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COMPLETE APPRAISAL 0 SUMMARY REPORT
of
Martel Construction, Inc., a Commercial Property
1109 & 1203 S. Church Ave.
Bozeman, Gallatin
MT, 59715
As of
March 1, 2006
Prepared For
City of Bozeman, Empire Building Materials, Ponderosa Land Development, &Martel
Construction
Prepared by
Ross Wenger,
Licensed Residential Appraiser
MT-753
and
Jerry R. Gossel,
Certified General Appraiser
MT-106
Appraisal Services
P.O. Box 1076
67A W. Kagy Blvd.
Bozeman, MT 59771
File 4- 06-095
APPRAISAL SERVICES
P.O.Box 1076 406-587-5044
67A Kagy Blvd, 406-587-5481
Bozeman,MT 59715 rossw@montana.com
March 1, 2006
City of Bozeman, Empire Building Materials,Ponderosa Land Development, &Martel
Construction
Re: Martel Construction, Inc.
1109 & 1203 S. Church Ave.
Bozeman, Gallatin
MT, 59715
Dear City of Bozeman, Empire Building Materials, Ponderosa Land Development, & Martel
Construction:
At your request, we have prepared an appraisal for the above referenced property. The purpose
of this appraisal is to estimate the market value of the subject property's fee simple estate for
business purposes. This appraisal is intended for the use of the client.
This is a Complete Appraisal. All applicable research and valuation analyses have been applied.
This is a Summary Report as defined by Uniform Standards of Professional Appraisal Practice
under Standards Rule 2-2(B). This format provides a summary of the appraisal process, subject
and market data and valuation analyses.
We certify that we have no present or contemplated future interest in the property beyond this
estimate of value. Your attention is directed to the Limiting Conditions and Assumptions,
located on page 9. Acceptance of this report constitutes an agreement with these conditions and
assumptions.
March 1, 2006
Page 2
In our opinion,the value of the subject property, as of March 1, 2006, was as follows:
Subject Property "As Vacant" Premise, Fee Simple Estate
Value Conclusion $2,300,000
Further, we estimate the market exposure period necessary for the subject to have achieved this
value to be 1-6 months.
Respectfully submitted,
Appraisal Services
/�7
Ross Wen°g er,��3 R. Go T;
-106
Licensed Residential Appraiser , -'Certified eneral Appraiser
TABLE OF CONTENTS
Summary of Important Facts and Conclusions............................................................................... 5
AppraisalScope............................ ................................................................................................. 7
Limiting Conditions and Assumptions .......---_^.^__--..~~.....----.---.._------ g
Definitionof Market Value........................................................................................................... 10
PropertyRights Appraised............................................................................................................ l0
RegionalMap..........................................................^,............................................ ^.^.^^^.^.~^......... 12
Purpose and Intended Use/User..................................................................... .............................. 13
Market Area, City,Neighborhood, and Location Data................................................................. 13
Property Description........................................................... 18
Subject Photographs-^.—.—_.....~...—.--~^.~..---.~..._------.--^..^^.__.—_22
Zoning...........................................................................................................................................27
Assessmentand Taxes ..................................................................................................................2Q
Sale/Transfer History................................................................... ................................................ 3O
Highestand Best Use.........................................................._^^------~..~..~~...^.~~'^~^^~~'`'30
ValuationMethodology ............................................ ..................................................................3l
Sales Comparison Approach for Potential Use.............................................................................3Z
Comparables '~'^~----~-^^--'---.....--.—_..^-~----.—.~......,........~.....,37
Map................................................ ....................................................................]7
AnalysisGrid............................................................................................................................ 37
ComparableSalo Adjustments.................................................................................................. 3g
Sales Comparison Approach for Potential Use Conclusion .....................................................4D
Developer's Cost 0fPotential Improvements.--,-^._--.—...,....------------.--4l
CostApproach Conclusion..................... ................................................................... .............4l
Reconciliation Vf Land Value...................................... ................................................................43
ValueConclusion......................................................................................................................4]
CertificationStatement ...............................^......................................................^......^..........^ .......44
Addenda...............................................................................................................-^^^,,^^^—..^..-^.^45
Appraisal Services 4
Summary of Important Facts and Conclusions
GENERAL
Subject: Martel Construction, Inc.
1109 & 1203 S. Church Ave.
Bozeman, Gallatin County
MT, 59715
Owner: Martel Construction, Inc.
1109 & 1203 S. Church Ave.
Bozeman, Gallatin County
MT, 59715
Tax Identification: RGH2192 & RGH4253
Date of Report: March 2, 2006
Date of Value: March 1, 2006
Property Rights Appraised: Fee Simple
Intended Use: Business Purposes
Intended User(s): Client
Appraisal Purpose: Market Value
Taxes/Parcel: $11,750.20 and $8,341.27
Total Taxes: $20,091.47
Appraisal Purpose: Market Value
PROPERTY
Land Area: Tract 3 COS 236, 6.02 acres
Tract 26 Bozeman Creek Annexation, 4.15 acres
Total: 10.17 acres
Usable: 5.09 acres
Excess: 5.08 acres
Appraisal Services 5
Improvements: Building Type: Industrial Warehouse
Year Built/Rehabbed: 1968/1991
Condition: Average
Number of Stories: I
Gross Building Area: 20,862
Net Leasable Area: 20,862
Number of Units: 4
Zoning: R-S, Residential Suburban
Highest and Best Use The highest and best use of the subject, as vacant, is for R-S
As Vacant: residential suburban development.
v
Reconciled Value Conclusion: Premise: "As Vacant"
Estate: Fee Simple
Value Conclusion: $2,300,000
Since the highest and best was determined to be as vacant,the land value is the appraiser's
estimation of value. The appraiser estimated the land value through extraction
1. A complete comparable sales approach was applied to the subject's potential use.
2. A developer's cost was applied to the potential improvements as stated in the highest and
best use analysis.
