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Difficult Assignment Question

Discussion in 'Illinois' started by ExplainDNA, Mar 15, 2011.

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  1. ExplainDNA

    ExplainDNA Senior Member

    13
    Oct 30, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    Hi,

    Got a very, very difficult assignment from a client, a very good client. I have to accept it, I will finish it, it's one of those business decision kinda things. (I'd have declined this in a heartbeat if it was a call out of the blue.)

    Below is a slightly modified version of what I sent my client after discovering what was going on with my subject. I would be grateful for any insights you might have, ESPECIALLY as related to exploring any potential 'External Obsolescence' adjustment given where where the Subject is and the lack of any subsequent neighbors being a distinct reality.

    Please feel free to ask me any questions if the below isn't clear:

    (Begin)

    1. Yes, this place is, literally, in the middle of nowhere (Ringwood, Illinois), and here's why...

    2. The developer had this great idea to buy farmland (out in the middle of nowhere Ringwood) and make a Heaven on Earth for rich people - in 2008. Best custom homes in all of McHenry County was what he was shootin' for, and gosh darn it if he didn't do *exactly that* - in 2008.

    3. But *exactly that* resulted in exactly one home - the (borrower's) home. They paid ~$600,000 for their bad boy pad, too. Big figure for rural McHenry.

    4. So, there's an entire subdivision of empty lots, except for theirs, and no one is buying. Nor will they, for some time to come, especially given the covenants for this development. They are ultra strict, the highest caliber you can imagine. I could not foresee under any circumstances a potential buyer asking the builder, if he still exists, to build one now.

    5. So we have a massive ~4,000 square foot home on an acre lot with a full walk out lower level completely finished (with a kitchen, too boot!), and a 20' X 20' in ground pool. It's basically a resort getaway, but in an area where no one will ever come.

    6. Because of where this developer bought the home is, as I've stated, in the middle of nowhere Ringwood. (Try to find it on Google, you'll see what I mean, even the all powerful Google couldn't find it.) There are no neighbors, nor neighboring subdivisions, of any kind. The sales, or preferably, the comparables (hah!) will come from God only knows where. Miles away.

    7. I do not have a crystal ball, and I'm basically a simple man, so can I really know what the value of a wonderful home that exists in a subdivision isolated from the rest of the world that will never be finished in our lifetimes is? I do not have that answer at the moment.

    8. What would you like me to do? If you want me to move forward, you know I will, I don't back down from challenges, but the fee for the fight has to be commensurate with the effort needed to vanquish the enemy.

    Thanks,

    Dave...

    (End)
     
  2. CANative

    CANative Elite Member

    121
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    Looks like a pleasant little hamlet.

    The problem is being in a failed subdivision. You're right. This is a very complex assignment. I don't envy you.

    [​IMG]
     
  3. CANative

    CANative Elite Member

    121
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    Couldn't you work something out using any sales in that neighborhood on the looping street (Patty Ln)?

    [​IMG]
     
  4. ExplainDNA

    ExplainDNA Senior Member

    13
    Oct 30, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    Greg -

    That's Ringwood alright, but nowhere near my guy. He's rather close to the Glacial Trails park (a little Southeast of there), and that can be found on Google, but you have to manipulate the Google map to where my guy's joint is.

    I've never done one like this, I know there has to be loss due to a never-to-be-finished subdivision, but other than SWAG I don't have a formula for that sort of thing. Just being honest.

    Seems to me the IDEAL comp would be some recent resale of the ONLY home ever built in an equally upscale subdivision, but that just doesn't exist.

    The sales you're seeing are half the size and half the quality of my guy, for sure. I doubt they'd look sane on my report.

    Dave...
     
  5. CANative

    CANative Elite Member

    121
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    Is this the general area?

    [​IMG]

    You're right. It looks pretty BFE agricultural. There is a speedway though. LOL

    By any chance are there any sales of large, high end houses on acreage lots in the region? The larger lots would likely support an HBU of an estate sized house. Perhaps you could grid one or two of these and back out the land value a bit. This is a highest and best use problem to solve. They built that house on the wrong lot.

    Remember, if you're having a hard time it's likely everyone else will have just as hard a time. It's just an opinion.
     
  6. ExplainDNA

    ExplainDNA Senior Member

    13
    Oct 30, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    It's literally due North a ways of the first pic you posted. It's out there, isolated. I can't imagine that any typical buyer falls in love with that market.

    And thank you very much for your efforts, Greg.

    Dave...
     
  7. Rich Heyn

    Rich Heyn Senior Member

    0
    Jan 17, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Michigan
    You're close to Frank Harrison, who literally wrote the book on "Appraising the Tough Ones." Maybe go buy him a beer or two and pick his brain. He may even have some comps.
     
  8. BOCK FOLKEN

    BOCK FOLKEN Member

    0
    Jun 22, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    First problem is you need comps...any kind of comps. We get these here all the time, although they are typically on some acreage.

    If it were me, I would set my search criteria for 20-25 miles and then narrow it down from there an see what you get. Find a baseline for a 4000sf home with a large pool...no matter where it is (except downtown or some way superior golf course). Adjust the site as if it were vacant land in the area versus the sites where your comps are. I'm guessing the land aint worth very much right now.

    Then I would look for similar sales in the immediate vicinity up to 2-3-4-5 years old. Adjust them for time if necessary.

    This process should get you ballpark. From there, your client is paying you for your opinion. That might mean a single upscale home in dead subdivision isn't worth much, or maybe it's worth the same a big upscale home in some other part of the boonies that you found 25 miles away.

    dont forget your cost approach

    Good luck
     
  9. ExplainDNA

    ExplainDNA Senior Member

    13
    Oct 30, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    I'll look him up, thanks. Are you saying he lives in Northern Illinois, and I've yet to bump into this cat...?

    Dave...
     
  10. CANative

    CANative Elite Member

    121
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    Useless without market data. IMO
     
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