in Monte Sereno, they're all worth $365
17 per square foot or whatever number they are.
18 A. I would not take that sort of analysis with
19 this type of property, no.
20 Q. That would be way too simplistic of an
21 analysis, wouldn't it.
22 A. That's exactly right, counselor.
23 Q. In looking at your time records, by the way, is
24 there a retainer agreement that relates to your work in
25 this case?
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1 A. I believe I asked for a two-hour retainer at my
2 standard rate of $300 an hour, and I believe I was
3 conveyed a check in that amount.
4 Q. And you charge $300 for all your work including
5 going to depositions?
6 A. Consultation, inspection, deposition,
7 testimony, preparation, yes.
8 Q. And then by looking at your file I can see that
9 you record your time in a time record sheet; is that
10 true?
11 A. Yes.
12 Q. And there's a number of columns -- date,
13 activity, hours -- and then a column without a heading,
14 and it looks to me like the time involved.
15 A. That's correct.
16 Q. Do you make these entries at or about the time
17 you perform the work?
18 A. Yes.
19 Q. Appears to me that you first did work on this
20 case in November of 2006?
21 A. Yes.
22 Q. And that initially was a little more than half
23 hour reviewing data, correct?
24 A. Yes.
25 Q. What data did you review?
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1 A. The data that we've just discussed in my client
2 contact file, the two-page marketing brochure, the memo
3 from Mr. Rea to Mr. Simpson, that sort of thing.
4 Q. On November 7th there's a bill for a phone
5 call?
6 A. Yes.
7 Q. Was that to schedule a site inspection?
8 A. If I could --
9 Q. Sure, of course.
10 A. That was a phone call to Mr. Minoletti with
11 regard to my review of the data that he had sent me.
12 Q. And then it looks like on November 16th you
13 actually inspected the property, correct?
14 A. That's correct.
15 Q. What was your purpose in doing that?
16 A. Well, to familiarize myself with the subject
17 that is the matter of -- that is the subject of this
18 matter.
19 Q. Can you describe for me what you did during
20 that inspection.
21 A. Yes. I performed an interior and exterior
22 inspection of the subject property. I tape-measured the
23 subject property by hand. I walked through the front
24 and rear yards. Took photographs. I walked through the
25 main house and the guest house and the garages, taking
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1 notes and photographs. And that's substantially the
2 work that was done during the inspection.
3 Q. At any time during the course of your work in
4 this case, did your work involve comparing this property
5 to other comparable properties?
6 A. I think the answer to that is no. I'm not
7 quite sure what you mean by that, but I think the answer
8 to that is no.
9 Q. During anytime during the course of your work
10 in this case, have you gone to the city of Monte Sereno?
11 A. I have not gone to the city of Monte Sereno,
12 though I have talked with representatives of the city of
13 Monte Sereno.
14 Q. Who did you talk to?
15 A. I talked with Andrea -- and let me not butcher
16 her last name -- Chelamengo, who is an assistant planner
17 with the city of Monte Sereno.
18 Q. And was that important to you in your work to
19 contact someone from the city?
20 A. Yes.
21 Q. And why did you feel that was important?
22 A. Well, first I wanted to confirm the zoning for
23 the subject property, and in any case that I work on
24 that's a small piece of information but it's something
25 that in my opinion needs to be done. I also wanted to
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1 talk to her about some restrictions with regard to floor
2 area ratios and that sort of thing. So that was
3 important to I think touch base with the city of
4 Monte Sereno about.
5 Q. Is your conversation with the city reflected in
6 your time record sheet?
7 A. You know, I don't think that it's specifically
8 reflected in this time sheet. It's under the category
9 of analyze.
10 Q. How much time did you spend talking to, and I
11 have difficulty reading her handwriting, Ms. Chelamengo,
12 is that how you pronounce it?
13 A. I think it's Chelamengo.
14 Q. Chelamengo.
15 A. I talked to her on two separate occasions and I
16 would estimate that each of those occasions required
17 10 minutes or so of conversation.
18 Q. Can you describe for me what was discussed
19 between you and Ms. Chelamengo during the first
20 conversation.
21 A. In the first conversation, we talked about the
22 zoning and something about the floor area ratio of the
23 subject property.
24 Q. What did she tell you about the floor area
25 ratio of the subject property?
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1 A. She didn't specify about the subject. She
2 specified zoning regulations for Monte Sereno, that
3 there were some restrictions of size of dwelling,
4 permeable and impermeable, hardscape and that sort of
5 thing.
6 Q. What did she tell you in particular about those
7 kind of things?
8 A. Well, that there certainly were floor area
9 ratios that included those, and that depended on the
10 size of the main structure, the size of any auxiliary
11 structure, the square footage of pools, which would be
12 considered a hardscape or impermeable, and that for
13 example asphalt would be considered impermeable, whereas
14 cobblestone or interlocking brick would be considered
15 50 percent impermeable and that sort of thing.
16 Q. Did she tell you what the city's guidelines
17 were for floor ratios or impermeable surfaces or that
18 sort of thing?
19 A. I think she mentioned some numbers.
20 Q. Did you write those numbers down?
21 A. I don't recall whether I did or not. I don't
22 think I wrote them specifically down.
23 Q. And why don't you tell me what was discussed at
24 the second conversation with Ms. Chelamengo.
25 A. There was some conversations about those same
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1 topics, not the zoning, but floor area ratio and that
2 sort of thing. I also asked her about auxiliary
3 structures and restrictions on auxiliary structures.
4 Q. At the conclusion of your two conversations
5 with Ms. Chelamengo, did you come to any opinion or
6 conclusion concerning how the restrictions of the city
7 of Monte Sereno might affect this particular Blanchard
8 Drive property?
9 A. Well, I'm not sure that I would phrase it in
10 that manner that I came to any conclusions about how it
11 affected the Monte Sereno property.
12 One of the things that was discussed was the
13 utility of a second secondary structure, that is to say
14 our subject property has a main house, it has one
15 secondary structure, a guest house, a detached guest
16 house, and I asked her in that second conversation
17 specifically about restrictions on the utility of a
18 second secondary structure.
19 Q. What do you mean, asked her about the utility
20 of it.
21 A. That is to say, in what manner could it be
22 used.
23 Q. And what did she tell you about that?
24 A. She told me that a second secondary structure
25 could be put to a variety of uses.
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1 Q. Was she more specific than that?
2 A. Well, she said that it could be put to the use
3 of home office, art gallery, storage, that sort of
4 thing.
5 Q. Did she tell you there were some prohibited
6 uses?
7 A. She told me that one restriction would be that
8 there could not be, with regard to a second secondary
9 structure, a kitchen or sleeping facility.
10 Q. Is it correct that in your opinion, the
11 restrictions imposed by the city of Monte Sereno would
12 nevertheless allow the construction of a third structure
13 out at the Blanchard property?
14 A. I'm sorry, counselor, could you repeat that,
15 please?
16 Q. Sure. Is it your opinion that a third
17 structure could be built at the Blanchard property?
18 A. Under certain circumstances, a third structure
19 might be able to be built at the Blanchard property.
20 Q. And what would those certain circumstances be?
21 A. I believe that the owner of the property would
22 have to remove 1600 square feet or so of hardscape, that
23 is to say, patios, driveway, these sorts of things, or
24 more. 1600 square feet or more. And that if that were
25 done, there may be the possibility of adding a second
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1 secondary structure.
2 Q. When you say remove 1600 square feet of
3 impervious surface, are you really saying remove
4 1600 square feet of impervious surface and replace it
5 with a semi-impervious surface?
6 A. No, that's not what I'm saying. I'm saying
7 remove 1600 square feet or more of impervious surface.
8 Q. To your understanding to build another
9 800-square-foot structure, why did you need to remove
10 1600 square feet of impervious surface?
11 A. The plans and specifications that were drawn up
12 and submitted and approved by the city of Monte Sereno
13 include calculations as to the square footage of the
14 main dwellings, footprint and all other impervious
15 surfaces, that is to say, the hardscape, the patios, the
16 driveway, the pool and these sorts of things. And there
17 is only a certain number of square feet of that sort of
18 impervious coverage of the lot that's allowed relative
19 to the size of the lot.
20 And my understanding is that the subject
21 property is over the amount of strictly regulated
22 impervious surface and that in order to potentially put
23 another structure which would be counted as more lot
24 coverage or more impervious surface, that existing
25 impervious surface would have to be removed.
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1 Q. Have you made these calculations?
2 A. No.
3 Q. Do you know how many square feet -- strike
4 that. You indicated that the property is already over
5 the limit of impervious surface allowed by the city of
6 Monte Sereno. Do you know by how many square feet the
7 property is over that limit?