3. Then the developers cost of the improvements was subtracted from the appraiser's
estimation of value through the comparable sales approach to determine a land value that
is considered to be financially feasible to a developer
Comparable Sales Approach at its Potential Use $4,500,000
Less Cost of Demolition of Existing Structures -$400,000
Less Cost of Infrastructure -$118101000
Equals Indicated Land Value $2,290,000
Appraisal Services 6
Appraisal Scope
According to the Uniform Standards of Professional Appraisal Practice, it is the appraisers
responsibility to determine the appropriate scope of work. USPAP defines the scope of work as:
The amount and type of information researched and the analysis applied in an assignment. Scope
of work includes,but is not limited to, the following:
• the degree to which the property is inspected or identified;
• the extent of research into physical or economic factors that could affect the property;
• the extent of data research; and
• the type and extent of analysis applied to arrive at opinions or conclusions.
SCOPE OF WORK
Appraisal Type: This is a Complete Appraisal. All applicable research
and valuation analyses have been applied.
Report Type: This is a Summary Report as defined by Uniform
Standards of Professional Appraisal Practice under
Standards Rule 2-2(B). This format provides a
summary of the appraisal process, subject and market
data and valuation analyses.
Inspection: A complete inspection of the site was made, and
photographs were taken.
Highest and Best Use Analysis: A complete analysis of highest and best use, both as
vacant and as improved, was made. The analysis
concluded the highest and best use is as vacant.
Market Area and Analysis of
Market Conditions: A complete analysis of market conditions was made.
Valuation Analyses
Since the highest and best was determined to be as vacant,the land value is the appraiser's
estimation of value. The appraiser estimated the land value through extraction
1. A complete comparable sales approach was applied to the subject's potential use.
2. A developer's cost was applied to the potential improvements as stated in the highest and
best use analysis.
3. Then the developers cost of the improvements was subtracted from the appraiser's
estimation of value through the comparable sales approach to determine a land value that
is considered to be financially feasible to a developer
Appraisal Services 7
Comparable Sales Approach at its Potential Use $4,500,000
Less Cost of Demolition of Existing Structures -$400,000
Less Cost of Infrastructure -$1,810,000
Equals Indicated Land Value $2,290,000
Appraisal Services $
Limiting Conditions and Assumptions
Acceptance of and/or use of this report constitutes acceptance of the following limiting
conditions and assumptions; these can only be modified by written documents executed by both
parties.
This appraisal is to be used only for the purpose stated herein. While distribution of this
appraisal in its entirety is at the discretion of the client, individual sections shall not be
distributed; this report is intended to be used in whole and not in part.
No part of this appraisal, its value estimates or the identity of the firm or the appraiser(s) may be
communicated to the public through advertising, public relations, media sales, or other media.
All files,work papers and documents developed in connection with this assignment are the
property of Appraisal Services. Information, estimates and opinions are verified where possible,
but cannot be guaranteed. Plans provided are intended to assist the client in visualizing the
property; no other use of these plans is intended or permitted.
No hidden or unapparent conditions of the property, subsoil or structure, which would make the
property more or less valuable, were discovered by the appraiser(s) or made known to the
appraiser(s). No responsibility is assumed for such conditions or engineering necessary to
discover them. Unless otherwise stated,this appraisal assumes there is no existence of hazardous
materials or conditions, in any form, on or near the subject property.
Unless stated herein, the property is assumed to be outside of areas where flood hazard insurance
is mandatory. Maps used by public and private agencies to determine these areas are limited
with respect to accuracy. Due diligence has been exercised in interpreting these maps, but no
responsibility is assumed for misinterpretation.
Good title, free of liens, encumbrances and special assessments is assumed. No responsibility is
assumed for matters of a legal nature.
Necessary licenses,permits, consents, legislative or administrative authority from any local, state
or Federal government or private entity are assumed to be in place or reasonably obtainable.
It is assumed there are no zoning violations, encroachments, easements or other restrictions
which would affect the subject property, unless otherwise stated.
The appraiser(s) are not required to give testimony in Court in connection with this appraisal. If
the appraisers are subpoenaed pursuant to a court order, the client agrees to pay the appraiser(s)
our regular per them rate plus expenses.
Appraisals are based on the data available at the time the assignment is completed.
Amendments/modifications to appraisals based on new information made available after the
appraisal was completed will be made, as soon as reasonably possible, for an additional fee.
Appraisal Services 9
Definition of Market Value
The definition of"Market Value", as defined by the Office of the Comptroller of Currency
(OCC) under 12 CFR, Part 34, Subpart C-Appraisals, 34.42 Definitions, the Board of Governors
of the Federal Reserve System (FRS) and the Federal Deposit Insurance Corporation in
compliance with Title XI of FIRREA, as well as by the Uniform Standards of Appraisal Practice
as promulgated by the Appraisal Foundation, is as follows.
Market value means the most probable price which a property should bring in a
competitive and open market under all conditions requisite to a fair sale, the buyer
and seller each acting prudently and knowledgeably, and assuming the price is not
affected by undue stimulus. Implicit in this definition is the consummation of a sale
as of a specified date and the passing of title from seller to buyer under conditions
whereby,
1. Buyer and seller are typically motivated;
2. Both parties are will informed or well advised, and acting in what they
consider their own best interest;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of financial
arrangements comparable thereto; and
5. The price represents the normal consideration for the property sold unaffected
by special or creative financing or sales concessions granted by anyone
associated with the sale.
Property Rights Appraised
Fee Simple:
A fee simple interest is the most complete interest in real property. A fee simple interest is the
absolute ownership unencumbered by any other interest or estate, subject only by limitations
imposed by the governmental powers of taxation, eminent domain, police power, and escheat.
Leased Fee:
A Leased Fee position is defined in the Dictionary of Real Estate Appraisal, 4th ed. (Chicago:
Appraisal Institute, 2003), as:
An ownership interest held by a landlord with the rights of use and occupancy
conveyed by a lease to others. The rights of the lessor (the leased fee owner) and the
leased fee are specified by contract terms contained within the lease.
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Although, specific details of leases vary, a leased fee generally provides the lessor with the
following;
• Rent to be paid by the lessee under stipulated terms
• The right of repossession at the termination of the lease
• Default provisions
• The right of disposition , including the rights to sell, mortgage, of bequeath the property,
subject to the lessee's rights, during the lease period
Appraisal Services 11
Regional Map
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Appraisal Services 12
Purpose and Intended Use/User
The purpose of this appraisal is to develop an opinion of Market Value of the property of
interest. The Intended Use of this appraisal is for business purposes, subject to the stated Scope
of Work,purpose of the appraisal, reporting requirements of this appraisal report form, and
Definition of Market Value. No additional Intended Users are identified by the appraisal.
