Is this appraisal a disaster?

[Tnflyer]

Hello friends,

I’m a potential buyer in a land transaction of a 23 acre property next door to mine. I’m in a rural area of TN in an area with lots of large family farms still in tact. The seller said the property appraised last year for $289K. The market has slowed in the past couple years with average inventory and hardly any sales.

The seller has shared the appraisal and I am a little shocked as to its inaccuracies. The first red flag was that it was MY property photographed on the cover page. I’m next door but across the river. Ok, who cares about the cover page but it might signal the level of accuracy to follow.

The second is the appraiser used 3 comps:
10 acres $10,500 acre 20miles away
18 acres $12,800/acre *5 miles away*
5 acres $14,800/acre 2 miles away

The 18 acre property is actually less than 1 mile away and on the same road, odd mistake, but the least of the problem.

The appraiser averaged the high and low to get a value of $12,600/acre for the subject property and used this as the sole basis to determine value.

The seller is confident in the appraisal pointing out that the median property is on the same road and similar in size. The problem is the property in question wasn’t a land only transaction! There’s a 120x44 horse barn with1,600sq of living quarters 2bd/2ba, outdoor patio and above ground pool with deck. And the property isn’t 18 acres but was a living estate sale where they split it off selling 1.6 acres and the house. So to me this comp shouldn’t be considered.

I also question if the 5 acre lot can be compared without making adjustments. A 25 acre parcel isn’t worth 5X a 5 acre parcel.

I went back and gathered enough vacant land comps within 7 miles to plot a graph of what the price per acre might look like for this size lot. (Attached)
This gave me a result closer to $231K.



Also, the last page of the appraisal shows the flood map used to determine that the property isn’t in a flood zone. The property shown is a different property 5 miles away! And yes a portion of the subject property along the river IS inside a flood zone.

I’m a bit shocked at all of the inaccuracies and not quite sure how to proceed. I don’t want to offend the seller but should I point these out?

Thanks for any advice you’re willing to provide.

Mike

 

[CGinMN]

It is hard to convince someone that an appraisal, which supports their financial point of view, is wrong. You are an adjacent property owner and you should probably expect to pay a small premium above market value. I would get an appraisal of your own, send it to them, then work out the difference.

 

[shrubberyvaluation]

Hello friends,

I’m a potential buyer in a land transaction of a 23 acre property next door to mine. I’m in a rural area of TN in an area with lots of large family farms still in tact. The seller said the property appraised last year for $289K. The market has slowed in the past couple years with average inventory and hardly any sales.

The seller has shared the appraisal and I am a little shocked as to its inaccuracies. The first red flag was that it was MY property photographed on the cover page. I’m next door but across the river. Ok, who cares about the cover page but it might signal the level of accuracy to follow.

The second is the appraiser used 3 comps:
10 acres $10,500 acre 20miles away
18 acres $12,800/acre *5 miles away*
5 acres $14,800/acre 2 miles away

The 18 acre property is actually less than 1 mile away and on the same road, odd mistake, but the least of the problem.

The appraiser averaged the high and low to get a value of $12,600/acre for the subject property and used this as the sole basis to determine value.

The seller is confident in the appraisal pointing out that the median property is on the same road and similar in size. The problem is the property in question wasn’t a land only transaction! There’s a 120x44 horse barn with1,600sq of living quarters 2bd/2ba, outdoor patio and above ground pool with deck. And the property isn’t 18 acres but was a living estate sale where they split it off selling 1.6 acres and the house. So to me this comp shouldn’t be considered.

I also question if the 5 acre lot can be compared without making adjustments. A 25 acre parcel isn’t worth 5X a 5 acre parcel.

I went back and gathered enough vacant land comps within 7 miles to plot a graph of what the price per acre might look like for this size lot. (Attached)
This gave me a result closer to $231K.

View attachment 98417

Also, the last page of the appraisal shows the flood map used to determine that the property isn’t in a flood zone. The property shown is a different property 5 miles away! And yes a portion of the subject property along the river IS inside a flood zone.

I’m a bit shocked at all of the inaccuracies and not quite sure how to proceed. I don’t want to offend the seller but should I point these out?

Thanks for any advice you’re willing to provide.

Mike

Do you have a contract in place? Have you hired an appraiser?

It sounds like he is using the appraisal to try to get you to pay more, I mean I get it they are trying to sell the property for as much as they can get.

As for the specifics, I don't know the area. In general there tend to be diminishing returns. A 25 acre lot is probably not worth 25x a 1 acre lot.

I'd agree with hiring an appraiser.

 

[Zoe]

I don't know. You shared very little information in your analysis vs the appraiser for the seller?

You have 7 sales.

I don't know. You are trying to buy it. You probably do need to hire a professional appraiser as leverage in trying to buy the adjoining property.

That could bite too if the appraiser you hire comes in higher?

 

[sputnam]

You have raised some good points. If the Seller is interested in dealing fairly, they should have no problem with you hiring your own appraiser to either do another appraisal of the property or to do a formal field review of the Seller's appraisal. Yes, your appraiser could find a higher value... however, it's your appraisal... you aren't required to share it with anyone.

If you are getting a loan to buy the property, the bank will have an appraisal done and they will choose the appraiser.