8 A. I believe I was given to understand by
9 Mr. Simpson that it was approximately 8- or 900 square
10 feet in excess of permitted impervious surface.
11 Q. Okay. So your opinion is based upon getting
12 rid of the current excess plus getting rid of 800 square
13 feet so you can replace it by this third building.
14 A. Or more.
15 Q. How many conversations have you had with
16 Mr. Simpson?
17 A. Three.
18 Q. And in addition to that, did you meet with
19 Mr. Simpson at the site?
20 A. I did not.
21 Q. Did you meet with Mrs. Simpson at the site?
22 A. I did meet Mrs. Simpson at the site, yes.
23 Q. Did you discuss any of the facts or
24 circumstances of this case with Mrs. Simpson?
25 A. No. She simply allowed me access to the
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1 property, allowed me to do my work, and bid her adieu.
2 Q. Did you keep notes of the conversations you had
3 with Mr. Simpson?
4 A. No.
5 Q. How was it that you ended up talking to
6 Mr. Simpson?
7 A. Well, I dialed his phone number and he answered
8 it.
9 Q. What was your purpose in calling him?
10 A. My purpose in calling him was to discuss one
11 category of potential loss in value, and that would be
12 the installation of a fiberoptic network.
13 Q. We'll get to those conversations but I don't
14 want to get too far afield with where we were with
15 Ms. Chelamengo. Have you told me everything you can
16 remember about those two conversations with her?
17 A. Pretty much, yes.
18 Q. And I take it, tell me if my wrong, but I think
19 the purpose in calling her was, a., to find out the
20 zoning, and b., to find out the restrictions on this
21 third structure, correct?
22 A. Well, not specifically restrictions in the
23 third structure but restrictions the city of Monte
24 Sereno has with regard to floor area ratio and thirdly
25 the potential for putting a third structure in.
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1 Q. By the way, what did you find out about the
2 zoning?
3 A. I have -- I think I have that on a piece of
4 paper in the subject file, if I can review that.
5 Q. Sure.
6 A. The subject is zoned R1-20. Here is a note
7 about the floor area ratio footprint. 30 percent
8 coverage of the lot, which would include the pool, as
9 structures, concrete and that sort of thing.
10 Q. May I see what you're looking at?
11 A. Certainly (indicating).
12 Q. You've handed me a document that looks like it
13 was printed out on in October of 2006 and up at the top
14 it says, NDCData.com. Is that the Web site you got this
15 information from?
16 A. NDCData is a sort of public information taken
17 from assessor's records that contains characteristics of
18 the subject property or any other property relative to
19 their data sheets as well.
20 Q. And is it correct this is one of the first
21 places you went to to look for data about this property,
22 this NDCData.com?
23 A. Yes.
24 Q. Have you tried to verify any of the information
25 set forth on this document from NDCData.com?
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1 A. Well, when you say have I tried to verify any
2 of the information, certainly calling Andrea Chelamengo
3 in order to verify zoning is something that I did.
4 Tape-measuring the subject property to verify square
5 footage characteristics that appear in NDCData is
6 something that I did. Those are two verifications. I'm
7 not sure what else you might indicate.
8 Q. I'm not attempting to indicate anything. But
9 apparently it shows a zoning as R1-20, and you verified
10 that with Ms. Chelamengo?
11 A. Yes.
12 Q. And then you verified this footprint,
13 30 percent coverage, which is what you've written on the
14 document.
15 A. Well, that's not a verification of information
16 that appears in this sheet, because there is no
17 information with regard to floor area ratio that appears
18 in this sheet. But for example the NDCData sheet taken
19 from assessors' records tells me the building area is
20 4305 square feet and that of course relates to the main
21 house itself. So that is an object of verification
22 insofar as I tape-measured the main house to verify its
23 square footage.
24 I might also indicate that I verified the sale
25 price in reverse, by drawing the MLS data sheets from
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1 the sale of the property at the time of its sale.
2 Q. I guess it probably seems obvious that you had
3 this in front of you when you were talking to
4 Ms. Chelamengo and you wrote down on there this
5 footprint, 30 percent coverage, imper, which I assume is
6 short for impervious, equals structure, plus concrete
7 plus pool?
8 A. Yes.
9 Q. You indicated that you attempted to verify the
10 building area?
11 A. Yes.
12 Q. And on this document it shows it's 4,305 square
13 feet.
14 A. Yes.
15 Q. Did you determine that to be an accurate
16 figure?
17 A. My tape measurement of the subject property
18 indicates that there are 4,355.62 square feet of living
19 area.
20 Q. That's in the main structure?
21 A. That is the main structure, indeed.
22 Q. And did you also attempt to determine the
23 square footage of the guest cottage or guest house?
24 A. Yes.
25 Q. What did you determine that to be?
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1 A. By my tape measurement the guest house is
2 713.31 square feet.
3 Q. So in total we're talking about 5,068 square
4 feet, thereabouts?
5 A. Yes.
6 Q. Did you attempt to verify the lot size which is
7 indicated on the NDCData sheet as 28,313 square feet?
8 A. No.
9 Q. Do you have any reason to believe that's not an
10 accurate figure?
11 A. I do not.
12 Q. In addition to calculating the size of the main
13 house and the guest cottage, did you attempt to
14 calculate the square footage of the other impervious
15 surfaces on the property?
16 A. No.
17 Q. So I take it in giving your opinions, at least
18 in terms of the ability to construct another 800-square-
19 foot structure, you're relied on Mr. Simpson telling you
20 that he's already about 800 square feet over.
21 A. Yes.
22 Q. Let's go back to those three conversations you
23 had with Mr. Simpson. Do you recall the first
24 conversation you had with him, the date?
25 A. I don't recall the date. It would have been at
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1 some point close to my inspection, if not on the
2 inspection date.
3 Q. What was your purpose in calling Mr. Simpson?
4 A. Well, one of the categories that's in question
5 here is fiberoptics of, the presence or absence of a
6 fiberoptic system built into the subject property. And
7 I asked Mr. Simpson to obtain estimates of the cost to
8 install a fiberoptic system.
9 Q. Anything else that you discussed with
10 Mr. Simpson during that first phone call?
11 A. I just simply said that I had been to his
12 house, that I had done my inspection, this was a piece
13 of information that I would need, could he please try to
14 obtain that.
15 Q. And we'll get to that later. Did he obtain a
16 cost to install?
17 A. He obtained a general cost to install by
18 calling two companies.
19 Q. And did he verbally pass on that information to
20 you?
21 A. He did.
22 Q. Were they estimates in writing?
23 A. No.
24 Q. Maybe we'll get to that in our next
25 conversation. What's the next conversation you had --
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1 A. That was the second conversation, asking him
2 the results of his calls.
3 Q. And what did he tell you?
4 A. That he called two companies. That the
5 conversation was that it would cost approximately $100
6 per drop, that is to say, per fiberoptic connection in
7 each room, and that it would be $80 an hour for workers
8 to install and that they would likely use two workers at
9 a time.
10 Q. Is that $80 for both workers or for one worker?
11 A. $80 per hour per worker.
12 Q. Did he tell you how many hours it would take to
13 install?
14 A. He did not specify a number of hours. We
15 discussed the difficulty of doing an installation
16 subsequent to the construction of the subject property,
17 that walls may need to be torn up and restored, that
18 there's the potential use of using the crawl space for
19 running the wires, that there would be the difficulty of
20 trenching out to the guest house because it's a detached
21 structure, you would need to put the wires in the ground
22 and cover a certain amount of area to do so and that
23 sort of thing.
24 Q. Did Mr. Simpson provide you costs for any of
25 that sort of thing, trenching, etc.?
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1 A. Apparently he derived from his conversation
2 with the two contracting companies a general estimate of
3 about $10,000 to do the installation of fiberoptics.
4 Q. Do you know the name of either company?
5 A. I do not.
6 Q. Anything more you can remember about that
7 second conversation?
8 A. I think that's the general drift of it.
9 Q. Now, you had seen the advertising brochure that
10 said, fiberoptics to keep you in touch?
11 A. I have seen that.
12 Q. Did you come to any opinion or conclusion as to
13 what that meant?
14 A. It appeared to me that that brochure was
15 indicating the subject had fiberoptics built into the
16 house at the time of construction. It's listed as a
17 feature of the house.
18 Q. Would that be fiberoptics in say the office?
19 A. Well, I can only tell you that the brochure
20 says, fiberoptics for better communication, quality
21 specifications. So as one of the specifications of the
22 house in the sense of plans and specifications, one of
23 the qualify specifications was fiberoptics for better
24 communication.