Market Area, City, Neighborhood, and Location Data
The four forces that influence value in a market are social, economic, governmental, and
environmental. This analysis identifies the characteristics that influence value trends in the past
and that may affect values in the future.
Bozeman,the county seat, is located in the southwest portion of the state in Gallatin County.
The county area is 2,510 square miles. Billings, the state's largest city, is located 150 miles to the
east; Butte is located approximately 80 miles to the west. Helena, the capitol, is located 90 miles
to the north. Gallatin County is one of the fastest growing areas in the state.
Social Influences
In the market area analysis, the social characteristics that influence property values include:
population density, which is important in central business districts and high-rise residential
neighborhoods; skill levels or employment categories, which are important in industrial or high-
technology districts; age levels, which is important in residential neighborhoods; house-hold size;
employment status, including types of unemployment; extent of crime; extent of litter; quality
and availability of educational, medical, social, recreational, cultural, and commercial services;
and presence of community organizations.
According to the Census and Economic Information Center, Montana Department of Commerce,
the population of Montana in 2003 was 917,621. According to the 2000 Census, the population
of Gallatin County was 67,831 residents, and Bozeman was 27,509 residents. Woods and Poole
Economics estimated the population of Gallatin County in 2004 at 75,637, which make it the
fastest growing county in Montana. According to the Economic Information Center the
population of Bozeman in 2003 was 30,753. The census figures include some students as heads
of household and fluctuations in university enrollment may affect the population data.
Gallatin County has a well-educated work force. Of the county adult population over 25 years of
age, 41%have college degrees; in Bozeman, that number increases to 49.5%.
Gallatin County has experienced steady population growth in recent decades. More than 90% of
the population lives in Bozeman or within 30 minutes of Bozeman. The age distribution for
Gallatin County in 2000 is as follows: under 10, 11.7%; 10-19, 15.2%; 20-29, 21.9%, 30-39%;
40-49, 16.0%; and 60 & over, 11.4%. The age distribution for Bozeman in 1.990 is as follows:
under 10, 11.4%; 10-19, 15.7%; 20-29, 31.2%; 30-39, 16%; 40-49, 9.3%; and 60 & ,over, 11.4%.
The average persons per household in Gallatin County for 2000 were 2.46 and for 1990 were
2.50. The average persons per household in Bozeman for 1990 were 2.27.
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According to the Montana Employment& Labor Trends Quarterly; the civilian labor force of
Gallatin County in December of 2000 was 43,401, the number of employed workers was 42,114,
and the number of unemployed was 1,287, with an unemployment rate of 3.0%. The civilian
labor force in December of 2001 was 44,329,the number of employed workers was 42,937, and
the number of unemployed was 1,053, with an-unemployment rate of 1.2%.
The historical unemployment rates are as follows:
Year Montana% Gallatin County%
2004 3.84 2.39
2003 4.4 2.5
2002 4.6 2.7
2001 4.6 2.5
2000 4.9 2.7
1999 5.2 2.9
1998, 5.6 3.0
1996 5.3 2.6
1994 5.1 2.3
1992 6.9 5.4
The Bozeman Police Division, with 43 law enforcement officers and 7 civilian employees,
provides law enforcement protection to city residents and visitors. The department has a
community policing philosophy and has implemented many positive programs over the past few
years. In 2001,the number of crimes in Bozeman is as follows: homicide, 3; robbery, 7; assault,
12; burglary, 106; larceny, 1071, vehicle theft, 109; and rape, 24.
Gallatin County has 32 schools in 16 school districts, offering educational programs from
kindergarten through high school. Gallatin County's total. enrollment of students, including
private school numbers is 10,942.
Montanan State University is one of two university systems within the state. During the 2005
fall semester, 12,300 students were enrolled at MSU-Bozeman. The University offers
baccalaureate degrees in 50 fields, master's degrees in 40 fields and doctorates in 13 fields.
Bozeman has a full range of medical professionals, several clinics,two urgent care clinics, a low-
income clinic, and a modem short-term acute care hospital. There are approximately 100 doctors
and 35 dentists, 114 practical and 377 registered nurses in the community.
The number of increasing passenger boarding at Gallatin Field Airport is an indication of
strength in the tourism and recreation in Gallatin County. Bozeman is a destination point to
Yellowstone National Park,which continues to attract over 3 million visitors each year. The
alpine skiing is excellent with Bridger Bowl located 15 miles north of town and Big Sky, a
destination resort ski area, located 50 miles south of town. Both ski areas offer beginner to
expert ski runs. There are numerous cross-country ski trails in the area. The area is known for
its fishing on three rivers, the Gallatin, the Jefferson, and the Madison, which form the Missouri
River. Access to the Yellowstone River in Park County is 25 miles east of Bozeman.
Appraisal Services 14
There are 48 religious organizations in the Bozeman area representing a variety of affiliations
and denominations.
Bozeman has more than 70 motels/hotels with 1,400 rooms and more than 50 restaurants.
Economic Influences
Economic considerations relate to the financial capacity of a market area's occupants and their
ability to rent or own property,to maintain it in an attractive and desirable condition, and to
renovate it when needed. The economic characteristics include; mean and median household
income,per capita income, income distribution, extent of owner occupancy,property rent levels
and trends, property value levels and trends, vacancy rates for various types of property, and
amount of development.
The economy in Gallatin County and Bozeman is both broad based and diverse,with 3,400
establishments employing over 41,000 people. Major sectors of the economy, in addition to
Montana State University, include recreation,retail trade, agriculture, services, manufacturing,
and natural resource-based industry such as mining and forestry. Growing segments within these
sectors are technology-based, and sports and recreation-based businesses that find university
resources and an educated and recreational active labor force to be significant assets.
The largest employer in the area is Montana State University, which employs approximately
3,500 personnel. Employment numbers indicate that retail trade employee's make-up 26% of the
covered labor force, with government at 20%, and services at 25%. Manufacturing is the next
largest segment, employing 9% of the covered labor force.
In 1999 the median household income for Montana was $33,024 with a per capita income of
$17,151. The median household income for Bozeman was $32,156 with a per capita income of
$16,104.
