A couple of things to keep in mind when reading everyone's response:
- I am not aware of anyone active on this forum who has competent knowledge of your particular market.
- No one has been able to read the entire report, review potential comparables, and form an opinion as to what the appropriate market-based adjustments might be.
- Most importantly, while each of us is willing to provide you with some insight into our thinking, we are only providing you with our personal opinion based on very limited information. None of our opinions is worth any more than what you have paid for them, and some may be worth a good deal less.
All that said, these are a couple of things that jumped out at me:
- Date of Sale Time Adjustment: Comp #1 was adjusted 2.1% over an approximately 18-month period, which represents an approximately 1.4% annual rate of adjustment. However, the other two sales are about 6 months old, with no adjustments. Did the market increase 2.1% in 2024, and then has it been flat for the last 6+ months?
- Location: I have no idea how the adjustment to Comp #2 was arrived at, but I would be sure to ask. In looking at aerial imagery, the Comp #2 neighborhood appears to be fairly similar to the subject's, but then the market should be telling you what the difference is. In looking at an aerial image of Comp #3, it backs up to a major commercial district with several multiple-story buildings being within 400' and their parking lot being within 100' of the back corner of the house. Granted, there is a line of trees separating the house from the parking lot, but the house is partially visible from the parking lot, so my guess would be the parking lot is also partially visible from the house. I would ask for an explanation.
- Site: Each of the adjustments is based on $3.98 per square foot. However, in the cost approach, the subject site has been valued at $2.54 per square foot. Generally, when looking at site size, water frontage, street frontage, etc., the most valuable parcel on a square foot or front foot basis is that which gives you access, the second most valuable is that which is buildable, and the third is that which can be split into multiple parcels. So, valuing the subject site at $2.54 per square foot and then adjusting for somewhat minor differences using $3.98 per square foot needs to be explained. Also, with regards to Comp #2, one needs to be careful not to make a double adjustment when it comes to location and site value, due to all or part of one adjustment being included in the other adjustment.
- View: See location adjustment. Maybe the location is similar, but I am not sure the view (noise) would be considered similar by the market participants. Maybe this contributed to the extended marketing time.
- Condition: The adjustment made to Comp #3 is approximately $18.11 per square foot; this would not be enough to redo a kitchen, update all the bathrooms, or even install contractor-grade floor coverings.
- Gross Living Area: The adjustments in this section are similar and are based on approximately $74.00 per square foot. It would be interesting to see where this number came from, considering it is between 1/4 and 1/3 of the reported per square foot selling prices of the comparables.
- Basement & Finish: Interesting, a $64.00 per square foot adjustment was made to Comp #1 for not having any basement. Then the other two comparbles include basement areas approximately half the size of the subject, with no adjustments. If adjusted the same as Comp #1, Comp #2 would have been adjusted $57,219, and the adjustment to Comp #3 would have been $55,168. The half bathroom adjustment remained constant at $5,137.
In looking at the cost approach, the things that jump out at me based on your comments are:
- All three of the cost numbers used are fairly similar to what I find using Marshall & Swift.
- See my site comments above.
- There is no cost indication for having any finish in the basement area.
- There is no cost information provided for the pool/sauna, or possibly it was included without mention in the porches/patio/fireplace adjustment line.
- The physical depreciation number may or may not be correct, depending on how extensive your renovation work will be, the quality of the improvements, and if any of the major depreciation areas, such as windows, roofs, kitchen, bathrooms, HVAC, etc. are being addressed, or is it more like putting perfume on a pig.
Lastly, when it comes to your question regarding the differences in square footage, I wonder if the appraiser did not include the square footage of the pool area. On the floor plan included, there is a large void with no obvious entry to the left of the living room fireplace, and could this possibly be the difference?
I am not sure the answers to any of these questions or comments will make any difference in your appraisal. I know you mentioned that you were a contractor and doing a lot of the work, basically as sweat equity, but have you ever provided them with your estimate of hours/cost of this sweat equity? What would you charge for this work in an arms-length transaction?
Good luck, and let us know how things work out.
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. You are spot on.