25 Q. In your work have you seen other houses that
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1 have fiberoptics installed?
2 A. Yes.
3 Q. Is that a common thing to see?
4 A. It's becoming more and more common, and in fact
5 it's becoming more common more rapidly with upper-end
6 homes.
7 Q. Is that a feature you see buyers demanding
8 these days?
9 A. It's a feature that has an appeal in the market
10 for upper-end homes and for people who work in the
11 computer industry.
12 Q. To your understanding what's the benefit to
13 having fiberoptics?
14 A. Now, I'm a layperson with these things but as
15 far as I understand, the benefit of having fiberoptics
16 is the speed with which data can be transferred and the
17 size of the files that can be transferred.
18 Q. During the conversation -- let's go to the
19 third conversation with Mr. Simpson, would you describe
20 that for me.
21 A. The third conversation with Mr. Simpson
22 included short discussion with regard to a couple of my
23 findings or conclusions.
24 Q. Can you describe those short discussions for
25 me.
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1 A. He and I discussed potential loss in value with
2 regard to the 800-square-foot structure that had been
3 represented to him as his being able to put another
4 800-square-foot structure. And we also touched upon
5 fiberoptics.
6 Q. When you say touched upon, can you describe for
7 me the conversation.
8 A. Well, the conversation included his indication
9 to me that fiberoptics meant a great deal to him, in
10 terms of its utility in value.
11 Q. What specifically do you recall him saying
12 about that?
13 A. Well, that he works in the computer industry
14 himself, that his son who is in college and has served
15 an internship with Cisco is learning computer science,
16 shall we say, and that their use of a fiberoptic system
17 would not only connect the house in a network but allow
18 them to communicate with their workplaces in a more
19 efficient manner.
20 Q. Did Mr. Simpson quantify for you the nature of
21 that loss of efficiency?
22 A. No.
23 Q. Did he describe for you how this loss of
24 efficiency affected him on a day-to-day basis?
25 A. Well, as I say, on a day-to-day basis, without
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1 fiberoptics connecting all the rooms of the house,
2 they're not able to transfer data for example from the
3 guest house to the main house or these sorts of things,
4 and that he feels that that's an important factor.
5 Q. But he was unable or didn't quantify for you
6 how this affected him quantitatively on a day-to-day
7 basis?
8 A. No, not as I recall.
9 Q. Let me get back to an earlier question which is
10 what exactly does it mean to have fiberoptics, does that
11 mean fiberoptics in every room?
12 A. Well, one of the things that Mr. Simpson said
13 to me was that they have, I think he said, seven PCs in
14 the house, they have plasma screen TVs, they have video
15 games and these sorts of things, and that they could be
16 all networked with a fiberoptic system.
17 Q. I'm not sure that answers my question. For
18 instance, my home has telephone lines installed in it
19 but they're not in every room. Is a fiberoptic system
20 different than that that you would expect to see it in
21 every room?
22 A. I would expect to see a fiberoptic system
23 available in every room to network the house together.
24 Q. So it's different than a phone line then, you
25 would expect to see this in every room.
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1 A. I would think that, yes.
2 Q. Did Mr. Simpson tell you that the $10,000 cost
3 estimates that he obtained were to install it in every
4 room?
5 A. I think that his indication was indeed that to
6 install -- when they have seven different PCs in the
7 house to begin with and there are let's say 10 rooms in
8 the house, if I'm not mistaken, when they have not only
9 seven PCs but they have different video games that can
10 be played in different rooms, that that would include
11 every room in the house.
12 Q. Do you know how they connect these computers
13 presently?
14 A. I don't think that they do connect them in a
15 network in the house. If they do I'm unaware of it.
16 Q. He didn't mention they had a wireless system or
17 anything like that.
18 A. No.
19 Q. And he didn't give you any kind of description
20 as to if they had a wireless system how much slower that
21 would be than a fiberoptic system.
22 A. I don't think he quantified that. I think his
23 indication was that a fiberoptic system was more or less
24 state of the art, he called it a broad bandwidth and
25 that it was extraordinarily fast.
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1 Q. Have you now told me everything that you can
2 recall about those conversations with Mr. Simpson?
3 A. Generally speaking, yes, counselor.
4 Q. Now, we've talked about that you went out and
5 looked at the house and measured the house, at least
6 looked at this NDCData source, you talked to someone
7 from the city. Anything else that you did to assist you
8 in coming up with opinions and conclusions in this case?
9 A. Well, in addition to measuring the house I did
10 a full inspection, that is to say, I took photographs
11 and notes about materials and finishes, condition and
12 that sort of thing.
13 Q. How do those relate to your opinions?
14 A. Well, it gives me an idea of the quality of the
15 house.
16 Q. Did you come to an opinion or conclusion as to
17 the quality of the house?
18 A. Yes. It's a good quality house.
19 Q. And then let me turn to your data sheet. I
20 take it -- data file, rather. That contains your
21 opinions?
22 A. Yes.
23 Q. Why don't we take this in order. The first one
24 apparently relates to the diminution in value of the
25 driveway. Do you have an opinion as to how the
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1 replacement of the driveway affected the value of the
2 Blanchard property?
3 A. Well, at the time of its purchase, it was
4 apparently represented that the purchaser would be able
5 to install a pool.
6 When Mr. Simpson went to the city and applied
7 for permits to install a pool, he was made aware that
8 the floor area ratio was improper, that there was more
9 impervious surface than there should be, and that he
10 could not install a pool.
11 And apparently in his discussions with
12 Mr. Levinthal, the planning person with the city of
13 Monte Sereno, through discussions, Mr. Levinthal
14 represented to him that if he removed impervious surface
15 or replaced it with semi-impervious surface, that he may
16 be permitted to put a pool in.
17 And I think Mr. Simpson said that indeed he did
18 remove the impervious surface of the driveway, he
19 replaced it with interlocking brick, I think it is, and
20 that that cost him $64,000 to do in order to obtain a
21 permit to put the pool in.
22 And so I think that one category of diminution
23 in value would be the cost of switching out the driveway
24 in order to put the pool in, plus interest, plus a
25 factor for management compensation; and what that
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1 represents is the time it would take the owner of the
2 house to put in the application, find out that he could
3 not have a pool, reach an agreement with the city to put
4 a pool in, obtain estimates for removing driveway and
5 replacing it, overseeing the crews and their work while
6 they're doing it and that sort of thing. And that's
7 calculated at approximately 10 percent of the cost of
8 the project.
9 The third category is the inconvenience of
10 having a driveway torn up for a month or so while the
11 work is occurring, and that's calculated at
12 approximately five percent of the cost of the project.
13 Q. Did you -- strike that. How did you determine
14 how long it took to complete the driveway work?
15 A. I think that Mr. Simpson represented that it
16 was something in the order of a month or just short of a
17 month.
18 Q. Did he describe for you how many hours he spent
19 dealing with this particular situation?
20 A. No.
21 Q. Do you know if he spent one hour or 10 hours?
22 A. Well, I don't think it was one hour. I think
23 that from the conversation we had, that he had to go to
24 the city, he had to negotiate with the city, he had to
25 obtain estimates, he had to oversee the project, that
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1 one hour, and even 10 hours, would be insufficient to do
2 that.
3 Q. You haven't tried to calculate this on a
4 per-hour basis, have you?
5 A. I have not.
6 Q. You just come up with a rough 10 percent?
7 A. That's correct.
8 Q. Why is 10 percent the appropriate figure?
9 A. Well, it's a figure that occurs in appraisal
10 work relatively regularly in terms of management
11 compensation, and for example, with contractors who are
12 building projects or that sort of thing, they usually
13 calculate a 10 percent overhead and 10 percent profit,
14 so that 10 percent figure resonates in the industry.
15 Q. So this 10 percent equates to Mr. Simpson being
16 his own general contractor on this work?
17 A. Well, you could put it in that manner. I don't
18 think I would put it in that manner. I think I would
19 suggest that the term management compensation is more
20 appropriate.
21 Q. And how do you determine that five percent or
22 $3,200 is the appropriate figure for inconvenience?
23 A. You know, it's got to be worth a couple
24 thousand bucks to be inconvenienced for having your
25 driveway torn up and that sort of thing, and if it's
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1 worth a few thousand bucks, a figure of five percent of
2 the overall project is probably appropriate.
3 Q. Did you talk to Mr. Simpson and ask him how
4 this inconvenienced him?