Housing statistics for 2000 are as follows; Residential housing units in Montana 412,633, and for
Bozeman 10,877. The persons per household in Montana were 2.45 and Bozeman was 2.26 with
the homeownership rate in Montana of 69.1% and Bozeman was 42.9%.
Residential housing starts in Bozeman for single-family and multi family units were as follows:
1997, 309; 1998, 423; 1999, 546; 2000, 415; 2001, 422; 2002, 526; 2003, 612; 2004, 881.
Source: City of Bozeman Planning Office.
The average rental prices in Bozeman as of May 2005 for apartments were: I bedroom $300-
$500; 2 bedrooms $500-$795; 3 bedrooms $650-$1000. The average studio rental was $275-
$400. The average house rental was. 2 bedrooms $600-$850 and 3 bedrooms $80041,200.
Source: Peak Property Management.
According to the City of Bozeman Building Division the new construction valuation, including
both residential and commercial for Bozeman:
2000 $81.2 million
2001 $78.9 million
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2002 $85.8 million
2003 $133.1 million
2004 $144.2 million
Governmental Influences
Governmental considerations relate to laws, regulations, and property taxes that affect properties
in the market area and the administration and enforcement of zoning laws, building codes, and
housing and sanitary codes. The governmental characteristics include; property tax burden
relative to services provided compared with other areas in the community; special assessments;
zoning, building, and housing codes; quality of public services, such as fire and police protection,
schools, and other governmental services; and environmental regulations.
In 1921, the city of Bozeman adopted a Commissioner-Manager form of government. The day-
to-day operations of local government are administered by the City Manager. All department
heads are responsible to the City Manager, who is in turn responsible to the City Commission.
Five commissioners are elected at large for four-year overlapping terms. The City Judge, the
only other elected official, is also elected at large for a four-year term.
The city provides water and sewer services that is supported by user fees. Garbage collection
and landfill operations costs are covered by an annual assessment of property-owners. Through
its general taxing authority,the City of Bozeman also provides library, parks, cemetery, street,
and tree maintenance services.
The Bozeman City/County Planning Office advises the Bozeman City Commission, Gallatin
County Commission and Bozeman City/County Planning Board on matters within the planning
Jurisdictional area. The staff reviews subdivision requests, annexation requests, Master Plan
amendments, zone changes; conditional uses, and makes recommendations to the respective
bodies. The staff is also responsible for carrying out long range, comprehensive planning
programs. The Department administers the Bozeman area-zoning ordinance, which contains
provisions for site review and planned unit-development. The planning staff administers all
housing-programs and historic preservation.
Environmental Influences
Environmental considerations consist of any natural or man-made features that are contained in
or affect the market area and its location, including: building size, type, density, and
maintenance; topographical features (terrain and vegetation); open space; nuisances and hazards
from nearby facilities; the adequacy of public utilities; the existence and upkeep of vacant lots;
general maintenance; the attractiveness and safety of routes into an out of the area; effective ages
of properties; changes in property use and land use patterns; microclimate characteristics
(temperature, wind,humidity, snowfall, etc.); environmental liabilities (landslides, floods, etc.);
and access to public transportation, schools, stores and services establishments, parks and
recreational facilities, house of worship, and workplaces.
The Gallatin Valley is surrounded by several mountain ranges and thousands of acres of national
forest land, where trail systems and wilderness areas abound. Two of the entrances to
Yellowstone Park, America's oldest and best-known park are within a 90-mile drive of Bozeman.
Appraisal Services 16
Yellowstone National Park can be enjoyed year round and Glacier National Park is short-days
drive to the west.
Bozeman is near ten national forests that accommodate a variety of outdoor recreational
experiences. There are several areas that are designed to accommodate the needs of people with
disabilities, families with small children, and senior citizens.
Many organizations and Recreation Department use public lands and city/county facilities to
conduct programs. The city of Bozeman supports 23 parks and recreation areas, 19 of which are
owned by the city. The city maintains 17 public tennis courts with three public parks are
converted to outdoor ice skating rinks in the winter.
Bozeman's climate reflects its mountain valley location. Summers are pleasant, characterized by
warm days, cool nights, and an abundance of sunshine. Hot weather and humid conditions are
infrequent. Bozeman is located in one of the few regions in the country where the average
summer climate is comfortable due to the moderate combined heat and humidity.
The average high temperatures for the summers are in the 70's and 80's; the average low
temperatures are in the mid 40's and low 50's. The autumn high daily temperature is 70 degrees
until the middle of October then between 20 and 50 degrees in October and November. The
average monthly high and low temperatures for December,January and February are 35 and 16,
31 and 11, and 37 and 17 degrees. The average temperatures for spring are between 53 and 72
degrees. The average snowfall for Bozeman is 73.1 inches.
Appraisal Services 17
Property Description
SITE
Information Sources: Property owner, deed, assessment records, inspection
Total Site Size: 10.17 acres
Usable Site Size: 5.09 acres
Excess Land: 5.08 acres
Comer Lot: The site is not a comer lot.
Visibility: Good
Shape: Irregular
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Appraisal Services 18
BOZEMAN CREEK ANNEXATION
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Road Frontage/Access: Church Avenue with Good access. The average depth is 792 Feet
Topography: Mostly Level
Drainage: Appears Adequate
Utilities: Electricity: NorthWestern Energy
Sewer: Septic
Water: Well
Natural Gas: Northwestern Energy
Underground Utilities:
Adequacy: Good
Site Improvements: Average
Landscaping: Average
Site Utility: Good
Appraisal Services 19
Flood Zone: The subject is located in an area mapped by the Federal Emergency
Management Agency (FEMA). The subject is located in a flood
hazard zone.
FEMA Map Number: 30002800120
FEMA Map Date: July 15, 1988
FEMA Zone Classification: AE and X
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09
Easements: The appraiser viewed the site and reviewed the zoning map,
subdivision plat, and deed. The appraiser did not observe any
adverse easements affecting the marketability of the site.
Encroachments: The appraiser did not observe any encroachments affecting the
marketability of the site.
