Appraising an outlier properties

[App601]

I am appraising a property being sold for $300000 The neighborhood, or development in which it is located has a median value of $150000 with one sale at $200000. This is the highest priced comparable sale. After I apply the standard adjustments for site, GLA etc lets say it yields $250000 a value I believe is high for the neighborhood. Do you have any suggestions about what percent adjustment I should deduct for a functional obsolescence ? 10% ? 20% ?
I searched sales for the past 5 to 6 years and typical values have remained relatively stable under $175000
So maybe its possible maximum value should not exceed $220000 or 10% above the highest sale in the neighborhood.
Is there anything written on how to deal with these kinds of properties
I will not go to another neighborhood as I have 3 or 4 comparable sales from the same neighborhood,

I would appreciate your comments

 

[John Hassler]

Is there a prior sale(s) of the property to measure how it compared in the past?

 

[TerryRohrer]

Focusing on price, as opposed to features that impact prices, is problematic. Are size, age, site size, etc, bracketed by those characteristics of sales.

Studying data from other markets may provide insight into prices of sales that establish the bounds of whatever characteristics are not represented in your sales. You have made it clear that the three or four local sales don't include sufficient information to answer your questions. Sales in other markets don't have to be direct comparables to your subject.

 

[DWiley]

I am appraising a property being sold for $300000 The neighborhood, or development in which it is located has a median value of $150000 with one sale at $200000. This is the highest priced comparable sale. After I apply the standard adjustments for site, GLA etc lets say it yields $250000 a value I believe is high for the neighborhood. Do you have any suggestions about what percent adjustment I should deduct for a functional obsolescence ? 10% ? 20% ?
I searched sales for the past 5 to 6 years and typical values have remained relatively stable under $175000
So maybe its possible maximum value should not exceed $220000 or 10% above the highest sale in the neighborhood.
Is there anything written on how to deal with these kinds of properties
I will not go to another neighborhood as I have 3 or 4 comparable sales from the same neighborhood,

I would appreciate your comments

If you adjust for functional obs then you need support for that adjustment - support beyond "someone on AF said..."

You might not go to another neighborhood for direct comps, but you could look in other areas for other over improvements that have sold, and extract a discount rate by comparing that sale price to the price of other homes in that area.

 

[Trihard]

Better to have the worst house in the best neighborhood than the best house in the worst neighborhood.

 

[Fernando]

I hope you got a premium for this assignment.
I usually do a presearch and when I find it's an over improvement, I search for what available comps.
If none available, I don't take it.
If some sales which can somehow be used, then creative mind of Fernando takes over.

 

[Surf Cat]

Do you have any suggestions about what percent adjustment I should deduct for a functional obsolescence ?

Why do you think it has functional obsolescence? Because it sold for $100,000 over the highest priced competitive sale?

I will not go to another neighborhood as I have 3 or 4 comparable sales from the same neighborhood,

You stated in the op that It's in a development, Yes? Is the subject in a PUD? Newer builds?

If the subject is in a PUD, like a condominium, lenders like to see a sale from a competitive development because it provides a broader and more reliable benchmark for evaluating the market value....

 

[Fernando]

Ask yourself why is there such a large premium over the median price.
I remembered one house which I could have appraised.
It was an over improvement with highest priced if sold but I can see the justification because it was on the waterfront.
I saw the value in the premium but still difficult to appraise.

 

[glenn walker]

We have many homes that are worth five times what is typical because the wealthy don't buy and sell based on comparable sales and their estates are not appraised based on GSEs or lenders guidelines But a $300,000 home is not normally a wealthy persons home and it's just bigger or better than what's around it.

But the appraiser doesn't try to bring
it's value down to it's lower valued sales comparables. It can be worth $300,000 and the lender just has to decide if they want to make the loan.

** CAN YOU HAVE THE BIGGEST HIGHEST VALUE HOME ? Sure your just not getting a traditional loan and it's a portfolio loan or buyer pays the difference in cash. My ghetto shack is worth maybe $1.2 million but 1,000 feet North there is a 6,000 Sq.Ft Mansion worth $4 million and no there isn't any comparable for 5 miles away.

 

[Fernando]

Ask yourself why is there such a large premium over the median price.
I remembered one house which I could have appraised.
It was an over improvement with highest priced if sold but I can see the justification because it was on the waterfront.
I saw the value in the premium but still difficult to appraise.

Did I see value at that high price?
Yes, I would buy it since I appreciate waterfront views.
Would I appraise it?
Yes, at a high premium fee.