5 A. Well, I guess that I didn't specify that
6 question to him. I relatively thought that it would be
7 obvious that if your driveway is torn up, that it would
8 be inconvenient and that you wouldn't be able to park
9 your cars in your garage, for example, you would have to
10 leave them on the street and that sort of thing.
11 Q. That's what I was getting at. Did he tell you
12 how many days he had to do that --
13 A. I don't believe he specified a specific number
14 of days.
15 Q. Did you take into account that Mr. Simpson's
16 belief of having a cobblestone driveway is now an
17 improvement over an asphalt driveway?
18 A. No.
19 Q. In your opinion is a cobblestone driveway more
20 valuable than an asphalt drive?
21 A. No.
22 Q. That would not improve the value at all?
23 A. Not in my opinion.
24 Q. Would it decrease the value to have a
25 cobblestone driveway?
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1 A. No.
2 Q. They're just neutral.
3 A. It's a driveway. Does it function as a
4 driveway or not. I haven't done a study in terms of the
5 study of a macadam versus cobblestone, but in my
6 perspective does it function as a driveway or not.
7 Q. Do you have any understanding as to which
8 driveway costs more, cobblestone drive or an asphalt
9 drive?
10 A. I do not.
11 Q. Do you suspect that a cobblestone driveway
12 costs more than an asphalt driveway?
13 A. I have no idea. Apparently this cobblestone
14 driveway cost $64,000, though.
15 Q. Well, you've seen other houses with cobblestone
16 driveways, haven't you?
17 A. I have.
18 Q. And I take it it would surprise you that anyone
19 paid more for a cobblestone driveway than an asphalt
20 driveway given that they're functionally equivalent.
21 A. Well, people have different tastes, so as an
22 appraiser a driveway is a driveway. As a homeowner, a
23 homeowner may prefer one thing to the other for
24 aesthetic reasons or for other personal reasons.
25 Q. In your opinion as a professional appraiser is
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1 a cobblestone driveway more aesthetically pleasing than
2 an asphalt driveway?
3 A. No.
4 Q. Any other opinions you have about the driveway
5 issue?
6 A. I think that covers it, counselor.
7 Q. Next we have a document entitled Diminution in
8 Value, apparently it relates to the size of the home.
9 Can you describe for me your opinions regarding the
10 diminution in value regarding the size of the home.
11 A. Yes. Apparently the size of the home was
12 represented at 5,300 square feet, and when I say house
13 let me specify that I'm including both the main house
14 and the guest house, so that what I'm talking about here
15 is gross living area. And the gross living area was
16 represented at 5,300 square feet.
17 My tape measurement of the main house and the
18 guest house indicates that they are 5,069 square feet.
19 This is a different of 231 square feet. Now, my
20 estimate of cost to construct is approximately $350 per
21 square foot for this quality of home in this area. And
22 if you multiply the 231-square-foot differential with
23 the $350-per-square-foot cost to construct, it yields a
24 difference of $80,875.
25 Q. That would be the cost to construct another
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1 231 square feet at the property.
2 A. That's correct.
3 Q. Do you have an opinion as to how the loss of
4 that 231 square feet affects the market value of the
5 property?
6 A. Well, the 231 square feet is the differential
7 between what was promised and what was delivered. If
8 Mr. Simpson had to build the additional 231 square feet
9 it would cost him $80,875, more or less.
10 Q. And where would he build those additional
11 square feet?
12 A. Well, apparently he cannot.
13 Q. If he could, where would he put it?
14 A. Well, I haven't studied where he might put
15 that. I mean, perhaps a living room could be enlarged
16 or that sort of thing. But that is the differential
17 between what was promised and what was delivered.
18 Q. Is it your opinion, sir, if there was an
19 identical house next door to this one that was
20 231 square feet larger, that house would sell for an
21 additional $80,000 over the Blanchard property?
22 A. Well, it's a matter of the size of the house
23 being in proportion to the cost of the house. So yes,
24 if there was a house that was next door that really was
25 5,300 square feet, in my opinion it would sell for more
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1 relative to a house that had 5,069 square feet.
2 Q. It seems evident that the slightly larger one
3 would sell for more, right?
4 A. Yes.
5 Q. My questions is, sir, by how much?
6 A. Well, I think that we're dealing here with
7 construction costs, and my estimate is $350 per square
8 foot to construct, and that would work out to the
9 $80,875 figure.
10 Q. I'm not sure that's giving me the market value.
11 For instance, if a hundred people looked at the two
12 houses, and the house that was 230 square feet less but
13 priced $80,000 less, couldn't it be that a hundred
14 percent of those people would choose the cheaper house
15 and keep the 80 grand because they don't care about the
16 extra 231 square feet?
17 A. No, sir.
18 Q. I guess I'm confused by this because
19 especially when you look at what Mr. Rea did, and you
20 just went and divided out properties and came up with a
21 per-square-foot basis, is that pretty much what you're
22 doing here?
23 A. No, sir.
24 Q. And why is that different?
25 A. Well, his calculations include land value, for
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1 example, that simply should not be included in a
2 discussion about the value of the property and its
3 differential.
4 What we're talking about here is cost to
5 construct. If for example the contractor had built a
6 house that was 5,300 square feet at a cost of $350 a
7 square foot, the cost would have been $80,875 more.
8 If when the differential was noticed by
9 Mr. Simpson, if he had to construct that differential
10 square footage, it would cost him that amount as well.
11 So here we are talking about cost to construct.
12 Q. In doing your appraisal work, is it appropriate
13 to just figure out the cost to the land and then figure
14 out the square footage and multiply that times $350?
15 A. In some cases.
16 Q. And apparently in this case.
17 A. Yes, I believe so.
18 Q. Did Mr. Simpson tell you that he learned about
19 this discrepancy in the square footage before he even
20 made an offer on the property?
21 A. No.
22 Q. Would that affect your opinion of the
23 diminution in value?
24 A. I haven't analyzed that.
25 Q. Do you recall what Mr. Simpson paid for the
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1 property?
2 A. $3,250,000.
3 Q. If Mr. Simpson knew of this problem prior to
4 making his offer and prior to entering into a contract
5 to purchase the property, that would indicate that there
6 should not be a diminution in value because of course he
7 was a willing buyer who paid knowing those facts,
8 correct?
9 A. Is this a hypothetical question?
10 Q. Yes.
11 A. Hypothetically that would be correct.
12 Q. I take it in some of your appraisal work,
13 you'll look at a subject property and compare that to
14 other comparable properties, correct?
15 A. Yes.
16 Q. And sometimes those properties are not exactly
17 the same size, are they.
18 A. That's correct.
19 Q. And how do you handle that difference in trying
20 to compare the two properties that are not exactly the
21 same?
22 A. I would make an adjustment for that
23 differential.
24 Q. And do you do that on a per-foot basis?
25 A. Yes.
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1 Q. What per-foot basis do you use?
2 A. It depends on the type of property, it depends
3 on the location of the property, it depends on the value
4 of the property; it depends on a number of factors.
5 Q. You don't use $350 a foot, do you.
6 A. In some instances I do. In some instances I
7 use more and in some instances I use less.
8 Q. How do you calculate what that per-foot
9 difference should be?
10 A. Well, it's not a calculation in the strictest
11 sense of two plus two equals four, but as I tried to
12 indicate, the adjustment for differences in square
13 footage have to do with the value level that you're
14 dealing with, the type of property that you're dealing
15 with, the location that the property is located in, and
16 these sorts of factors.
17 Q. Correct. And not the cost to build an extra
18 231 square feet?
19 A. In some instances it is the cost to build 231
20 square feet.
21 Q. And in some instances it isn't?
22 A. And in some instances it is not.
23 Q. In what instances is it appropriate to use a
24 cost to construct and other instances it isn't
25 appropriate to use a cost to construct?
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1 A. When you're dealing with new construction it is
2 appropriate to discuss cost to construct, and if you're
3 dealing with old properties then you're dealing with
4 contributory value.
5 Q. How did you determine the rate of $350 per
6 square foot?
7 A. Well, there were two ways. The first way is
8 that I do a lot of appraisal work of properties from
9 plans and specifications, where I deal with contractors'
10 costs.
11 Contractors' costs are predicated on quality of
12 materials and these sorts of things. And my inspection
13 of the subject property indicated to me that this was a
14 good quality property and that $350 a square foot was
15 approximately appropriate for construction costs on a
16 square-foot basis.
17 The second way that I determined that was to
18 allocate between land and improvements. And given the
19 50 percent allocation of land and improvements, the
20 calculation of square footage divided into the
21 50 percent allocation is, from memory, $325 a square
22 foot. So that correlates with my experience with
23 contractors and appraising from plans and specs.
