3rd bedroom - worth $100k or $20k

[LynnCondoOwner]

Looking for some help in Maine. We have a condo on the beach that we inherited, are trying to determine the value and then one buy the others out. we have two appraisals from licensed appraisers. one makes sense, the other seems to have funky assumptions. we have agreed on three and take the average. but the funky assumptions on appraisal two has caused us to pause.

this is a condo in a small high rise, there are about 10 of these small (7-10 story) high rises along the beach. most all are two bedrooms, just a few three bedrooms in the area. We have three bedrooms.

both appraisers used the same comp of a recent sale in the building...
other unit sold for 850,000 - this unit is 2 bedroom, 2 bath, 1152 sq ft.
our unit is 3 bedroom, 2 bath, 1525 sq ft.

Appraiser A - added $20,000 for 3rd bedroom and $33,200 for sq footage.
Appraiser B - added $100,000 for 3rd bedroom and $18,500 for sq footage

Appraiser A - report says:
Based on a sensitivity analysis of comparable paired sales in the marketplace, adjustments were applied to the following physical characteristics: Gross Living Area Above Grade (GLAAG) at $90 per square foot, Bedrooms at $20k, Full Bathrooms at $8K, Garages at $8K per space, and fireplaces at $3,500.
Adjustments for differences in construction quality, if made, were based on the Marshall & Swift Residential CostHandbook, modified for the open market and local area. Adjustments for differences in condition, if made, were the costs estimated to cure those differences based on market perception; they are NOT dollar-for-dollar.

Appraiser B - report says
The last 3 bedroom unit to sell at same building was unit 2A. It sold for $490,000 on 11/16/2017. A 2 bedroom unit sold for $375,000 on 10/27/2017. This indicates a difference of $115,000. After adjusting for gross living area, an indicated value forthe difference between a 2 bedroom unit and a 3 bedroom unit was approximately $100,000.

Appraiser B - seems off base with the statement and it is sort of arbitrary to calculate for a 3rd bedroom that way. Additionally there was a major special assessment (over $100k) that came up right after the sale in 2017 and we know there was litigation regarding lack of disclosure regarding the assessment.

there are some other gross inaccuracies in Appraiser B report - but this is the most glaring.

is Appraiser B correct in making an assumption like above?

 

[Dublin ohio]

Looking for some help in Maine. We have a condo on the beach that we inherited, are trying to determine the value and then one buy the others out. we have two appraisals from licensed appraisers. one makes sense, the other seems to have funky assumptions. we have agreed on three and take the average. but the funky assumptions on appraisal two has caused us to pause.

this is a condo in a small high rise, there are about 10 of these small (7-10 story) high rises along the beach. most all are two bedrooms, just a few three bedrooms in the area. We have three bedrooms.

both appraisers used the same comp of a recent sale in the building...
other unit sold for 850,000 - this unit is 2 bedroom, 2 bath, 1152 sq ft.
our unit is 3 bedroom, 2 bath, 1525 sq ft.

Appraiser A - added $20,000 for 3rd bedroom and $33,200 for sq footage.
Appraiser B - added $100,000 for 3rd bedroom and $18,500 for sq footage

Appraiser A - report says:
Based on a sensitivity analysis of comparable paired sales in the marketplace, adjustments were applied to the following physical characteristics: Gross Living Area Above Grade (GLAAG) at $90 per square foot, Bedrooms at $20k, Full Bathrooms at $8K, Garages at $8K per space, and fireplaces at $3,500.
Adjustments for differences in construction quality, if made, were based on the Marshall & Swift Residential CostHandbook, modified for the open market and local area. Adjustments for differences in condition, if made, were the costs estimated to cure those differences based on market perception; they are NOT dollar-for-dollar.

Appraiser B - report says
The last 3 bedroom unit to sell at same building was unit 2A. It sold for $490,000 on 11/16/2017. A 2 bedroom unit sold for $375,000 on 10/27/2017. This indicates a difference of $115,000. After adjusting for gross living area, an indicated value forthe difference between a 2 bedroom unit and a 3 bedroom unit was approximately $100,000.