Appraisal 'Services 20
CURRENT IMPROVEMENTS
Building Type: Industrial Warehouse
Construction: Concrete
Quality: Average
Year Built: 1968
Year Rehabbed: 1991
Condition: Average
Effective Age: 45
Remaining Useful Life: 15
Areas &Ratios: Gross Building Area: 20,862
Net Leasable Area: 20,862
Building Efficiency Ratio: 100%
Units Description:
Unit Type 9 of Units Description Unit Size Total SF
I I Office 1,910 1,910
I Industrial Warehouse 16,500 16,500
1 Residential Garage 504 504
1 Residential House 1,948 1,948
Totals 4 20,862
FOUNDATION,FRAME &EXTERIOR
Commercial Concrete Foundation, Masonry and Steel Frame, Masonry and Steel
Improvements: Exterior, Built-up and Metal Roof Cover
Residential Concrete Foundation, Wood Frame, Wood Siding, Cedar Shingle
Improvements: Roof Cover, and Wood Windows
SITE IMPROVEMENTS
Parking Type and Type: On-Site Asphalt/Gravel
Condition: Fair-Average
Appraisal Services 21
Subject Photographs
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Subject Front: 1203 S. Church.Ave.
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Subject Front: 1203 S. Church Ave.
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Subject Rear. 1203 S. Church Ave.
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Subject Front: 1109 S. Church.Ave.
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Subject Rear: 1109 S. Church Ave.
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Subject Residential House: Church Ave.
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Zoning
Zoning Classification:R-S
General Description: Residential Suburban
Conformance: Grandfathered, the subject is a non-conforming use
Zoning Change: Not Likely
Source: Bozeman Zoning Regulations
The intent and purpose of the R-S, Residential Suburban, district is to allow open space, resource
protection and single-household development in circumstances where environmental constraints
limit the desirable density. All new subdivision and site plan developments in this district shall
be subject to the provisions of Chapter 18.36, BC,Planned Unit Development, and shall be
developed in compliance with the adopted Bozeman growth policy.
The lot size requirements for R-S zoning utilizing a city water and sewer system is 6,000 Square
Feet.
Assessment and Taxes
The State of Montana, through the Department of Revenue, is responsible for valuing all taxable
and real property.
The Montana Department of Revenue is composed of six divisions:
The Customer Service Division is designed to provide centralized and consistent customer
service,revenue collection, and document processing for the department and for state agency
partners.
The Business and Income Taxes Division oversees audits and verifies compliance with
Montana tax law for all taxes, and completes appraisals and assessments of industrial and
centrally assessed property.
The Property Assessment Division is responsible for the valuation and assessment of real and
personal property throughout the state for property tax purposes. The division is comprised of a
central office located in Helena and six regions. There is a local DOR office located in each
county seat within the regional areas.
The Resource Management Division provides service and support to the department by
integrating Human Resources, Payroll and Benefits, Education and Training, Liquor Distribution,
Accounting, Purchasing, and Facilities and Asset Management.
The Information Technology Division provides service in the area of data support, applications
support, technology support, and user assistance that enables the department to meet its business
objectives.
Appraisal Services 28
The Director's Office supports the agency's director and is composed of six work units. The
basic function for each unit is:
• Legal Services supervises the overall legal efforts of the department, which includes rules,
policies, bankruptcy, disclosure officer and the Office of Dispute Resolution.
a Tax, Policy&Research is responsible for the preparation of legislative fiscal notes that affect
revenue, the analysis of legislative proposals affecting the department, and department economic
data analysis.
• Budget Analyst provides ongoing oversight of the department budget.
• Communications manages the department's communication activities, including information
dissemination,media relations, document editing, stakeholder relations, website maintenance,
public involvement and special events.
0 Internal Quality Manager is responsible for providing management with information about
the adequacy and the effectiveness of its system of internal controls and quality of its operations
with established standards and management expectations.
0 Administrative Support assists all units in the Director's Office with administrative
responsibilities including,preparing for legislative committees, editing correspondence
and finalizing mass mailings.
The property tax is determined by multiplying the property's value by a tax rate. The Montana
Legislature sets the tax rate. The taxable value is then multiplied by the mill levy. The local tax
jurisdictions, city and county government, school districts, and other public services influence the
mill levy.
The general property tax equation is:
Value x Tax Rate=Taxable Value
Taxable Value x Mill Levy= General Property Tax
The Property Assessment Division is responsible for determining the value of real property
throughout the state for property tax purposes. State Law requires the Department of Revenue's
Property Assessment Division to reappraise property periodically.
Assessor Parcel#: RGH2192
Year: 2005
Taxes: $11,750.20 and $8,341.27
Total Taxes: $20,091.47
Total Assessed Value: $976,986 and $573,970
Taxable Market Value: $698,811 and $472,744
Appraisal Services 29
Sale/Transfer History
According to Public Records the subject has not transferred within the last three years.
According to MLS the subject is not currently listed for sale. According to MLS the comparable
sales have not transferred in the past one year. The date of research was 03/02106.
Highest and Best Use
Highest and best use may be defined as
the reasonably probable and legal use of vacant land or improved property, which is
physically possible, appropriately supported, financially feasible, and that results in the
highest value.I
• Permissible Use. What uses are permitted by zoning and other legal restrictions?
• Possible Use. To what use is the site physically adaptable?
• Feasible Use. Which possible and permissible use will produce any net return to the
owner of the site?
■ Maximally Productive. Among the feasible uses which use will produce the highest net
return, (i.e., the highest present worth)?
The subject site currently has improvements, and the contribution of the improvements to the
overall value depended on how it could be put to use. Therefore,the highest and best use of land
as though vacant was considered in relation to its existing use and all potential uses. The
conclusion of highest and best use of land as though vacant indicated the improved property did
not have significant economic life.
The possibility of removing existing improvements underlies the concept of highest and best use
of land as though vacant, even when improvements are present. When the highest and best use
of the land as though vacant is different from that of the property as currently improved,
demolition may be considered as one alternative. The cost of demolition was addressed as well
as the cost of curing any environmental problems.
The total site size of the subject is 10.17 acres, 5.09 of which would be considered developable.
The City of Bozeman would allow 6,000 square foot lots if they were connected to community
sewer and water. The 5.09 acres would allow for a total of 36 subdivision lots.
Highest and Best Use As Vacant
The highest and best use of the subject, as vacant, is for R-S residential suburban development.