24 Q. Let me get to that. You would take the
25 $3,250,000, divide it by two, assign half to the land,
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1 half to the building.
2 A. Yes, in this case.
3 Q. And then you divide that by 5,069 square feet.
4 A. I think it was 5,300 square feet.
5 Q. To come up with a cost per square foot.
6 A. Of approximately $325 a square foot by that
7 method.
8 Q. When you use that method you come to the cost
9 to construct the entire house, correct?
10 A. Yes.
11 Q. Including the -- and some square feet of the
12 house are far more expensive than others, right?
13 A. There are zones of a house, yes.
14 Q. The square foot that has a stove in it is worth
15 a lot more than a square foot that has a closet, isn't
16 it.
17 A. I think that the difference in zones of a house
18 distinguishes cost. If you would use the example of a
19 bathroom for example with plumbing, versus a closet, I
20 think that there's probably a difference in that cost to
21 construct.
22 Q. Well, for instance, if the missing 231 square
23 feet, if we call it missing square feet, had been built
24 onto this as say a walk-in closet in a bedroom, you're
25 not suggesting that would cost $80,000 to construct, are
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1 you?
2 A. Well, I didn't predicate that on the
3 construction of a walk-in closet. I'm using an overall
4 cost to construct a house.
5 Q. You think that's fair and appropriate in this
6 case to do that.
7 A. I do.
8 Q. The next document you have is diminution in
9 value that relates to fiberoptics. Do you have an
10 opinion as to the diminution in value as a result of not
11 having fiberoptics?
12 A. Yes, I do.
13 Q. What's that?
14 A. $10,000, approximately.
15 Q. How do you come to that conclusion?
16 A. Well, I think that I have testified that I
17 discussed this with Mr. Simpson, that his discussion
18 with two companies indicated that it would be
19 approximately $100 per drop, that two workers at $80
20 each per hour would be used to install, that there would
21 be some installation difficulties, and that trenching to
22 the guest house would be one of them, and that
23 Mr. Simpson represented approximately $10,000 as the
24 cost to do that.
25 Q. Do you have an opinion as to the market value
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1 of this subject property, the Blanchard property, as
2 opposed, as compared to a property next door with the
3 exact same house that did have fiberoptics?
4 A. Well, I think here we're talking about a cost
5 to install. I think it is cost that we're talking
6 about. And I think that if you're building a house that
7 had fiberoptics, it would cost more to build that house
8 than the one next door, and I think that you would
9 concomitantly charge for more that house. And if the
10 fiberoptics were promised and not installed, then the
11 purchaser would be left to install them himself, such
12 that we're talking about cost.
13 Q. Well, let me ask you this, sir. Have you tried
14 to -- you know what it costs to install; did you make
15 any effort to determine how this would affect the market
16 value?
17 A. Well, let me say this, that in appraising
18 properties of this level, because of their complexity in
19 terms of lot size, lot utility, view, materials and
20 finishes, architectural appeal and a hundred other
21 categories of value, this is a relatively small
22 category. $10,000 relative to a $3,250,000 house is
23 something that I don't think can be extracted from the
24 market accurately.
25 I think, on the other hand, when something is
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1 promised and not delivered, for the owner of the house
2 to have to install that subsequent to the purchase, I
3 think we're talking about cost at that point and not
4 necessarily contributory value.
5 Q. If there had been fiberoptics to say two rooms
6 in this house would you then consider that to have been
7 a misrepresentation about the house having fiberoptics
8 to keep you in touch?
9 A. Well, the question is, was that representation
10 made, I think the answer is yes; and if two rooms had
11 been wired, I think that first of all that wouldn't be
12 typical for construction of this type of house. The
13 fiberoptics I've seen installed in houses are included
14 in every room. But to answer your question more
15 specifically, if two rooms had fiberoptics, then that
16 would be within the realm of representation.
17 Q. Why is it then not the cost to install
18 fiberoptics in two rooms?
19 A. Well, because as I say most of the houses that
20 I see of this level that have fiberoptics installed have
21 them installed in every room. I mean, this is what
22 networking a house is.
23 Q. Can you recall any specific houses as you sit
24 here that you've appraised in say the last year that
25 have fiberoptics?
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1 A. I couldn't give you addresses as we sit here
2 today.
3 Q. Do you have records that would indicate that?
4 A. There may be records that indicate that. I
5 could not specify this address, this house or that sort
6 of thing.
7 Q. Do you recall ever doing an appraisal in trying
8 to compare your subject property to a different subject
9 property, where you made an adjustment as a result of
10 one property having fiberoptics and the other not having
11 fiberoptics?
12 A. Yes. With one property having fiberoptics,
13 being one relatively minor feature of the overall
14 property, yes, I have made adjustments for that reason.
15 Q. Do you recall the adjustment that you made?
16 A. That adjustment would have been made as a part
17 of an overall adjustment with regard to the features of
18 a property, so I couldn't recall exactly what that
19 contributory value was figured at.
20 Q. Would you agree, sir, that fiberoptics to a
21 significant section, cross-section of the marketplace,
22 could care less about fiberoptics?
23 A. Well, I think that we're not dealing with a
24 significant cross-section of the buying public here. I
25 think that we're dealing with an upper-end home, first
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1 of all. I think we're dealing, second of all, with a
2 home in Santa Clara valley where the majority of
3 purchasers would likely be very interested in
4 fiberoptics.
5 Q. So you would anticipate that if a new home
6 builder said to a potential buyer, "For $10,000 you'll
7 get fiberoptics," most buyers would choose that option?
8 A. I think that if you're dealing in properties of
9 this category or price level, I think they indeed would.
10 Q. What's your basis for believing that?
11 A. Well, seeing new construction and the inclusion
12 of amenities and fiberoptics is an amenity that's
13 advertised these days in upper-end homes and even
14 condominiums.
15 Q. So in your opinion it's become commonplace,
16 like every home has to have a dishwasher these days,
17 upper-end homes need to have fiberoptics.
18 A. I think I'm not talking about need here. I
19 think that I've already testified that it's becoming
20 more common for fiberoptics to be included as an amenity
21 and it's becoming more common more rapidly for
22 fiberoptics to be included as an amenity in upper-end
23 homes.
24 Q. Let's move on to loss of use of the swimming
25 pool. I see you've done a calculation for that as well.
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1 A. Yes.
2 Q. Have you determined the loss of use as a result
3 of the Simpsons' inability to have a pool for some
4 period of time?
5 A. Yes.
6 Q. What did you determine?
7 A. My estimate is that it meant a loss of value of
8 approximately $5,000.
9 Q. How did you come to that opinion?
10 A. I performed a survey of alternatives. If they
11 did not have a pool for one year, what would they do
12 instead. And I think the answer to that would be they
13 would go to where a pool is to use that pool.
14 Now, I called the Alpine Hills Tennis &
15 Swimming Club; they told me that membership from day one
16 would be $16,000 to buy in and that after that it would
17 be $75 per month as a monthly charge. Now, I think that
18 that represents the high end of a loss in use.
19 I called another company called Spa Los Altos,
20 and they told me that it was a simple $69 per month to
21 use their facilities. And I think that that represents
22 the low end.
23 And I called another company called Almaden
24 Valley Club One, they told me that membership would be
25 $250 and that it would be $185 per month after that.
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1 And I think that that represents the mid-range.
2 And I think that what I did was take the cost
3 of membership and the cost of monthly dues, which works
4 out to $2,470, and use that as a basis to replace the
5 use of a pool. I then added 50 percent as a, what you
6 might call, hassle factor for having to drive to Almaden
7 Club One instead of having it in your backyard. And
8 that figure is just under $5,000, so I rounded it to
9 $5,000.
10 Q. How did you determine that -- strike that.
11 Mr. Simpson told you that he was without a pool for a
12 year?
13 A. That's correct.
14 Q. Did he tell you why he was without a pool for a
15 year?
16 A. Well, I think that he was without a pool for a
17 year because of the difficulty of obtaining permits
18 because he needed to change his driveway and these sorts
19 of things.
20 Q. Did you discuss with the city how long his
21 permit was delayed as a result of these impervious
22 surface issues?
23 A. No.
24 Q. Did Mr. Simpson give you any time frames in
25 terms of when he first began talking to pool
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1 contractors?
2 A. All I can tell you is that Mr. Simpson
3 represented to me that there was a loss of use for
4 approximately one year.
5 Q. Do you know when he moved into the house?
6 A. Strictly speaking I do not know the date he
7 moved into the house.
