"deal Killer" No Value Added For Permited Guest House

[Metamorphic]

This really shouldn't be that hard.

The lack of readily available data for an ADU is not convincing evidence of the lack contributory value for an ADU. The ADU might be worth nothing, but that's a not a reasonable starting assumption. If the appraiser wants to make that case he'd have to present some convincing data.

If you take the more likely option....that the ADU contributes value.....there are several options for beginning to understand the potential size of the contribution.

-Prior sale analysis. Comparison of historic sale data for the subject with similar age sales without the ADU should provide a value indication for the ADU.
-Analysis of ADU or inclusion of Comps from nearby competitive markets that have ADUs.
-Analysis of the subject based on the combined utility of the 1,900 main home and the 600sf ADU. It shouldn't be that hard to find a 2500 sf comp somewhere. While not all buyers would accept the detached GLA at the contributory rate for normal GLA (small children), there is certainly a group that would not find dis-utility in the detached ADU and many that would find superior utility.

Particularly at 1,900 sf for the main home...you're a long way from superadequacy for living space on a lot in most markets in this country. My starting assumption would be 100% contributory $/sf value for the ADU and I'd be looking for my market data to pull me away from that number. I'd suspect that in a neighborhood in the maturity or gentrification you'd see 100%; maybe half that if the neighborhood is in the development or decay phases.

Its really important remember that your'e not talking about a superadequate main home to begin with.

 

[suzuki4444]

I read a thread about Chase bank (the buyer was using) on this website and from what I read there aren't to many appraisers that care to do work for that lending institution. I am going to send a copy of my appraisal report to the state for review this week. The houses in my neighborhood that aren't lakefront properties vary from $127.00 sq. ft. to the mid $90's a sq. ft. and houses built in the late 90's from the low $80's to around $110.00 sq. ft. I want to thank everyone for all the feedback and help answering my questions.

 

[JTip]

Using the guest house for an income property,

Have you ever dealt with tenants? Ever enjoyed unlimited excuses why they can't pay the rent? How great would that be in your 'back yard'?

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

$1,500 maximum (2014). $5 a square foot, max 300 sf.

instead of paying for a nursing home to take care of a relative receiving some kind of compensation for that.

If a relative reaches that point, I sure wouldn't put them up on the 2nd floor of the detached garage.


Either the appraiser justified the $0 value or they didn't (in the report). Let us know what was disclosed in the report....

 

[Terrel L. Shields]

If the appraiser is "giving no value" to the ADU in the first place with no legitimate explanation, I wouldn't trust the $198,500 number

Far too true. I don't understand "invisible" improvements. Basically, the support for not including it rests on the assumption that if there is no other sales then it can't be worth anything...bringing up a chicken and egg argument over the valuation of any factor. So all the new fences, barns, pools, outbuildings, detached garages, shops, hobby barns, etc. contribute zero? Sure, Nothing is worth anything until it sells ... so how is it going to sell if the appraisers stop all sales that have such ancillary items?

 

[suzuki4444]

The report only stated it was atypical and could not justify a value because there were no comps in the neighborhood, that's it. The guest house is on a concrete foundation, it's a small house with an attached garage. (600 sq. ft. with a 640 sq. ft. oversized garage) Both houses are all brick one stories with the same roof lines.

 

[The Warrior Monk]

The lack of readily available data for an ADU is not convincing evidence of the lack contributory value for an ADU. The ADU might be worth nothing, but that's a not a reasonable starting assumption. If the appraiser wants to make that case he'd have to present some convincing data.

If the ADU is worth nothing, that would imply that it would have an adverse effect on value. Given the choice between a property improved with a dwelling, and a property improved with a dwelling and ADU that has no contributory value, at the same price, the buyer is going to opt for the former. That's because if the ADU truly has no contributory value, the property owner either has to raze the structure, or opt to pay taxes and maintenance on the structure, either way resulting in more out of pocket expenses.

 

[Terrel L. Shields]

stated it was atypical and could not justify a value

If I eliminated "value" to improvements on most of the places I appraise, then I would zero out half of them...

 

[Michigan CG]

If the appraiser is "giving no value" to the ADU in the first place with no legitimate explanation, I wouldn't trust the $198,500 number.

I completely agree.

 

[Michigan CG]

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.

.

I completely disagree. First of all you are assuming that the $198,500 is credible. I don't find that credible for the simple fact that the appraiser thinks he is "that good" and that there is no commentary on why the ADU has no value other than he was too lazy to do the homework. And then there is the statement of HAS to use comps in the immediate neighborhood.

The appraiser was not qualified to do the report in the first place.

 

[Michigan CG]

In the appraisal report there should be NO LESS than two pages of commentary on the ADU and why it has not value. The appraiser may not be an idiot (although I think he is) but if there is something that has a significant COST then the appraiser had better be able to tell the reader of the report WHY there is no value and had better be able to have EVIDENCE and DISCUSSION as to why there is NO VALUE.

I am guessing we have a $300 appraisal that should have been $1,000 and a turn time that was 72 hours that should have been two weeks that was assigned not based on competency but rather fee and turn time which is typical of all Chase AMCs.