I The Appraisal of Real Estate 11 to Edition,Page 297, Appraisal lnstitute
Appraisal Services 30
V aluation Methodology
In this appraisal:
Since the highest and best was determined to be as vacant, the land value is the appraiser's
estimation of value. The appraiser estimated the land value through extraction
1. A complete comparable sales approach was applied to the subject's potential use.
2. A developer's cost was applied to the potential improvements as stated in the highest and
best use analysis.
3. The developers cost of the improvements was subtracted from the appraiser's estimation
of value to determine a land value that is considered financially feasible to a developer
Comparable Sales Approach for Potential Use $4,500,000
Less Cost of Demolition of Existing Structures -$400,000
Less Cost of Infrastructure -$1,810,000
Equals Indicated Land Value $2,290,000
Appraisal Services 31
Sales Comparison Approach for Potential Use
The Sales Comparison Approach is based on the premise that a buyer would pay no more for a
specific property than the cost of obtaining a property with the same quality, utility, and
perceived benefits of ownership. It is based on the principals of supply and demand, balance,
substitution and externalities. The following steps describe the applied process of the Sales
Comparison Approach.
I. The market in which the subject property competes is investigated; comparable sales,
contracts for sale and current offerings are reviewed.
2. The most pertinent data is further analyzed and the quality of the transaction is determined.
3. The most meaningful unit of value for the subject property is determined.
4. Each comparable sale is analyzed and where appropriate, adjusted to equate with the subject
property.
S. The value indication of each comparable sale is analyzed and the data reconciled for a final
indication of value via the Sales Comparison Approach.
Comparables
We have researched and analyzed four comparables for this analysis. All sales have been
researched through numerous sources, inspected and verified by a party to the transaction.
Appraisal Services 32
COMPARABLE I
Property Type: Land Date: 01/13/06
Address: 3274 Summerset.Dr., Sale Price: $125,000
Bozeman,MT
Grantor Chase-Skoggins Financing: 1031 Exchange
Grantee: Stephen Black Marketing Time: 21 Days
Deed: Warranty Deed Confirmed By: Ross Wenger
Book/Page: 2215730 Property Rights: Fee Simple
SITE DATA
Site Size(Acres): 0.1.9 Zoning: R-2 Residential Two-
Site Size(SgFt.): 8,276 Household Medium[Density
Site Topography: Level Electric: NorthWestern Energy
Location: Good Gas: NorthWestern Energy
Water&Sewer: City
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./appraisal Services ^_ 33
COMPARABLE,2
Property Type: Land Date: 09/14/05
Address: 3269 Summerset Dr., Sale Price: $125,000
Bozeman,MT
Grantor: Russell Financing: Conventional
Grantee: Purdie&Mastny Marketing Time: 16
Deed: Warranty Deed Data Source: Ross Wenger
Book/Page: 2201879 Property Rights: Fee Simple
SITE DATA
Site Size(Acres): 0.19 Zoning: R-2 Residential Two-
Site Size(SgFt.): 8,400 Household Medium Density
Site Topography: Level Electric: NorthWestern Energy
Location: Good Gas: NorthWestern Energy
"Water&Sewer: City
IMAGES
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NOTES
@Value Software—www.atvalue.corn
Appraisal Services 34
COMPARABLE 3
Property Type: Land Date: 01/17/06
Address: Lot 110 West Meadow Sub Sale Price: $115,000
Phi,Bozeman,MT
Grantor: West Meadow,LLC Financing: Conventional
Grantee. Merriman Marketing Time: 79
Deed: Warranty Deed Data Source: Ross Wenger
Book/Page: 2216171 Property Rights: Fee Simple
SITE DATA
Site Size(Acres): 0.175 Zoning: R-1 Residential Single-
Site Size(SgFt.): 7,620 Household Low Density
Site Topography: Level Electric: Northwestern Energy
Location: Good Gas: Northwestern Energy
Water&Sewer: City
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Appraisal Services 35
COMPARABLE 4
Property Type; Land Date; 02/01/06
Address- Lot 110 West Meadow Sub Sale Price: $110,000
Ph 3
Grantor: West Meadow,LLC Financing: Conventional
Grantee: George&Louis Carter Marketing Time: 79
Deed: Warranty Deed Data Source: Ross Wenger
Book/Page: 2217351 Property Rights: Fee Simple
SITE DATA
Site Size(Acres): 0.19 Zoning. R-1 Residential Single-
Site Size(SqFt.): 8,400 Household Low Density
Site Topography: Level Electric: NorthWestern Energy
Location: Good Gas: NorthWestern Energy
Water& Sewer: City
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Appraisal Services 36
Gomparables Map
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Analysis Grid
The above sales have been analyzed and compared with the subject property. We have
considered adjustments in the areas of.
Property Rights Sold • Economic Trends (time)
• Financing ® Location
Conditions of Sale ® Physical Characteristics
Appraisal Services 37
Below is the sales comparison grid displaying the subject property,the comparables and the
adjustments applied.
Sales Adjustment Grid
Analyst:Ross Wenger Subject Comparable 1 Comparable 2 Comparable 3 Comparable 4
Address 3274 Summerset 3269 Surnmerset Lot 110 West Lot 115 West
Sale Date Confirmed 01113106 09114105 01117106 02/01106
Sale Price $125,000,00 $125,000.00 $115,000-00 $109,000,00
Property M R Fee Simple Fee Simple Fee Sim le Fee Simple
•Adjustment l 0.00% 0.00% Mo% OM%
Financin@ 1031 Exchange Conventional Conventional Conventional
•Adjustmen 0.00% 0.00% 0.00% 0,00%
Conditions of Salel
%Adiustment 0.00% a00% 0,00% 0.00%
Economic Trends 31112006 111312006 9/1412005 111712006 21112006
Annual%Adjustment 0.00% 0% 0% 0% 0%
Adjusted Price $125,000.00 $125,000.00 $11116,000M $109,00O.W-
Location Good Good Good Good Good
Comparison
%Adjustment 0,0% 0.0% 0.0% 0,0%
$Adjustment $0.00 $0.00 $0.00 $0.00
Land Area SP 8276.4 8400 8992 7620
%Adjustment 0.0% 0.0% 0.0% 0.0%
$
Adjustment l $0.00 $0,00 $0.00 $0,00
Topography Level Level Level Level Level
Comparison
%Adiustment 0.0% 0.0% 0.0% 0.0%
$Adjustment $0.00 $0.00 $0.00 MOO
Zoning Code R-S R-2 R-2 R-1 R-1
Comparison
%Adjustment 0.0% 0.0% U% U%
I Adiustment $0,00 WOO $0.00 $0.00
Final Adjusted Price $125,000.00 $125,000.010 $116,000.00 $109,000.00
Net Adjustments$ $0.00 $0.00 $0.00 $Uo
Range&Average Low;$109,000.00,High:$126,000.00,Average:$118,500.00
Reconciled Value $126,000
Appraisal Services 38
Comparable Sale Adjustments
Real Property Rights
Real property rights can be sold,they may be the sole subjects of the contract or the contract may
include other rights, less than all of the property rights, or even another property or properties.
