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Over-improvements

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Homestead

Sophomore Member
Joined
May 11, 2007
Professional Status
Certified Residential Appraiser
State
Hawaii
I am appraising a home that is approximately 7,000 SF. In the entire neighborhood/marketing area, the largest home ever built that I can find in county records is only 4,455 SF.

How do I adjust for the over-improvement based on the size of this home????
 
At a CE course a instructor told me there could be a negative adjustment to a house to large for the neighborhood but I dont how you would support a adjustment like that.

Try to get a comps in a superior neighborhood similar in size to your subject and similar in size to your comps in your subject neighborhood and give a location adjustment. (a good chance your net and gross % are gonna be large.)

Make sure to put a comment in the addendum in BOLD caps.

Most important to adjust your regular FEEEE
 
Some might opine that the absence of similar sales indicates that the market does not
 
ZZGAMAZZ

that the market does not ... what????
 
I am appraising a home that is approximately 7,000 SF. In the entire neighborhood/marketing area, the largest home ever built that I can find in county records is only 4,455 SF.

How do I adjust for the over-improvement based on the size of this home????

Homestead,

Well, the first thing you do is recognize that the largest home ever built has to be at least "approximately" 7,000 and not 4,455.

Webbed.

P.S.. for a correct answer to your question look up "Burden on ownership" in any texts you happen to have. Not going to some superior neighborhood as your only solution. .. Oh, and then decide if the neighborhood, as you view it, is really the only exclusive "market" for this house.
P.S.S. But before all that, you might try advising your client about your not being qualified for the assignment and see if it is ok by them for you to become qualified with telling them how you are going to do that... Since USPAP requires that of you.
 
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. . . exist for an improvement of this magnitude; that to extend the analysis to a different neighborhood, in which larger units are less atypical, might warrant relatively significant downward adjustments if that area is superior--or to justify the absence of a location adjustment, which might be impossible to do, if the "other" neighborhood demographics are dissimilar to the subject, based upon the potential for a neighborhood comprised of larger and, ergo, higher priced homes typically to be superior. Towards that end the "enhanced" GLA might not warrant any adjustment; and the additional, tangible costs of owning the larger unit might actually require downward adjustments to reflect the financial burden of enhanced utilities, taxes, maintenance, etc., relative to smaller units in the same hood.

Others will say hogwash a bigger house inherently is more valuable, but others will ask for proof of "market reaction" rather than "personal opinion" upon which that call can be made.

[It's intersting, at least to me as a perpetual newbee, how virtually all of the threads on the forum eventually dovetail into a relatively singular, straightforward approach to appraising, as tangled a web--proverbial web not intellectual web--as it is...]
 
Some might opine that the absence of similar sales indicates that the market does not
Are those the same peole who say a tree makes no noise when it falls if no one is there to hear it?
 
At a CE course a instructor told me there could be a negative adjustment to a house to large for the neighborhood but I dont how you would support a adjustment like that.
With market data and a graph? I, for one, haven't seen or heard of one getting that far past the point of diminishing returns yet.
 
I am appraising a home that is approximately 7,000 SF. In the entire neighborhood/marketing area, the largest home ever built that I can find in county records is only 4,455 SF.

How do I adjust for the over-improvement based on the size of this home????


In the case of an over improvement, my opinion is the question is better defined if asked, "what does this neighborhood support?"

In terms of value, the typical buyer will migrate to a superior neighborhood at a certain price-point. Above that price-point, no higher value is credibly supported in any given neighborhood (my opinion). And, yes, there are certain exceptions, but they are rare. :)

I think the issue of your problem is not the house but the neighborhood. Determine what value the neighborhood would support (keeping in mind that a typical buyer will not pay a higher price in the subject's neighborhood past its support level but will go to a superior value-range neighborhood) and you've determined the maximum market value (for the typical buyer). The adjustment to be made is in the cost approach (if completed). There doesn't need to be an adjustment in the sales approach (necessarily). :icon_lol:
 
Welcome back Denis....I haven't seen you here for some time. I hope all is well.
 
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