Appraiser B - seems off base with the statement and it is sort of arbitrary to calculate for a 3rd bedroom that way. Additionally there was a major special assessment (over $100k) that came up right after the sale in 2017 and we know there was litigation regarding lack of disclosure regarding the assessment.

there are some other gross inaccuracies in Appraiser B report - but this is the most glaring.

is Appraiser B correct in making an assumption like above?

Did either appraisal have a 3 bedroom sale?

 

[Joe Flacco]

Without paying attention to what the appraisers said and looking at only the facts provided, this is what I read.

In 2017..

1152 SF (2BR) unit sold for $375,000 = $325 per SF
1525 SF (3BR) unit sold for $490,000 = $321 per SF

In 2024..

1152 SF (2BR) unit sold for $850,000 = $737 per SF
1525 SF (3BR) unit would sell for ??????

 

[Dublin ohio]

Without paying attention to what the appraisers said and looking at only the facts provided, this is what I read.

In 2017..

1152 SF (2BR) unit sold for $375,000 = $325 per SF
1525 SF (3BR) unit sold for $490,000 = $321 per SF

In 2024..

1152 SF (2BR) unit sold for $850,000 = $737 per SF
1525 SF (3BR) unit would sell for ??????

Around $1.1M +/- total. $725 sf

 

[George Hatch]

There's going to be a consistent relationship in the pricing between 2bd vs 3bd units in these different projects and going back several years. If this were my assignment I would only mention the recent sale of the 2bd unit for the purpose of disclosure, not as being directly comparable; and even then it's only because I can't find 3bd units in my project. Apart from that I'd be looking at 3bd sales on other projects and work out the difference attributable to location or project from there. The relationships between these different projects will also be apparent by comparing their respective sales histories.

Unlike with conventional single family homes there is no redevelopment potential with condo units, and no potential for room additions. What you see is what you get, so the differences in room count become almost insurmountable.

 

[Surf Cat]

I often do what appraiser B has done it in regards to finding 3 bedroom sales in comparison to the 2 bedroom sales at similar selling dates to discern differences. However, I wouldn't do just the most recent one in 2017, I would do all that I had MLS records on to try and discern what the market pays for a three-bedroom in comparison to a two-bedroom in that particular complex.

Having said that, there are other factors that come into play such as condition, floor level, and proximity within the complex that have to be factored in the differences. After finding those ratios, I will look at the most recent, similar, three bedroom sales in competitive complexes.

Appraiser A sounds as if he's "double dipping" in adjusting for square footage AND bedroom count. I'm wondering where appraiser A came up with that separate $20k adjustment for the third bedroom.

 

[Joe Flacco]

He is not double dipping. Both SF adjustments are probably way low. 2nd appraiser is at $45 per SF.

 

[Joe Flacco]

There's going to be a consistent relationship in the pricing between 2bd vs 3bd units in these different projects and going back several years. If this were my assignment I would only mention the recent sale of the 2bd unit for the purpose of disclosure, not as being directly comparable; and even then it's only because I can't find 3bd units in my project. Apart from that I'd be looking at 3bd sales on other projects and work out the difference attributable to location or project from there. The relationships between these different projects will also be apparent by comparing their respective sales histories.

Unlike with conventional single family homes there is no redevelopment potential with condo units, and no potential for room additions. What you see is what you get, so the differences in room count become almost insurmountable.

Too many differences and unknowns between different condo projects. Almost always better to look at history in the project than look at other projects. That is my experience with condos anyway.

 

[Surf Cat]

He is not double dipping. Both SF adjustments are probably way low. 2nd appraiser is at $45 per SF.

It says so in the OP...

"Appraiser A - added $20,000 for 3rd bedroom and $33,200 for sq footage."

For an approximate million dollar property, $45 per sq.ft. is way too low....

 

[George Hatch]

Too many differences and unknowns between different condo projects. Almost always better to look at history in the project than look at other projects. That is my experience with condos anyway.​

I'm confident you would do both. Not just one, not just the other. If the area is short of 3bd units to begin with then we'd have to use outside sales anyway so we already have to consider location/project differentials.