lake front, but no comparables

[Varinia]

So, I bought this house, that I'm presently renovating and will be moving in within a month. Since I've used all cash, I will want to put financing on it, after 6 months seasoning.

The property has a number of unique features and there really aren't properties that are like it.
- It has lake frontage on a 20 acre private lake - only about 15 or 16 properties border it and none of them has sold in the past few years. Aren't any other lake properties around, except outside of town (I'm considered intown area of Atlanta) in the suburbs.

- It has 2.25 acres and the average lot is 1/4 or 1/3 acre. Nothing else has sold around here with +1 acre.

- It has a pool inside a 2000sqf patio and deck.

How would an appraiser go about that?
1) Would you only look for comparable houses (3/2 , 1700 sqf, double attached garage) and disregard the extra amenities?
2) Would you look at other lake properties, even if they're farther away (there are 2 bigger lakes NW and NE of Atlanta and according to a Forbes article, Atlanta water front properties sell for 33.4% more than similar properties without. I'm sure that number is based on Lake Lanier and Lake Allatoona properties)?
3) Would you look for other properties with large lots, even if farther away?
4) Would you use the comparable houses and then add something on for water frontage, wooded lot, pool (I know that pool doesn't really play so much into value)?

Just wondering how you would approach a property like this.

Thank you for your insights

 

[Joe Flacco]

It is a complex assignment. How the appraiser goes about it will depend on what data is available. The first thing i would do is research all the properties fronting the same lake that sold or have been listed for sale over the last 10-20 years. I would then probably look at what has sold nearby that do not front the lake. Then I would probably look at other lakes. And then after that the appraiser will have a better idea of how to go about it.

 

[George Hatch]

Just the fact that the original poster apparently bought the property a while back while it was in pre-renovated condition can be deployed in an analysis by comparing what it sold for at that time with the other properties that were otherwise similar in overall design, size and condition but which lack the same location element. Whatever the comparative difference that is attributable to the location factor itself can then be imported for use with the current sales of non-lakefront properties.

The subject's prior sale is just one datapoint. If an appraiser can repeat that process with a couple more sales in such locations (comparing them to their own respective competition at the time of sale) a usable pattern will probably emerge.

That's not the only way to do this analysis but it is one way. Another way is to look at land sales data with and without lakefront locations. Another way is to look at all the prior sales with lakefront locations and find their respective comparables as of those prior dates to see how these properties have historically performed in comparison with the non-lakefront properties. As Joe mentioned above there are other ways besides those.

 

[Varinia]

Just the fact that the original poster recently bought the property can be deployed in an analysis by comparing what it sold for at that time with the other properties that are otherwise similar except for the location.

FYI - I'm putting 120K into the renovation, because it wasn't livable

 

[bnmappraisal]

Just remember cost (i.e. $120k) doesn't always equal value

It may ... or it may not ...

 

[Varinia]

Just remember cost (i.e. $120k) doesn't always equal value

It may ... or it may not ...

You're right. Ok, to give more figures (was really just looking for a glimpse on how an appraiser approaches a property like this)

Bought for 165K cash. Putting in 120K . 3/2's in that sqf sell from high 100's (need rehab) to mid 300's and I've even seen some in the 400's. Those are on basic, small lots. They're also different, in that there are different styles around the area: cottages, Victorians, brick ranches, Craftsman homes. Mine is a mid-century modern, which is seen as 'very cool' by younger people today, but I know that doesn't make much of a difference in value. A few MCM around here, but it's not a prevalent type of house (but there are neighborhoods in Atlanta that are full of MCM and that's what some buyers target)

 

[George Hatch]

FYI - I'm putting 120K into the renovation, because it wasn't livable

The process i described above is used to isolate a particular factor for use with the current dataset, not to identify sales that will be used in the Sales Comparison analysis in a current appraisal. The selection of sales used for the current dataset will ideally consist of recent sales of properties that are in comparable "renovated" condition.

If you have a 50-yr old home that was just rehabbed and has all-new interior and exterior finishes then the most comparable properties will be other recently renovated properties with comparable finishes. 50% of the structure is original and the other 50% is new. 100% of the design/appeal and the original floorplan are old. Etc, etc. This means that homes of recent construction that are 100% recent inside and out will not be the most similar comps in an appraisal unless there's literally nothing else to use with recent finishes.

 

[Terrel L. Shields]

Small lakes here have minimal impact. A large lake yes. I would cast about for some sale on some small lake somewhere that was similar to see the impact. 2 or more sales would be better. Sounds like the site has surplus land...which usually has some added value, but I've yet to see a pool that contributes more than 50% of its cost and often it seems to contribute almost nothing.

 

[NachoPerito]

To get the lake front adjustment you can go back 15-20 years to find paired land sales or paired homes sales that show an adjustment. That adjustment won't change much over time.

 

[Tom4value]

I would find at least one lakefront property comp. Don’t be afraid to travel. Buyers of lakefront are generally buying the lakefront, not the town.

For adjustments to the other non-lakefront comps, I would extract an adjustment from non-lakefront comps in that community where the lakefront comp is. Then, go back as far as you need to find a sale on your lake and extract an adjustment from a non-lakefront comp of that sale at that time period. Then reconcile the two adjustments for a waterfront adjustment for your other two present comps of the subject property.

Easy!!!!