The comparable sales all have fee simple property rights.
Financing
The financing terms of the transaction, the terms provided by the seller can affect the price of the
comparable sale. According to the Realtors, all of the sales sold with cash equivalent terms that
did not influence the price negotiated in the transaction.
Conditions of Sale
The motivation of either the buyer or the seller in a transaction is to determine if in fact the
comparable sale was at arm's-length. In many situations the conditions of sale significantly
affect the transaction price. The comparable appear to all be arm's length transactions.
Expenditures Made Immediately After Purchase
An informed buyer will consider expenditures that will have to be made upon purchase of the
property. These expenditures may influence the price the buyer agrees to pay for the property.
These expenditures may include; cost to cure deferred maintenance, cost to demolish or remove
any portion of the improvement, cost to petition for zoning changes, or costs to remediate
environmental contamination.
Market Conditions
The market condition is also referred as a"time" adjustment. The market conditions may have
shifted over a period of time. Any adjustment is made because of changes in market conditions;
time is not the cause of the adjustment. Appreciation or depreciation of property values is the
cause of the adjustment and time is the measure of the adjustment. If market conditions have not
changed, no adjustment is made.
Economic Trends
The probable direction, extent, impact, and cause of change within the local economy that affects
the value of real property, the changes include; population, net household formation, diversity of
the economic base of the community, the level and stability of employment, wage rates, and
household or family income.
Location
Locational characteristics of comparable properties may differ from those of the subject property.
Most properties within a market area have similar characteristics; however variations may exist
with that area of analysis. A properties location is analyzed in relation to the location of other
properties. Sales of physically similar properties situated in different locations have been
analyzed. In the Neighborhood Analysis, on page 13, we described the subject neighborhood and
researched comparable sales in the same neighborhood or in similar economic neighborhoods.
All of the comparable sales are considered to be similar economic neighborhoods.
Appraisal Services 39
Use/Zoning
The difference in the current use or the highest and best use of a comparable sale and the subject
property is addressed. Examples of differences of current use or differences in highest and best
use include; properties that have been converted and properties that either have zoning
requirements or properties have gone through zoning changes. All of the comparable sales are
considered to have similar zoning requirements.
Sales Comparison Approach for Potential Use Conclusion
Based on the above analysis, we have reconciled to a value of$125,000 for each lot, as of March
1, 2006, and subject to the Limiting Conditions and Assumptions of this appraisal. The subject
site has the potential for 36 lots that are approximately 6,000 square feet each, as determined in
highest and best use analysis.
Reconciled value of each lot $125,000
Multiplied,by the number of potential lots 36
Equals the potential value of the site $4,500,000
Appraisal Services 40
Developer's Cost of Potential Improvements
The Cost Approach is based on the principle of substitution- that a prudent and rational person
would pay no more for a property than the cost to construct a similar and competitive property,
assuming no undue delay in the process. The applied process is as follows:
• Estimate the demolition cost of the building and site improvements
• Estimate the cost of the infrastructure and the on-site and off-site improvements
• Estimate the entrepreneurial profit
Soft Costs
Where appropriate, we have included the following soft costs:
• Engineering
• Architectural
• Permits and Legal
• Marketing & Leasing Commissions
• Contingency
• Developer's Profit
Cost Approach Conclusion
Based on the analysis detailed on the following page, we have reconciled to a developer's cost of
the potential improvements of$2,210,000, as of March 1, 2006, subject to the Limiting
Conditions and Assumptions of this appraisal.
Appraisal Services 41
Building Improvements Cost Section 1 of 1
Item .......Unit Type Cost Quantity Total
Demolition Existing Buildin s Lump Sum $400,000.00 1 $400,000
$400,000
Per SF GBA $19.17
Site improvements
Item Unit Type Cost Quantity Total
Grade Lift Lump Sum $100,000.00 1 $100,000
Sewer Line Per Unit $35.00 1,600 $56,000
Water Line Per Unit $35.00 800 $28,000
Roads Per Unit $35.00 1,600 $56,000
Install.Bridges Per Unit $150,000,00 3 $450,000
lack&Bore Stream Crossing Per Unit $200,000.00 1 $200,000
$590,000
$1,290,000
Per SF GBA $61.53
Soft Costs
Item Percent Type Total
Engineering ........ ....................... 5% %Building Cost $64,500
Architectural ................................. 10% %Building Cost $129,000
Permits&Legal ..................................................................................... $0
Leasing .......... ........ .............................. .. $0
$193,500
Contingency @ 5% $64,500
Entrepreneurial Profit 20% $658,000
$2,206,000
Per SF GBA $105.74
Cost Allocation
Total Building Casts ................... ........................ ............... ...............
TotalSite Costs .....................................................................................
Depreciation
Component Effective Age Life Percent Amount
Physical Depreciation: Building 0 70 0% $0
Physical Depreciation: Site 0 1 0% $0
Functional Obsolescence Building ..................................................... 0% $0
External Obsolescence Building ............................. ...................... 0% $0
Land Value
LandValue ........ .................... .................... ................................. $2,000,000
$2,206,000
$2,210,000
Per SF GBA $106.93
(Value software-www,aivalue.eom
The entrepreneurial profit was based on the total cost to the developer for the potential
improvements plus the price to acquire the land. The price to purchase the land was estimated at
$2,000,000.
Appraisal Services 42
Reconciliation of Land Value
Since the highest and best was determined to be as vacant, the land value is the appraiser's
estimation of value. The appraiser estimated the land value through extraction.
1. A complete comparable sales approach was applied to the subject's potential use.
2. A developer's cost was applied to the potential improvements as stated in the highest and
best use analysis.
