"deal Killer" No Value Added For Permited Guest House

[The Warrior Monk]

I've seen it.

I'd be interested in knowing the specifics.

If the appraiser cannot prove a market value he cannot make an adjustment. Period. And your last statement demonstrates the point. People do not like them if given a choice

I'm sorry, but this is false. Value is not dependent on whether or not a property like it has sold before. For example, do the improvements on this oceanfront estate property shown below have no value because nothing like has ever sold in the United States, and thus "cannot prove a market value?"

 

[The Warrior Monk]

We don't know whether or not the item has contributory value, or the specifics of why the ADU is on the property. It may very well be possible that such a structure might not be allowed to be built on other properties for zillions of reasons.

In this specific case, we have someone willing to pay more for this item, yet the appraiser is saying no. For the purpose of analysis here, one can work backward from the information given using an income approach, making various assumptions pertaining to GRMs, and determine what a rent for that unit would have to be to make up that difference. It does not seem to be an unreasonable number.

 

[Scott Kibler]

I'm not sure income approach is the best way to skin this cat. That oddball of an SFR may be even odder as a rental in its market. This thing in this market as described, to me, screams related living thus from a functional standpoint, would be more comparable to homes with expanded living space that have some sort of separation from the rest of the living space. Around here is basement country and ADUs in finished basement area are very common. That's probably not the case there but I bet you have SFRs with in law suites in 2nd floor area or perhaps in 1 story homes, at the end of the home opposite the master suite. I've seen such things around here and in other markets, heck my folks bought one over 20 years ago. I'm thinking for your typical buyer in this market segment, that is your main competition. The space isn't best used to rent to some stranger for income, it's to house grandma. Only difference is you have some grass separating you rather than a flight of stairs or a hallway. The kitchen is the monkey wrench. Not so much in my market as every other city house has some sort of second kitchen set up somewhere, but maybe there. If I am right then valuing becomes a matter of adjusting for the finished square footage of the ADU, maybe at a lesser amount than for GLA.

This is all speculation as I don't know the market.

 

[The Warrior Monk]

My point was not that the income approach should be used, but rather using a reasonable income estimate (and by NY standards, incredibly low estimate) readily explains the difference between the appraisal value, which assumes the ADU has no contributory value, and the contract price. That said, If there is no similar properties with ADUs that has recently sold, there are various methods that can be utilized to determine if that item has contributory value or not. The methodology utilized depends on a whole host of factors; e.g., if the ADU increases the building envelope of the property, if the perc/sanitary flow of the combined units exceeds the allowable amount and is legal, if the unit can be readily rented, etc.

ADUs are very uncommon in my market area, yet have notable contributory value. That's because except in certain very small multifamily zones, they area not normally permitted. The are either legal, preexisting, nonconforming or are created by various special circumstances (transfer of development and/or other rights, various arrangements made when subdividing property, etc.).

The report under question does not appear to address of this; it's seems to be the "no comp = no value" method, which is not appropriate.

 

[Michigan CG]

I would wager, appraisal unseen, that there was a $1500 fireplace adjustment made...

God I love this post.

 

[Michigan CG]

........... (the buyer was using Chase)..................

That right there speaks 1,000 words. Chase, low pay AMCs with short turn times.

 

[Carlos Danger]

$198,500. How can any of you argue with that kind of precision?

 

[Mike Kennedy]

$198,500. How can any of you argue with that kind of precision?

you forgot the 25 cents.

 

[Terrel L. Shields]

the appraiser cannot prove a market value he cannot make an adjustment. Period. A

That's just plain nuts.

 

[Evincere]

I have
a 600 sq. ft. guest house (permitted

My point was not that the income approach should be used, but rather using a reasonable income estimate (and by NY standards, incredibly low estimate) readily explains the difference between the appraisal value, which assumes the ADU has no contributory value, and the contract price. That said, If there is no similar properties with ADUs that has recently sold, there are various methods that can be utilized to determine if that item has contributory value or not. The methodology utilized depends on a whole host of factors; e.g., if the ADU increases the building envelope of the property, if the perc/sanitary flow of the combined units exceeds the allowable amount and is legal, if the unit can be readily rented, etc.


The report under question does not appear to address of this; it's seems to be the "no comp = no value" method, which is not appropriate.

OP stated after receiving the report that Appraiser stated ADU is atypical.
OP specifically stated the ADU could NOT be used as a rental due to community restrictions and they are very strict about the restrictions..\
There would be NO income from the ADU to consider. -

OP stated that SC was $265 and EMV was $195. It would appear that there is not a hail mary that would have the differential between those 2 twains meet regardless of any "contributory" value of a 600 sq ft unit. That's not to say, it shouldn't have been allocated.

Nevertheless, I sense, ill informed buyers. But would really like to know the Original List price; DOM, Prior offers (if any);

Could you please explain or give an example of how the ADU would expand the "building envelope" or how it would be applicable in this particular SF residential property?