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"deal Killer" No Value Added For Permited Guest House

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Did you mentioned to the appraiser that the additions were done with permits? If so, did appraiser mentioned in report why the addition was not given any value? I had a similar type situation in my area and I was fortunate to come up with few comps with some type of guest house.
 
The house was originally listed for 274k and was on the market for a couple of months, the majority of individuals viewing the house were young with children ranging from 2-10 years of age (having 3-4 kids) and needed more bedrooms (probably 5 couples) or were couples that needed to sell their house first (2-3 couples). Of probably 10-12 couples that looked at the house, only one said the house was priced to high and 2 said the 2 bedrooms in the main house were to small. EVERY person or couple that viewed the house loved the guesthouse and thought it was a big positive. My realtor and I decided to take it off the market until summer, the following day the house was put back on the market at 269k we had an offer for 266k which I accepted. We had three appointment that day to show the house, one was less than an hour after the agreed offer so we showed the house to that couple, when they left they wanted to make an offer on the house but I had already agreed to a price with the person before them. I can understand this house not being right for every couple especially ones with a young children but this is the perfect house for someone who is taking care of a parent, relative, a couple with a teenager or would like an office that works from home also one of the couples told me it would be perfect for a man cave. The appraisal for $198.5k was made solely on the main house which is 1950 sq. ft. and absolutely 0 $ value for guest house, the back porch was worth more than an entire complete self contained 600 sq. ft. guest house with central air, heat, full kitchen and bathroom with shower. The house was permitted and built when the main house was built and there was 0 $ value from the appraiser because it was atypical and there were no other comps to use in the neighborhood.
 
The sale price was $265,000
The appraisal, without the guest house was $198,500
So, you're saying the guest house is worth at least $66,500
Where are the sales agents comps for coming up with this number?
How was this number decided?
The unit is not rentable.
It has no land of its own.
It can not be separately subdivided and sold.
Just where did the list price come from?

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Agree.

I think this whole thing falls back into the lap of the listing agent and owner coming up with real numbers from the market and start over.

At 600 SF, that $66,500 represents $110.83 per sf of solely the ADU, which is not brand new.

"Get real" is a phrase that comes to my mind.

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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. -

You missed my point. It's a dwelling unit, and I am making the assumption it can be occupied. If there is added utility, there is value. That can be measured in many ways. Some ways are better than others, given the particular assignment and the market data available. It the market is void of similar properties that have sold within a reasonable time frame, then another approach may be necessary. Using an income approach based what one would pay for similar utility is a much better approach than throwing one's hands up and "giving it no value."

There are also circumstances where an income approach is an accepted approach for a property that cannot be rented. Valuation of certain life estates comes to mind.
 
7 pages of kardashian assumptions with no true verbiage from the original appraisal report.
 
The price was using homes that had sold and were for sale at that time and added both the sq. footage of the main and guest house together, the 198.5k comes out to about $102.00 sq. ft., I would have been happy if there was some kind of value in the guest house maybe $75-$85 sq.ft. but $0, I might as well parked a 1970 travel trailer in the back yard and called it a guest house. Using the guest house for an income property, I would think you could write it off at the end of the year as an office for the homeowners business if he or she works at home or instead of paying for a nursing home to take care of a relative receiving some kind of compensation for that.
 
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Agree.

I think this whole thing falls back into the lap of the listing agent and owner coming up with real numbers from the market and start over.

At 600 SF, that $66,500 represents $110.83 per sf of solely the ADU, which is not brand new.

"Get real" is a phrase that comes to my mind.

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Why would they list it for less if buyers are willing to pay more? It sounded like there are other interested parties if the deal falls apart.
 
Why would they list it for less if buyers are willing to pay more? It sounded like there are other interested parties if the deal falls apart.

Buyers are always willing to pay more, when they are paying with the bank's money.

Haven't we learned that already?

And then when they can't make the payments they start crying about "over appraised" and other whiney things that it wasn't their fault for overpaying.

And then the banks start whining "over appraised"

and the FDIC gets in on the same action,

But all along,

the buyers were willing to pay more.

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