3. Then the developers cost of the improvements was subtracted from the appraiser's
estimation of value through the comparable sales approach to determine a land value that
is considered to be financially feasible to a developer
Comparable Sales Approach at its Potential Use 54,500,000
Less Cost of Demolition of Existing Structures -$400,000
Less Cost of Infrastructure -$118101000
Equals Indicated Land Value $2,290,000
Value Conclusion
Based on the data and analyses developed in this appraisal, we have reconciled to the following
value conclusions, as of March 1, 2006, subject to the Limiting Conditions and Assumptions of
this appraisal.
Reconciled Value Conclusion Premise: "As Vacant"
Estate: Fee Simple
Value Conclusion: $2,300,000
Appraisal Services 43
Certification Statement
We certify that,to the best of our knowledge and belief.
The statements of fact contained in this report are true and correct.
The reported analyses, opinions and conclusions are limited only by the reported
assumptions and limiting conditions, and are my personal, unbiased professional
analyses, opinions and conclusions.
• We have no present or contemplated future interest in the property that is the subject
of this report, and we have no personal interest or bias with respect to the parties
involved.
• Our compensation is not contingent upon the reporting of a predetermined value or
direction in value that favors the cause of the client,the amount of the value estimate,
the attainment of a stipulated result, or the occurrence of a subsequent event.
• Our analyses, opinions, and conclusions were developed and this report has been
prepared in conformity with the Uniform Standards of Professional Appraisal Practice
(USPAP).
• We have made a personal inspection of the property that is the subject of this report.
No one provided significant professional assistance in the development of the
conclusions contained in this report.
We certify sufficient competence to appraise this property through education and
experience, in addition to the internal resources of the appraisal firm.
The value conclusion(s) and other opinions expressed herein are not based on a
requested minimum value, a specific value or approval of a loan.
Appraisal Services 44
Addenda
Ross Wenger
Licensed Residential #753
rossw@montana.com
(v)406-58'7-5044 Appraisal Services
(f) 406-587-5481 P.O. Box 1076
(c)406-539-9564 Bozeman, Montana 69771
...................... ...............
Education
Appraisal Institute
Successfully Completed
Basic Income Capitalization January 26-February 1, 2006
15-Hour National USPAP Course April 26-27, 2004
Appraisal Principles April 12-17, 2004
Appraisal Procedures April 19-24, 2004
Attended Seminars
The Professional's Guide to the URAR June 30, 2005
National Association of Independent Fee Appraisers
Successfully Completed
Residential Report Writing January 26-27, 2004
Principles of Residential Real Estate Appraising January 15-18, 2004
Montana State University, 2000-2003.
Major: B.S. in Business Management: Course study; Management, Economics,
Entrepreneurship and Small Business, Finance, Business Communications, and
Accounting
Work Experience
Licensed Appraiser- Appraisal Services Sept 2005-Present.
Bozeman, Montana. Working as a Licensed Appraiser. Residential appraisals. 3500+hours of
valuation experience preparing appraisal reports using the cost approach, comparable sales
approach, and income approaches to value. URAR, 2055, Condominium, Land, and 2-4 Family
forms
Appraiser in Training-Appraisal Services Aug 2004-Sept 2005.
Bozeman,Montana. Worked as a Licensed Trainee with a Licensed Mentor. Residential
appraisals. 3000 hours of valuation experience preparing appraisal reports using the cost
Appraisal Services 45
approach, comparable sales approach, and income approaches to value. URAR, 2055,
Condominium,Land, and 2-4 Family forms
Appraiser in Training-Joel Peterson Appraisals,Inc., Jan 2003-June 2004.
Bozeman, Montana. Residential appraisals. Prepared appraisal reports making internal and
external inspections of properties for URAR, 2055, Condominium, Land, and 2-4 Family forms
using property valuation of cost approach, comparable sales approach, and income approach
Memberships
Appraisal Institute
Bozeman Area Appraisers
National Association of RealtorsO
Montana Association of Realtors@
Gallatin Association of Realtors@
References
Kennedy American Mortgage
Marie McSpadden, Mortgage Broker
1632 West Main St.
Bozeman, MT 59715
(406) 585-3737
US Bank Home Mortgage
John Thorn, Mortgage Broker
104 E. Main St.
Bozeman,MT 59718
(406) 585-5238
Allied Home Mortgage Capital Corporation
Denise Weidhaas, Branch Manager
2023 Stadium Drive, Suite 2-B
Bozeman, MT 59715
(406) 585-5476
Appraisal Services 46
JERRY R. GOSSEL
Appraisal Services
67A West Kagy Blvd.
P.O. Box 1076
Bozeman, Montana 59771
Facsimile: (406) 587-5481 Telephone: (406) 587-5044 E-Mail:jgo,ss@avicom.net
............
APPRAISAL EXPERIENCE
Appraisal Services, Bozeman,Montana
Owner 1985 to Present
Certified General Real Estate Appraiser- Certificate 4106
Licensed in State of Montana January 1992
Small Business Administration, Helena, Montana
Commercial 1986 to Present
Veterans Administration, Fort Harrison, Montana
Residential 1986 to Present
US Bank Bozeman, Bozeman, Montana
Residential and Commercial 1985 to Present
Norwest Bank, Bozeman, Montana
Residential and Commercial 1983 to Present
First Security Bank, Bozeman, Montana
Residential and Commercial 1983 to Present
Trans America Relocation Service, Walnut Creek, California
Residential 1983 to Present
Home Equity Relocation, San Mateo, California
Residential 1982 to Present
Merrill Lynch Relocation Management, Inc., Bellevue, Washington
Residential 1982 to Present
Federal Housing Administration, Helena, Montana
Residential 1977 to Present
Federal National Mortgage Assn., Los Angeles, California
Approved 1975 to Present
Federal Home Loan Banking Board
Approved 1975 to Present
American Bank, Bozeman, Montana
Residential and Commercial 1973 to Present
Lender Services, Inc., Pittsburgh, Pennsylvania
Residential 1993 to Present
Mortgage Support Services, Mount Laurel,New Jersey
Residential 1993 to Present
Big Sky Western Bank, Big Sky, Montana
Residential and Commercial 1993 to Present
Appraisal Services 47
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