8 Q. Okay. Then we have a diminution in value
9 apparently relating to the third structure. You have
10 some opinions as to diminution in value?
11 A. Yes, the answer is yes, I do have an opinion.
12 Q. And can you tell me what your opinion -- tell
13 me your opinion.
14 A. If the property had a third structure, a second
15 secondary living space, it's my opinion that the value
16 of the property would have been approximately $130,000
17 diminished by the absence of such an amenity.
18 Q. And what's your basis for that opinion?
19 A. Well, there are three approaches to value in
20 appraisal work. One of them is the cost approach, one
21 of them is the sales comparison approach, and one of
22 them is the income approach.
23 Now, with a relatively significant amenity like
24 an 800-square-foot detached guest house, cost approach
25 in my opinion doesn't tell the story, doesn't equal
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1 value. In this case I don't think cost equals value.
2 In fact I think that there would be a greater value than
3 it would cost to have that third structure. So we can't
4 use that to measure loss in value.
5 The second approach is the sales comparison
6 approach. Now, guest houses are not sold separately, so
7 we don't have any data about the sale of guest houses
8 for a measure. And in fact, as I've indicated in prior
9 testimony, this sort of home, Mr. Simpson's home on
10 Blanchard, is a complex residential property. And when
11 I say complex I mean that it has a variety, a number, of
12 aspects of value -- size of the house, the quality of
13 the house, the size of the lot, view from the lot or
14 lack of view from the lot -- as I've indicated, a wide
15 number of aspects of value, such that I don't think that
16 it's possible to extract from the market using the sales
17 comparison approach the value of that third house or
18 third structure, if you will.
19 That leaves us only one avenue of approach, and
20 it's a hypothetical or theoretical avenue of approach,
21 and that is this. The income approach can measure the
22 loss in value to a property by the absence of such a
23 structure.
24 What I did in this regard was I reviewed rental
25 data from Monte Sereno and Saratoga and found two houses
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1 that had been rented. One of them is 17334 Parkside
2 Court in Monte Sereno. It was rented for $3,500 in
3 October of '01, 2001; and a second rental property,
4 11955 Walbrook, W-a-l-b-r-o-o-k, Drive in Saratoga,
5 which in December of 2001 was rented for $2,750.
6 Now, subsequent to the rentals of those
7 properties, those properties also sold. The property on
8 Parkside Court sold in August of 2004 for $1,340,000;
9 the property on Walbrook Drive sold in the middle of
10 2002 for $906,000.
11 Dividing the income, the rental income, into
12 the sale price, yields a rent multiplier. And in the
13 case of Parkside Court, that rent multiplier is 372.57.
14 In the case of Walbrook Drive, that gross rent
15 multiplier is 329.45. So we have been able to extract
16 from the market a gross rent multiplier.
17 Now, to figure the value of a third structure
18 in this case, we would need to apply the rent on a
19 per-square-foot basis to that third structure,
20 800 square feet multiplied by a $1.25 a square foot, and
21 let me back up and tell you where I got the $1.25 a
22 square foot.
23 The property on Parkside Court that's rented
24 for $3,500 is reported to be 3,273 square feet, which
25 equates to a rental value of $1.07 on a per-square-foot
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1 basis. The property on Walbrook Drive was rented for
2 $2,750, is reported to be 2,154 square feet, which
3 equates to $1.28 rental figure on a per-square-foot
4 basis. So that the range of rental value of $1.07 to
5 $1.28 is a relatively narrow range.
6 Now, using $1.25 a square foot, that is to say,
7 a figure from the higher end of that range, because it
8 would be new, for example, I calculate the income or
9 potential income from that third structure at $1,000 a
10 month. If you multiply that income of $1,000 a month by
11 a gross rent multiplier, and in this case I chose a
12 gross rent multiplier from the low end, a multiplier of
13 330, you get a return in the market of $330,000.
14 Now, if you subtract the potential cost to
15 build such a structure, and I calculated that cost at
16 $250 a square foot, that's $200,000 to build, subtract
17 it from $330,000 return, for a loss or potential loss of
18 $130,000.
19 Q. So in essence what you're saying is that if
20 this property had a third building, the marketplace
21 would say, hey, I can get a renter in there and I'll pay
22 $330,000 more for this income stream of $1,000 a month.
23 A. Essentially, yes.
24 Q. $12,000 a year.
25 A. Yes.
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1 Q. Why wouldn't they just take their $330,000 and
2 put it in a bank account and earn more money?
3 A. Well, I think that what they would put in the
4 bank account probably would be the $200,000 cost to
5 construct.
6 Q. They have to pay 330 more for the house, don't
7 they, because of this third unit?
8 A. If you'd like to calculate it on that basis,
9 fine. Because the return may or may not be the same as
10 is it would for that third structure, because besides
11 the income, there is the residual value of that third
12 structure. And so in my estimation there is a potential
13 hypothetical or theoretical loss of $130,000.
14 Q. What type of building would you envision would
15 increase the value of this property the most for a third
16 structure?
17 A. Well, I haven't done a highest-and-best-use
18 analysis in that regard, counselor. But if we're
19 talking about a third habitable residential structure,
20 these are the figures that I think represent its value
21 in the market.
22 Q. I understand but I'm not sure why that's the
23 least bit appropriate. For instance, would you
24 anticipate that most people looking to buy this
25 Blanchard house would be looking for a rental unit in
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1 the backyard?
2 A. Not necessarily.
3 Q. In fact you wouldn't be surprised at anyone
4 that wanted to do that, would you.
5 A. No.
6 Q. Would you suspect that maybe people looking at
7 this kind of house may want extra garage space, and that
8 would be a value to people as opposed to a third living
9 unit?
10 A. Well, they have four garage spaces already.
11 Q. So that would just be surplus.
12 A. I think so.
13 Q. Well, they already have a guest house, isn't a
14 guest house just surplus?
15 A. Well, I think that you could argue that. I
16 think that while that may be argued, that indeed there
17 would be a return for a third structure or second guest
18 house in the sense that you can have a son in college in
19 the one guest house and a guest in the other or a
20 caretaker in the other or that sort of thing.
21 Q. Why isn't the cost to construct $350 per square
22 foot?
23 A. Because a guest house is not as complex to
24 build as the main house. For example, if you look at
25 the floor plan of the subject's main house and its
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1 current guest house, one of the differences that's
2 readily perceivable is that there are very many angles
3 on the main house. This drives up the cost to
4 construct.
5 If you look at the guest house, it's a
6 rectangle. So it's not going to cost as much in terms
7 of foundation work or walls or cutting or time to
8 construct a rectangle as it would to construct a very
9 complex architectural property like the main house.
10 There are other factors. You don't always put
11 in necessarily the same high degree of quality and
12 finishes in a guest house that you would in the main
13 house, such that the cost to construct would be less
14 than it would be for the main house.
15 Q. We discussed the quote-unquote "missing"
16 231 square feet, and you said that's worth 350 a foot.
17 A. I believe so.
18 Q. So if someone were to construct the missing
19 230 square feet out of the main house, that would cost
20 350 a foot, but to build a guest house is only 250 a
21 foot?
22 A. Yes.
23 Q. And you would agree that if in fact that guest
24 house costs $350 a square foot, the missing third unit
25 has no value whatsoever; it costs more to construct than
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1 it adds to the value.
2 A. No, I don't think that's accurate. I think
3 that the potential loss would be smaller but I think
4 that there still would be some loss.
5 Q. Have you tried to figure out what the cost of
6 the Blanchard property would be using this $1.25 per
7 foot for rent?
8 A. I'm not sure I understand the question.
9 Q. Can you extrapolate this theory to the entire
10 Blanchard property, in other words, figure out the cost
11 per rent per month, multiply it times the 5300 square
12 feet of the Blanchard property, and come up with the
13 value of the Blanchard property?
14 A. I haven't extrapolated it to that point, no.
15 Q. Now, the two comparables that you looked at
16 were both single-family residences?
17 A. Yes.
18 Q. In your opinion is the cost to rent per square
19 foot higher or lower for single-family residences as
20 opposed to renting an 800-square-foot structure in
21 someone's backyard?
22 A. Well, you know, I think that the answer to that
23 is that these two rental comparables are in fact
24 single-family dwellings, but they're not nearly as nice
25 as our subject property is.
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1 Q. I thought you were talking about only building
2 a $250-per-square-foot house, is that nicer or worse?
3 A. Well, what I'm saying is I don't think that you
4 can derive a rental figure per square foot for the
5 subject's main house based on comparing it to these two
6 houses.
