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Highest And Best Use

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robertwells said:
the best way to value is with a cost to convert the retreat to a 3rd bedroom
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No go there. It is what it is. If that is a defect or inadequacy, then you might use a cost to cure as a proxy for the functional obsolescence and discount accordingly but I would prefer to use a paired sales analysis. But I am betting the room count does not mean squat and the SF adjustment would account for everything necessary in YOUR market or MINE.... There are too many appraisers who think the moon is hung on the room count. I personally think there is very little market resistance to same in a world where a lot of buyers are downsizing, empty nesters, single, etc. They simply don't need a 3rd bedroom...but don't mind having a "spare" room or large bedroom.
 
i'll take the large Master suite any day over 3 bedrooms.
Adults - Master bedroom
Additional kid - bunk bed
 
Sounds to me like there is no adjustment I would compare it to three bedroom models and make no bedroom adjustment and simply state the retreat is being used as a bedroom and has similar utility as the other models. I would not do a cost to cure and in my opinion this is not a H & B use issue. Keep it simple otherwise you will be leading yourself down that rabbit trail to hell.
 
I find total square footage (glas) more important than the number of bedrooms. Many of our higher end builders build large residences with only one bedroom above grade. That is usually a large Master Bedroom suite with sitting area, fireplaces, large bathrooms with separate tubs and showers, and huge walk-in closets.

The lower level (below grade) might have 3 or 4 bedrooms and two baths. Usually drives underwriters nuts.
 
It can depend on whether or not bedrooms influence price in similar sf size properties. The market should tell us especially if we compare year after year sales a pattern should emerge.

In starter home market 2 vs 3 bedroom can make a difference, with 3 bedrooms having a premium because typical buyer is often starting a family and that third bedroom is critical..

But in a more upscale market where the buyer pool is a mix of empty nesters and singles as well as families the third bedroom premium might disappear,

If a large portion of owners over the years have converted this subject model from 2 bedrooms to 3, could mean such a large master was a super adequacy and more buyers found a better use of the space is for another room. So check the market has majority or only a portion of the home had 3 bedrooms created from former two. (3rd room might be a den or study now)Confirm trends with RE agents whose names show up on a lot of the comps listings.
 
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J Grant said:
I would not use a cost to cure because there is nothing that needs curing, some owners just opted to change the large master bedroom into 2 smaller rooms, creating 3 bedrooms from former 2. I'd use the sales of sale size in subdivision where the MB has been changed to a 3rd bedroom, and then search back in time ( as long as 3 years perhaps), and in an expanded area search of similar appeal, use the largest 2 bedroom home sales you can find and adjust up for the inferior sf. Best comps would be older 2 bedroom sales in subject subdivision if available, as that kind of 2 bedroom floorplan sounds like an upscale type house/community.
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J Grant said:
We can't just start re configuring our subject properties to make them worth more ! (or because we can't find comps lol)
I assume HBU is asked and anwered, residential as exists so this is not an HBU issue, it is an evaluation issue for a subject with no recent similar exact floorplan/bedroom count recent sales.

Go back in time in subdivision, surely in years past houses with the subject 2 bedroom configuration and the same sf /model converted to 3 bedrooms sold? What was the price differences, if any, between them? That will provide support for your adjustment (or lack of one) , You also might find an older comp of the 2 bedroom and make a time adjustment.

Add support for conclusion by surveying RE agents, knowing your market re Restrain noted above.
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J Grant said:
We can't just start re configuring our subject properties to make them worth more ! (or because we can't find comps lol)
I assume HBU is asked and anwered, residential as exists so this is not an HBU issue, it is an evaluation issue for a subject with no recent similar exact floorplan/bedroom count recent sales.

Go back in time in subdivision, surely in years past houses with the subject 2 bedroom configuration and the same sf /model converted to 3 bedrooms sold? What was the price differences, if any, between them? That will provide support for your adjustment (or lack of one) , You also might find an older comp of the 2 bedroom and make a time adjustment.

Add support for conclusion by surveying RE agents, knowing your market re Restrain noted above.
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J Grant said:
It can depend on whether or not bedrooms influence price in similar sf size properties. The market should tell us especially if we compare year after year sales a pattern should emerge.

In starter home market 2 vs 3 bedroom can make a difference, with 3 bedrooms having a premium because typical buyer is often starting a family and that third bedroom is critical..

But in a more upscale market where the buyer pool is a mix of empty nesters and singles as well as families the third bedroom premium might disappear,

If a large portion of owners over the years have converted this subject model from 2 bedrooms to 3, could mean such a large master was a super adequacy and more buyers found a better use of the space is for another room. So check the market has majority or only a portion of the home had 3 bedrooms created from former two. (3rd room might be a den or study now)Confirm trends with RE agents whose names show up on a lot of the comps listings.
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Thanks to everyone...One of the 1st things I did was go back in time, and did locate a sale in 2001 of this precise floorplan...Unfortunately, there were no other sales in this small subdivision in that same year. I have some data from the year before, and some from the year after. The prior sale of the precise floorplan sold for $595,000...everything else sold from $795,000-$995,000, but included some much larger/remodeled homes. However, accounting for differences it does still appear there was a clear difference, with the assumption being that this prior buyer of the 2 bedroom floorplan, considered possibilities for conversion...Bob
 
It's hard to believe it would be worth that much substantially less as a 2 bedroom than as a 3 bedroom...I know I said go back in time, but back to 2001 with only one sale of that model might not tell you much. Comparing a 2300 sf range home to substantially larger just to get a bedroom adjustment might not work either.

If it would cost let's say $10,000 to do a good job converting the present 2 bedroom into 3, putting in new floors in the rooms, etc...would the difference in price be $100,000 more? Seems unlikely , (in my experience)

At this point you went back in time and going back in time did not help much. But the search did have value, you can now state, "appraiser went back a over a decade and found no similar 2 bedroom similar size homes in the subdivison."

Sometimes we just have to "grunt a report out". That means just putting the best comps we can come up, more than we might need and making the adjustments. Once you do that you can get an idea what is going on in today's market and recent past (back a year ). A comp may be added or subtracted but putting them on the grid and adjusting them at least a picture of value emerges that you can take further steps to refine.
 
J Grant said:
It's hard to believe it would be worth that much substantially less as a 2 bedroom than as a 3 bedroom...I know I said go back in time, but back to 2001 with only one sale of that model match
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100% agree. It doesn't cost very much to convert to 3 beds. I would go by GLA and talk to the RE agents that work in that area to get a feel of the market reaction. $100k less for a master suite??? That's a lawsuit waiting to happen.
 
Agree, if OP has not done so yet, talking with a couple of agents who know that subdivision well can help clarify.

It might cost only 3k to do a base 2 to 3 bedroom conversion but in an upscale area homes selling over 500k, a nice job of high finish could be 10k -15 k plus....a buyer for this type of home might put in wood floors, recessed lights, permits etc new electric and so on.

Still, even the high end cost to convert (normally) while it can contribute more than cost, such as a 10k cost contributes 20-30k in price, it's rare that a 10k cost will contribute a 100k plus.
 
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J Grant said:
residential as exists so this is not an HBU issue,
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glenn walker said:
this is not a H & B use issue.
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is this because the typical buyer and the ideal improvement are not components of the Highest and Best Use analysis? Not!
Depending on what the OP determines,there may very well be functional obsolescence, which may even be potentially curable, as determined by a proper Highest and Best use analysis
 
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