Contribution of detached workshop / garage

[Louis Pompeo]

Analysis of historical sales can be applied to current sales .... it might take some work however ... but thats why we are experts in real estate valuation.

I do not agree with this statement.

5 years ago the economy and the RE Market was humming. Sales of RV's were brisk and
hobbyists with disposable income to buy toy motorcycles and project cars were abundant. Those folks were actively looking for properties like the subject to store and work on their passions.

It's not that way now. I'd rather use current, theoretical analysis as a basis for such an adjustment than data from boom times.

In this market, it's more art than science that will provide credible solutions.

 

[Mark K]

So you do a flakey matched pair analysis, a theoretical income analysis, and a cost approach analysis with depreciation based on a formula rather than market extraction.

You wind up with 3 indicators of value that you didn't have before. You then reconcile them into an estimated adjustment.

It's better than wetting your finger and sticking it in the wind.

Barely.

Cost approach based on a formula or income based on a non-income property and then used for a residential superadequacy will result in a value no better than rectal extraction or the finger-in-the-air method.

"Flakey" matched pair analysis is the best option.

You can calculate the additional value on a per sq.ft. basis of a smaller detached garage (easier matched pair scenario) and give the subject the same unit value. You're comparing apples to oranges but it is likely the only available approach.

Calling two or three realtors that work the area and asking for their opinion is as good or better than the cost or income approach and is an approach I've used in the past and included in a report to support a "flakey" apples to oranges matched pair.

 

[Louis Pompeo]

Hahahahahahahahahahahahahahahahahahahah!

Barely.

Cost approach based on a formula or income based on a non-income property and then used for a residential superadequacy will result in a value no better than rectal extraction or the finger-in-the-air method.

"Flakey" matched pair analysis is the best option.

You can calculate the additional value on a per sq.ft. basis of a smaller detached garage (easier matched pair scenario) and give the subject the same unit value. You're comparing apples to oranges but it is likely the only available approach.

Calling two or three realtors that work the area and asking for their opinion is as good or better than the cost or income approach and is an approach I've used in the past and included in a report to support a "flakey" apples to oranges matched pair.

 

[CANative]

Sheesh! It's worth about $35,000. Adjust that much for no garage, adjust $25,000 against a 400 sf 2 car garage and call it even if the comp has two big garages.

 

[Michigan CG]

I think I agree with just about everything Louis has said. Complex properties call for a lot of examination and thinking. But I also agree with Mark in calling some of the local Realtors which is something appraisers rarely do.

Develop all three approaches, call a few Realtors and then pick your position. After the position is picked write about 6 pages of narrative so the reader finally says "ENOUGH, he has to be right with all of this jibberish!"

The art of narrative skills can be very beneficial when you are trying to sell someone on an opinion that is hard to prove.

 

[Louis Pompeo]

I think I agree with just about everything Louis has said.

Thanks for being such a clear thinking American.

 

[CANative]

You listen to Michael Savage, don't you?

:icon_mrgreen:

 

[Louis Pompeo]

Bill O'Reilly, the ultimate clear thinking American...after myself, of course

 

[Terrel L. Shields]

I do not agree with this statement...
5 years ago the economy and the RE Market was humming....hobbyists with disposable income ...were actively looking for properties like the subject to store and work on their passions.

beats a dart throw. And apparently some prefer recent darts over past market data. I don't see very many people selling off all their toys just yet. I meet an awful lot of bikers on week ends. And buyers, typically, are buying with more money down. Further, in my area, those small acreage dwellings are still selling with those amenities. The barn/shop builders are still building. We have a number of them in our area, and I noticed one has a sign offering a job to experienced welders.
We've also see steady sales of large personal storage buildings. Folks finally figured out that instead of renting long term storage at the storage for $50 a month, they could pay $2500 and own an equally large one in the back yard that will last a decade or longer.

You have to look at the market ultimately. And what market data you have varies. Expecting all your comps and all your adjustments to come from very recent "snapshot" viewpoints will lead to errors many times. An isolated single sale nearby last week does not tell me that is the "market". It could have sold above or below the market trend that has been established over a longer time frame. Do some regressions. Do some market studies. The trend falls out and by analogy (proxy) you apply that your problem. Absence of evidence is not evidence of absence.

To extract an adjustment for shop buildings, I went to a rurban development where they were common and I used a market extraction to estimate their contribution. In fact, that market study is incorporated in my Site Improvements and Buildings class. Each succeeding sale has confirmed that those buildings did not suddenly collapse in value just due to economy. The buyer who doesn't want or need one, goes elsewhere. The buyer who finds they want that building, pays a premium over similar property without the feature. Perhaps that may differ in your area. But you should run those numbers whenever an opportunity arises where you can.

Even in vacant ag land sales, I check the ratio between pastureland and woodlot. Distance from pavement and access (easement vs public road) issues. I find that the ratios often remain roughly the same even as land prices fall.

 

[Metamorphic]

beats a dart throw. And apparently some prefer recent darts over past market data. I don't see very many people selling off all their toys just yet. I meet an awful lot of bikers on week ends. And buyers, typically, are buying with more money down. Further, in my area, those small acreage dwellings are still selling with those amenities. The barn/shop builders are still building. We have a number of them in our area, and I noticed one has a sign offering a job to experienced welders.
We've also see steady sales of large personal storage buildings. Folks finally figured out that instead of renting long term storage at the storage for $50 a month, they could pay $2500 and own an equally large one in the back yard that will last a decade or longer.

You have to look at the market ultimately. And what market data you have varies. Expecting all your comps and all your adjustments to come from very recent "snapshot" viewpoints will lead to errors many times. An isolated single sale nearby last week does not tell me that is the "market". It could have sold above or below the market trend that has been established over a longer time frame. Do some regressions. Do some market studies. The trend falls out and by analogy (proxy) you apply that your problem. Absence of evidence is not evidence of absence.

To extract an adjustment for shop buildings, I went to a rurban development where they were common and I used a market extraction to estimate their contribution. In fact, that market study is incorporated in my Site Improvements and Buildings class. Each succeeding sale has confirmed that those buildings did not suddenly collapse in value just due to economy. The buyer who doesn't want or need one, goes elsewhere. The buyer who finds they want that building, pays a premium over similar property without the feature. Perhaps that may differ in your area. But you should run those numbers whenever an opportunity arises where you can.

Even in vacant ag land sales, I check the ratio between pastureland and woodlot. Distance from pavement and access (easement vs public road) issues. I find that the ratios often remain roughly the same even as land prices fall.

With this market you can make good arguments in either direction. I know people who have seen significant decreases in their disposable income or lost their job all together. I know people that haven't lost their job, but haven't seen a raise in a long time. I know people (government employees) who have seen advancement and greater income on top of increased buying power, at least in the RE market. Whether the "typical buyer" is far enough off the pace make a dent in the values is far too fine a point to bother with on the typical assignment.

If I were a reviewer and an appraiser wanted to use as-is some analysis that was a little bit dated or if they wanted to discount it a little based on "the economy" I think I'd probably take it either way. Heck. Just that fact that the did some analysis and presented it brings so much credibility to the table compared to what you normally see, you'd be pretty petty to quibble over the details.