Garage Adjustment

[Michigan CG]

One-way you can do it if you don’t get anywhere with a paired sales analysis is with the depreciated cost method. With this method you figure out what a garage would cost to build, subtract depreciation, and you have a basis from which to make your adjustment.

In order to extract depreciation correctly you need paired sales.

 

[Appraisal Santa Fe]

"Appraiser to provide 1 additional comp within 2 feet
of the subject property that has sold within the last
24 hours that does not have a garage"

:laugh: Excellent!

Yeah, do some research of the area and surrounding areas. You should be able to extrapolate enough data to find a value and support it if need be.
I dont know your territory, in my area, they range from 5K - 10K per stall.

Good luck. Some great tips here.

RC

 

[stefan olafson]

Great advice for you Grace, now it's up to you to follow that advice. The simple way is to pull a number out of thin air and say just because! The correct method is to do a thorough search of the market, let the market tell you....

 

[Don Clark]

Great advice for you Grace, now it's up to you to follow that advice. The simple way is to pull a number out of thin air and say just because! The correct method is to do a thorough search of the market, let the market tell you....

Good advice. It's called market reaction. If several comps sell for $xxxx dollars less than several other comps for $zzz dollars more, then you have market reaction. There is no "List" for adjustments. And, it is important to figure out market reaction to make adjustments in every appraisal you do. Such things may be consistent for a period of time but eventually the amount will change.

 

[Jim Onderisin]

The amount it cost to build is definitely related to the amount the market will pay. It's all about the market. The buyer looks at a property with no garage and says, "Darn, it'll cost me $12,000 (or $30,000) to build a garage." You can bet that is considered in his offer.

 

[Mike Boyd]

oh, for crissakes...

adjust it at $5000 or $10000 per space and leave it at that.

All us "Michaels" think alike. LOL

 

[Jim Onderisin]

We're either part of the solution or the problem.

 

[Mike Kennedy]

One could always call these folks and ask them

http://www.orea.ca.gov/

 

[Mike Garrett RAA]

What? You have no magic list? Shame on you. Every appraiser IN MY MARKET who was inducted into the secret society of real estate appraisers (SSREA designation) has the secret list, knows the secret hand shake, and the secret handbook called..."Avoiding Stips".

My brother created such a list some 30 years ago and we have real estate agents still using it...some appraiser's, for that matter too. Sounds like your mentor must have been one of my brother's students because that is about right for 30 years ago.

Paired sales analysis is the basis for all adjustments. That's what the book says and doing a paired sales analysis on every appraisal is a great way to determine the appropriate adjustment for almost anything. I always recommend that to my students in the Registered Appraiser 75 hour course. We even do several exercises using paired sales analysis including multiple regression.

Now back to the real world. I know very few "seasoned" appraisers who do paired sales analysis on every appraisal. Most develop that "secret list" be it written or mental of adjustments and know that in a median priced single family house the difference between a one car and two garage is ..... $XXXX (fill in the blank).

Let me ask you this question...Do you think the contributory value of a garage is the same in a $100,000 house as it is in a, say, $500,000 house? Hmmm, doesn't seem that "magic list" applies, does it? So, how do we solve that problem without going through the "paired sales analysis" on every appraisal? How about developing a "Percentage of Contributory Value" for different price ranges and different marketing areas?

If, in my market, a parking stall has a contributory value of, say, 3% then a two car garage would be worth about $15,000 and I would use an adjustment of around $7,500 when comparing a one car to a 2 car to a 3 car. By using a percentage (%) it compensates for the differences in price ranges and would also solve the differences in "market areas". Over the years, experienced appraisers develop those percentages based on literally thousands of appraisals. This is a very good reason for using "seasoned" appraisers rather than a trainee just entering the business.

A good way for an appraiser to verify their percentage of contribution is correct is to look at the new housing market. There, cost is king as far as a builder is concerned. Most have price lists for just about everything including adding an extra parking stall (3 car vs 2 car). While it isn't exact, it produces a basis for comparison. IN MY MARKET, buyers look at new homes even though they may be in the market for an existing home. They learn very quickly what a parking stall is worth by comparing what the builders are offering.

Lastly, cost services such as Marshall/Swift provide a cost for various components, including garages. This is a good verification of your adjustment under the principle of substitution. A buyer will generally not pay more than they can acquire a suitable substitute new. In other words, the cost generally sets the upper value limit.

As review...do your home work. Establish paired sales, create a list of percentage (%) of contribution for your market area. Talk to builders. Get a good cost book.

I wish you well!

 

[Tom Eichholz]

What? You have no magic list? Shame on you. Every appraiser IN MY MARKET who was inducted into the secret society of real estate appraisers (SSREA designation) has the secret list, knows the secret hand shake, and the secret handbook called..."Avoiding Stips".

My brother created such a list some 30 years ago and we have real estate agents still using it...some appraiser's, for that matter too. Sounds like your mentor must have been one of my brother's students because that is about right for 30 years ago.

Paired sales analysis is the basis for all adjustments. That's what the book says and doing a paired sales analysis on every appraisal is a great way to determine the appropriate adjustment for almost anything. I always recommend that to my students in the Registered Appraiser 75 hour course. We even do several exercises using paired sales analysis including multiple regression.

Now back to the real world. I know very few "seasoned" appraisers who do paired sales analysis on every appraisal. Most develop that "secret list" be it written or mental of adjustments and know that in a median priced single family house the difference between a one car and two garage is ..... $XXXX (fill in the blank).

Let me ask you this question...Do you think the contributory value of a garage is the same in a $100,000 house as it is in a, say, $500,000 house? Hmmm, doesn't seem that "magic list" applies, does it? So, how do we solve that problem without going through the "paired sales analysis" on every appraisal? How about developing a "Percentage of Contributory Value" for different price ranges and different marketing areas?

If, in my market, a parking stall has a contributory value of, say, 3% then a two car garage would be worth about $15,000 and I would use an adjustment of around $7,500 when comparing a one car to a 2 car to a 3 car. By using a percentage (%) it compensates for the differences in price ranges and would also solve the differences in "market areas". Over the years, experienced appraisers develop those percentages based on literally thousands of appraisals. This is a very good reason for using "seasoned" appraisers rather than a trainee just entering the business.

A good way for an appraiser to verify their percentage of contribution is correct is to look at the new housing market. There, cost is king as far as a builder is concerned. Most have price lists for just about everything including adding an extra parking stall (3 car vs 2 car). While it isn't exact, it produces a basis for comparison. IN MY MARKET, buyers look at new homes even though they may be in the market for an existing home. They learn very quickly what a parking stall is worth by comparing what the builders are offering.

Lastly, cost services such as Marshall/Swift provide a cost for various components, including garages. This is a good verification of your adjustment under the principle of substitution. A buyer will generally not pay more than they can acquire a suitable substitute new. In other words, the cost generally sets the upper value limit.

As review...do your home work. Establish paired sales, create a list of percentage (%) of contribution for your market area. Talk to builders. Get a good cost book.

I wish you well!

Above was very well stated.

To reiterate, Paired (or more) Sales Analysis IS the basis of all valuations indeed, because it reflects the particular market reaction (which cannot be fooled!).

However, finding the "perfect world" similar current Comps for each appraisal in every way but say, garage count, (or, also when comparing houses with pools, finished basements, number of beds or baths, fireplaces, etc, etc.) can often be challenging at best. This is exactly where that plain old experience factor and knowledge of what percentage other similar properties had adjusted for is well worth documenting and remembering.