"deal Killer" No Value Added For Permited Guest House

[The Warrior Monk]

What is it? It has value, but would you be willing to give an opinion as to exactly what that value is? Could you give a credible opinion of value? EXAMPLE: Real world! We have a 35,000 square foot mansion in our area. No one will buy it. No one will even take it as a donation! Reason: Too big! The cost of maintaining is so huge that no one can afford it. It cost over 15,000,000 to build. It is on the market now for 5,000,000 and still no one wants it!

So what is a property worth that you can't even give away?

The point: If you do not have a very specific idea of what a value is how can you just make an adjustment?

I'd like to see you before the state board when the ask, "And what is the basis for your market value adjustment?"

You actually hit on a point that I didn't address, but should have. If one just "gives no value" to the ADU, there value opinion is almost certainly incorrect. That because if it really doesn't contribute value, someone it not going to pay the same for this property versus one without that feature. That's because the existence of that feature means high costs: maintenance, taxes, etc.; the value should be lower than a property without the feature.

Regarding the property in TX, nobody's buying it because its listed too high. BTW, I'll take it is a donation provided that the demo costs are less than the property value. Just put me in touch with the person that is handling the donation. Thanks!

 

[The Warrior Monk]

So you are saying you can just pick a number out of the air? Really?

The lack of market support does not automatically mean a feature has no contributory value. $0 is also a number that one can pick out of the air, which the appraiser in question apparently did.

 

[Deleted member 128537]

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The lack of market support does not automatically mean a feature has no contributory value. $0 is also a number that one can pick out of the air, which the appraiser in question apparently did.

And maybe that is the number. By the way if you read my previous post I am not saying the ADU doesn't have value. I am saying there are times when the adjustment is in fact "0." Indeed it is possible for an improvement to have a negative value.

I appraised a house some time ago where I thought for sure the house had contributory value to the site. The house was 2200sf in good condition, remodeled kitchen and baths, and reasonably decent functionality. But it sold for 200,000 less than what I appraised it for the estate. When I talked to the realtor he said they simply couldn't get anyone to pay that kind of money with the improvements; even though the improvements were in reasonably good condition. The problem was the design of the house. No one wanted the design.

So although I thought there should be contributory value the market said, "No." I was astounded. But the property was on the market for a long time, had numerous offers, and essentially sold for 35,000 less than what the land vacant was worth because the present owner decided it cost 35,000 to demolish the place. So in this case the improvement were worth -$35,000.

The point is not the ADU doesn't have contributory value. I'm sure it has. The problem: What is it? Can an appraiser prove it? It is often VERY difficult to determine what that exact value is. If I had appraised the subject for a $-35,000 they would have thought I was nuts and completely incompetent. And had I reviewed that appraisal with a $-35,000 contributory value I would have thought the same about myself! Yet the market spoke on a consistent basis. I was just dead wrong. Humbling to say the least.

The problem is that in our area we have now seen this occur on a steady basis. And we are beginning to rethink the contributory value of improvements

 

[suzuki4444]

I have to say I never knew anything about appraisals and as far as taxes, I just paid them every year I received the bill in the mail. I found out my taxes all these years were done wrong, the tax appraiser has been adding the sq. footage of both houses together as if it was one house, so I've been paying for taxes on one 2550 sq. ft. house. My house at 266k with the upgrades is in-line of what's been sold and what's for sale in the neighborhood.

 

[The Warrior Monk]

homesweethome,

You have so far avoided the question that was put forth to you: You haven't provided a real world example of a ADU that does not have contributory value. You're discussing other issues not related to ADUs. ADUs are different, in that they are living units. If people would potentially occupy a unit, it has utility, and thus value.

Obviously, HBU comes into play. If the unit is dilapidated and needs a careless smoker, it might not have contributory value. Even then, other factors come into play. For example, if the unit is preexisting in terms of use or location, or has higher than permitted sanitary flow, etc. it still may have contributory value.

But we're just speculating. It appears the appraiser in question simply didn't do his job correctly and has no basis for his conclusion.

 

[Terrel L. Shields]

So you are saying you can just pick a number out of the air? Really?

Obviously you don't have a clue about making adjustments based on anything but the Magic Paired Sales that Fannie Mae is married to. You can make adjustments by cost related methods, income methods using an estimate of rent as a proxy, or you can go further afield or further back in time...and may have to to support any functional obsolescence due to the ADU.

The fact you have no comps with an ADU does not make it invisible.

 

[Webbed Feet]

Giving the ADU no value is a red flag and it should be looked at.

This study showed that ADUs, on average, added 25% to 34% to a property's value in Portland. So 0% is alarming.
http://www.appraisalinstitute.org/a...-using-income-approach-the-appraisal-journal/

Saying "there were no comps" is not a valid reason for giving it no value.

Referring to a "study" is fine, not knowing any details at all about the study isn't. I've sat in on author presented similar studies and the authors themselves brought out that the studies use some pretty "tongue-in-cheek" assumptions so far because all the data uses very dissimilar properties and facts about those properties and sales. Something that makes the public thinking 25% to 34% is some sort of benchmark result to be very misleading.

 

[Webbed Feet]

<....snip.....>
If all appraisers declined the assignment due to the assignment condition, you would not get a loan.

<......snip.....>

.

If all appraisers followed their state administrative rules regarding their licensing or certifications some people would not get loans? Is that supposed to sound as if it justifies so many appraisers violating standards?

 

[Webbed Feet]

<....snip......> The appraiser probably didn't get paid enough to do the necessary driving for the assignment.

<....snip....>

Then by all the rules and regulations over appraisers in every state I know of ... the appraiser should have either bit the bullet and lost money doing the job correctly, or should have declined the assignment. It drives me nuts to read casual statements like that to the public that leave out the part that it is NOT ok for an appraiser to fail to perform per state regulations because they didn't get paid enough.

 

[Webbed Feet]

Obviously you don't have a clue about making adjustments based on anything but the Magic Paired Sales that Fannie Mae is married to. You can make adjustments by cost related methods, income methods using an estimate of rent as a proxy, or you can go further afield or further back in time...and may have to to support any functional obsolescence due to the ADU.

The fact you have no comps with an ADU does not make it invisible.

Hear! Hear!