7 These two houses are not in my opinion as nice
8 as the subject's main house. You could say that because
9 they're not as nice, the reduction in quality is
10 commensurate with the reduction in quality for a third
11 living area.
12 Q. I'm not sure I completely understand your math
13 here. You have the rent per square foot at a $1.25,
14 then you have a cap rate of 330, is that basically what
15 that is?
16 A. Gross rent multiplier, yes.
17 Q. And to your understanding, is that the average
18 gross rent multiplier for instance in the apartment
19 complexes and that sort of thing?
20 A. Well, I did not study apartment complexes. I
21 did look into rental value for residential properties in
22 Monte Sereno, Los Gatos and Saratoga.
23 Q. So in your opinion in this case, for instance,
24 if someone were to buy this Blanchard property now
25 improved, over the next 330 months, they would recoup
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1 their initial investment by renting it out at $1,000 a
2 month.
3 A. I think by the math that would be the case.
4 Q. 30 years.
5 A. Well, I think that besides the income, you also
6 have the residual value of the structure itself.
7 Q. Lastly, I think we're at last, you've
8 calculated diminution in value as a result of zoned
9 heating?
10 A. Well, yes, I did.
11 Q. Let me show you that document. What's your
12 opinion regarding that?
13 A. Well, originally I was asked to calculate a
14 diminution in value for zoned heating. Apparently it
15 was represented, the subject property was represented as
16 having three zones and there were only two delivered.
17 Apparently subsequently the third was put in, and so
18 this becomes a moot question.
19 Q. Well, let me ask you about your opinions. You
20 determined that it would have a diminution in value of
21 $13,800 for having two zones as opposed to three zones?
22 A. Yes.
23 Q. And how did you make that calculation?
24 A. Now, if you'd like to pay me for my time to go
25 over a moot point I'd be happy to do it.
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1 Q. I would, yes.
2 A. Good. I contacted two contractors and I asked
3 them what would be the cost of putting in a third zone,
4 describing the subject property, describing its age and
5 these sorts of things.
6 And one contractor said, well, you'd have to
7 build a platform for the unit, you need to run gas and
8 electric, duct work, cold air return, you'd need to buy
9 the forced air and air-conditioning unit, you'd need to
10 retrofit if you have to destroy any walls or that sort
11 of thing, and he said generally speaking he thought
12 probably about $12,000 would do it.
13 Talking with the second contractor, he went
14 through generally similar categories and such and came
15 up with an estimate of 10,000-$13,000, for the
16 installation of a third zone. So there's a high degree
17 of correlation between those two contractors and their
18 opinions of adding a third zone of heating or
19 air-conditioning.
20 And so I chose the $12,000 figure as most
21 representative, added a factor for management
22 compensation, a factor for convenience, and that equals
23 $13,800.
24 Q. Did Mr. Simpson tell you how much it cost to
25 have this work done?
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1 A. No.
2 Q. So in total, do you have a total for the
3 diminution in value as a result of all these issues
4 we've been talking about, exclusive of the heating and
5 air-conditioning?
6 A. I've got to tell you, counselor, I have not
7 totaled them up. I don't know if you included this in
8 your calculations (indicating).
9 Q. I'm not going to add them all up, I just wanted
10 to go through it because I can't add or subtract any
11 more without a calculator.
12 We would add up to $10,000 for the fiberoptics?
13 A. Yes.
14 Q. $5,000 for the loss of use of the pool?
15 A. Yes.
16 Q. $80,875 for the "missing" quote-unquote
17 231 square feet?
18 A. Yes.
19 Q. $130,000 as a result of the missing third
20 building?
21 A. Or its potential.
22 Q. Right. And then $64,000 for the cost for
23 replacing driveway, management compensation of 6400, and
24 one month inconvenience, 3200, we come up with a total,
25 whatever that is.
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1 A. That's correct.
2 Q. And are there any other issues that you feel
3 affect the value of this property, other than what
4 you've already gone through?
5 A. No. I think that that is generally an accurate
6 summation of my opinion with regard to the loss of value
7 for the subject property.
8 Q. Other than your time here today, how much in
9 total have you spent doing this work?
10 A. Well, if I can refer to my file?
11 Q. Sure.
12 A. Something on the order of eight, nine or
13 10 hours. I'm not going to add all this up in my head
14 but something in this order.
15 Q. I think we've talked about every piece of paper
16 basically in your file except for this Infolink
17 printout. How did that assist you in your work?
18 A. This is a package of data of Multiple Listing
19 Service sheets from the Multiple Listing Service that
20 serves Monte Sereno, Saratoga, Los Gatos, that sort of
21 thing.
22 I drew this data just to review this data with
23 regard to refreshing my knowledge of that area. So
24 while that might be the case, it doesn't bear directly
25 in any of my opinions of value.
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1 Q. It's just background.
2 A. That's correct.
3 Q. One of the things I asked you to bring was a
4 list of any publications which you've authored. Have
5 you authored any publications?
6 A. No.
7 Q. Do you teach any seminars?
8 A. Yes, I teach seminars and courses.
9 Q. What seminars and courses have you taught?
10 A. I've taught a seminar in historic and
11 high-value homes for the Appraisal Institute. And I
12 should mention that the Appraisal Institute is the
13 preeminent national organization for professional
14 appraisers.
15 I've taught a seminar in how to become a real
16 estate appraiser. I've taught a seminar in the use of
17 the new URAR forms. I've taught a seminar in cost
18 approach in the changing market. I've taught a course
19 in fundamental appraisal course, appraisal procedures,
20 for the Appraisal Institute. And off the top of my head
21 I think that's a fair list.
22 Q. When you teach those courses, do you hand out
23 material?
24 A. On occasion.
25 Q. Is that material you've authored?
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1 A. Well, it's not material that I would say that
2 I've authored. It's for -- Oh, I've also done break-out
3 sessions with seminars for the national fall conference
4 for the Appraisal Institute. And in those occasions,
5 I've put together data, that is to say, data sheets with
6 regard to number of transactions in a given market area,
7 median sale price and days on market. So I wouldn't
8 think of those as having authored, I would think of
9 those as compiling statistics.
10 Q. Do you know if any of these courses are
11 available on videotape or audiotape from the American
12 Appraisal Institute?
13 A. It's just the Appraisal Institute.
14 Q. Appraisal Institute, I'm sorry.
15 A. I don't recall that any of them have been
16 videotaped or audiotaped.
17 Q. Do you plan on doing any additional work in
18 this case?
19 A. At this point I have not been asked to do any
20 additional work. Certainly if this goes to trial I will
21 do a thorough review of my file, and if Mr. Minoletti
22 cares for me to do any additional work I certainly would
23 undertake it given time constraints, but nothing has
24 been asked of me so far.
25 Q. As you sit here do you anticipate doing any
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1 additional work?
2 A. No.
3 Q. Other than reviewing the work you've already
4 done.
5 A. (Witness nods head up and down.)
6 Q. Is there additional work that you would like to
7 do that you haven't done yet?
8 A. Not that I can think of as I sit here today.
9 Q. If you do any additional work or change your
10 opinions, can you let me know so we can depose you
11 again?
12 A. Most certainly.
13 Q. Okay. I don't think I have any more questions.
14 MR. THOMAS: Let's go off the record.
15 (Discussion off the record.)
16 EXAMINATION BY MR. THOMAS
17 Q. Mr. Grey, you described three methodologies
18 that are commonly used in arriving at value. If I'm not
19 mistaken I think there's the cost approach, the income
20 approach and the sales comparison approach?
21 A. Yes.
22 Q. And did you attempt to do a sales comparison
23 approach with respect to what's been called the missing
24 square footage issue?
25 A. No. I reviewed data and it became apparent
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1 when I reviewed data the properties of this sort in that
2 location have a high degree of variability. And
3 therefore, a further analysis into the sales comparison
4 approach would likely be fruitless.
5 On the other hand, I don't think that it's the
6 sales comparison approach in this regard that's most
7 appropriate to measure the loss in value. I think the
8 cost approach is the most appropriate measure.
9 Q. When you say it would likely be fruitless, what
10 do you mean by that?
11 A. Well, because of the high degree of variability
12 of these types of properties.
13 Q. And describe for me what you mean by degree of
14 variability.
15 A. Well, these types of properties, that is to
16 say, mid-, upper-end properties, have a great degree of
17 differential or variability in lot size, view, size of
18 dwelling area, amenities, and a number of other aspects
19 of value. The more custom a property is, the more
20 variable the aspects of value are. And as I've said
21 with this property, it's got a great many aspects of
22 value that vary from other properties.
23 You could have two properties that both sold
24 for $3.25 million. One of them may be a three-acre lot
25 with a 900-square-foot house, one of them may be
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1 two-thirds acre lot with a 4,000-square-foot house.
2 This is what I mean by a high degree of variability
3 between properties of this register or level.
4 Q. Well, don't appraisers in using the comparable
5 sales methodology commonly make adjustments to allow for
6 those differences and variations in the properties?
7 A. Yes. There are two types of adjustments:
8 qualitative and quantitative. And appraisers use both
9 of those types of adjustments.
10 Q. And how do those differ?
11 A. Well, as the name implies, when you make a
12 qualitative adjustment you're writing down the aspects
13 of value of a comparable property in terms of their
14 inferiority, similarity or superiority relative to the
15 subject property.
16 In quantitative adjustments you quantify those
17 differences in dollar amounts, either on a lump-sum
18 basis, a per-square-foot basis, a percentage basis or
19 that sort of thing.
20 Q. Is it your testimony that it would be improper
21 methodology to utilize a sales comparison method for
22 valuation of this property taking into account the
23 possibility of adjustments?
24 A. Well, I think I've testified that the cost
25 approach is more relevant or pertinent in this matter
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1 with regard to the differential of what was promised and
2 what was delivered.
3 Q. Sure. But somebody else could believe that a
4 sales comparison methodology might be more appropriate;
5 is that true?
6 A. Somebody could believe many things.
7 Q. Uh-huh. Would you find it incorrect in terms
8 of your experience and training as an appraiser to use a
9 sales comparison methodology to determine what
10 diminution in value if any resulting from the missing
11 square footage?
12 A. Well, I think I've been asked that question and
13 answered that in my opinion the cost approach here is
14 more relevant or pertinent. The newer the house, and
15 when we're dealing with new construction as we are here,
16 the more relevant the cost approach is.
17 And my assertion is that if the contractor had
18 built the 5300 square feet instead of the 5,069, that's
19 my estimate of what it would have cost to build it. Or
20 if the homeowner had to build that additional 231 square
21 feet, that's approximately what it would have cost to
22 build. And because we're talking about new
23 construction, I think that that becomes more relevant or
24 germane than sales comparison approach.
25 Q. Are you aware there have been two appraisal
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1 reports of this property?
2 A. I'm aware that there is another appraiser
3 report, there may be two. But that's as far as I know
4 about them.
5 Q. Have you seen them?
6 A. I have not.
7 Q. Have you been told what the conclusions of
8 those appraisal reports have been?
9 A. I know nothing about them whatsoever.
10 Q. Is the data you used to determine that the
11 sales comparison approach would not be relevant
12 contained somewhere in your files?
13 A. Is there a written statement to that effect in
14 my files?
15 Q. Well, a note of properties or a reference to
16 what you considered?
17 A. No, I don't think there's anything written in
18 my files that specifies that this approach is more
19 important than that approach with regard to the 321
20 (sic) square feet.
21 Q. I believe you testified you made a preliminary
22 review of data and determined that it would be
23 fruitless, or words to that effect. What data did you
24 look at to make that determination, is what I'm asking
25 you.
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1 A. This package of data that serves as a
2 background information for this market area, this house,
3 this city and this value level.
4 Q. What's in that package of data?
5 A. It is a great number of sales of single-family
6 dwellings, predominantly in Saratoga and Monte Sereno.
7 Q. But you didn't consider those in arriving at
8 your opinion.
9 A. Well, I did not consider them in arriving at my
10 opinion, because again, the high degree of variability
11 and the new age, that is to say, the fact that the
12 subject is new construction, pointed me in the direction
13 of the cost approach as being the most relevant approach
14 in this matter.
15 Q. And would you explain to me again, because I'm
16 not sure I understood, why the cost approach wasn't the
17 proper methodology to determine the diminution in
18 valuation for the missing third structure, as we've
19 called it.
20 A. Well, when there's a different basis for
21 valuation, the basis for the missing 321 (sic) square
22 feet would be the cost to construct what was promised,
23 when it's new construction.
24 With regard to the third structure, it was not
25 the representation of the developer that he was going to
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1 build a third structure or that he was going to supply a
2 third structure. Therefore, it's not his cost that's of
3 importance here. The return to the overall property
4 should the owner build such a structure in the future is
5 what's important here.
6 Q. And that return is gauged in part on the
7 ability to receive income from that third structure; is
8 that your testimony?
9 A. Well, what I meant to testify and what I think
10 I testified to was that lacking the other two approaches
11 to value, being left with the income approach to value,
12 that it is a hypothetical or theoretical gauge or
13 measure of the contributory value of that third
14 structure.
15 Q. And that would be a value derived from the
16 ability to receive income.
17 A. That's right.
18 Q. And that income would be the result of renting
19 out this third structure.
20 A. That's right.
21 Q. Okay. Thank you, I don't have anything
22 further -- actually, I'm sorry, I do.
23 Did you see the documentation, did either
24 Mr. Minoletti or Mr. Simpson provide you with the
25 documentation that pertained to the costs incurred in
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1 removing and replacing the driveway?
2 A. I did not see that documentation. I took their
3 representation of $64,000 as an honest statement.
4 MR. THOMAS: Okay, that's fine. Thanks.
5 FURTHER EXAMINATION BY MR. KOSS
6 BY MR. KOSS:
7 Q. I take it, sir, that using the income approach
8 to the "missing" quote-unquote 231 square feet wouldn't
9 be appropriate?
10 A. No, I don't believe so.
11 Q. It wouldn't be appropriate to say that
12 231 square feet could be another bedroom and you could
13 rent out a room to a border?
14 A. I don't think that that would be the most
15 appropriate manner of calculating or ascertaining or
16 estimating that difference in value.
17 MR. KOSS: No other questions, thank you.
18 MR. THOMAS: Are you going to mark any of
19 those?
20 MR. KOSS: Yes. What I want to do is photocopy
21 all these things and mark it. Let's do that.
22 Why don't we call what we call your master file
23 Exhibit 2, why don't we call the Client Contact file
24 Exhibit 3, the Subject file, or subfile I guess I should
25 be calling it, as Exhibit 4, and the Data file as
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1 Exhibit 5.
2 (Whereupon, Defendant's Exhibits 2
3 through 5 were marked for
4 identification.)
5 BY MR. KOSS:
6 Q. I guess the last thing we'll put on the record
7 is, Mr. Grey, I have a check here for you for $600 which
8 is I think about how much time I spent.
9 A. The other $75?
10 Q. What $75?
11 A. 10:00 o'clock to 12:15 is 2.25 hours.
12 MR. MINOLETTI: We didn't start till about
13 10:15.
14 MR. KOSS: I think that's about what time we
15 started.
16 Did you make the mark.
17 THE REPORTER: We started at 10:19.
18 THE WITNESS: I think Mr. Minoletti has
19 corrected my notion of starting time.
20 (Discussion off the record.)
21 BY MR. KOSS:
22 Q. We've been discussing this, you're going to
23 take your CD and make copies for Mr. Thomas and myself?
24 A. I am going to take this CD with photos that I
25 took during my inspection of the subject property and
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1 make copies of those photos and provide you each with a
2 copy.
3 Q. Otherwise the court reporter will take the
4 exhibits and copy them, fair enough?
5 A. Yes.
6 MR. MINOLETTI: Return them directly to
7 Mr. Grey.
8 THE REPORTER: Yes.
9 (12:18 p.m.)
10
11
12 ____________________________
13 BRIAN T. GREY
14
15 ____________________________
16 Date
17
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20
21
22
23
24
25
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1 I do hereby certify that the witness in the
2 foregoing deposition was by me duly sworn to testify the
3 truth, the whole truth and nothing but the truth in the
4 within-entitled cause; that said deposition was taken at
5 the time and place therein stated; that the testimony of
6 the said witness was reported by me and was transcribed
7 under my direction into typewriting; that the foregoing
8 is a full, complete and true record of said testimony;
9 and that the witness was given an opportunity to read
10 and correct said deposition and to subscribe the same.
11 I further certify that I am not of counsel or
12 attorney for either or any of the parties in the
13 foregoing deposition and caption named, or in any way
14 interested in the outcome of the cause named in said
15 action.
16 Should the signature of the witness not be
17 affixed to the deposition, the signature has been waived
18 by stipulation; or the deposition was not signed for the
19 following reason:
20 _______________________________________________________.
21 IN WITNESS WHEREOF, I hereunto certified the
22 foregoing transcript by authority of the Code of Civil
23 Procedure, Section 2093(b).
24 Date:_______________________ __________________________
JOANNE HAAG
25 CSR NO. 4716
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