Questions about outbuilding value

[AppraisingLA123]

Hi all, and thank you in advance for your time. I am currently contracted to sell our farm, and unfortunately the appraisal came in lower than the contract price. After reviewing the appraisal report, it appears to me that the appraiser found great comparables, as I expect this can be difficult in rural areas.

Where I'm confused and feel like I should respond in some way, is that the appraiser only gave a 20k adjustment for the outbuildings on the property. Said outbuildings include a 100'x30' 9 stall horse barn with 2 garage bays, an office, hot water, and electricity and a 30'x40' metal quonset hut in like new condition. There are a few other sheds on the property as well, but they are small enough to likely be ignored.

I recognize that I'm not at all an expert, so I'm here to gain further understanding, and maybe learn how to to respond in my ROV without coming off offensively or like a know it all civilian. The appraisers notes say that the outbuildings were not given much value because of their poor condition, but as I stated, the quonset hut is like new and the horse barn is cinder block construction and in perfectly useable condition. These are significant selling points for the property.

Please forgive me if I'm asking a dumb question!

Deterining those values are challanging for appraisers, because of lack of data, also, how much low did the appraisal come in at? And as always i blame the seller, why do you sell your house without first hiring a prelisting appraisal? You don't know how much your house is worth, yet you want to challnage the appraisal?

 

[Zoe]

You should have gave all the cost data you have on the "other" site improvements to the appraiser. With you being FSBO, the loan officer working with your buyer would have to request the reconsideration of value.

Your buyer could request the reconsideration of value with the loan officer. You could give your buyer all the cost data you have and let them provide it to the loan officer. You probably missed the boat on communicating with appraiser at this time. You could try. It wouldn't hurt anything, but you are probably better off going through your buyer and the loan officer to the appraiser. Clean track.

An appraiser could use depreciated cost estimates on the other site improvements in the sales comparison approach. It is not likely the appraiser will be able to find sales with similar site improvements, so depreciated cost is about the only other way they can go. If you have a vet as a buyer, you have a very smart buyer. Way above average intelligence.

The loan officer could request a 2nd appraisal too and not do a reconsideration of value with this current appraiser or the loan officer can do both. The loan officer can request both reconsideration of value with this appraiser and another appraisal from a different appraiser.

 

[Zoe]

The appraiser likely needs to bracket the sales price you and buyer have agreed on somehow if possible and do depreciated cost estimates on your "other' site improvements for this veterinarian. Let the loan officer know.

If your buyer is going to run a business out of the property, it complicates things. If the use changes from residential to commercial, it complicates things.

The vet can probably take tax deduction on the office you say it has. The vet probably makes a bunch of money. Zoning would dictate somewhat on what the property can be used for.

 

[Zoe]

The vet could possibly take tax deduction for home office on the out building. The vet could work somewhere else full time and maybe take home office deduction at the house.

I am curious. When you bought the house, were the buildings worth anything to you?

 

[Tom D]

If the loan amount is small and can be had at the appraised value, then the sale price is irrelevant. The buyer can still get the loan, unless they had an appraisal contingency. If they can get the loan, they cannot back out. And did you save realtor money by selling it fsbo. As a buyer i would have taken that off the sale price when negotiating. The value is always more to the buyer who has a use for all that stuff.
If i didn't have a use for those outbuildings i would consider them an extra expense that i didn't need.

 

[Zoe]

If the loan amount is small and can be had at the appraised value, then the sale price is irrelevant. The buyer can still get the loan, unless they had an appraisal contingency. If they can get the loan, they cannot back out. And did you save realtor money by selling it fsbo. As a buyer i would have taken that off the sale price when negotiating. The value is always more to the buyer who has a use for all that stuff.
If i didn't have a use for those outbuildings i would consider them an extra expense that i didn't need.

Yeah, but your getting into MV definition. It must have had some value to this seller and this buyer. When this seller bought it, it had some value to them.

I would look at depreciated cost estimate seriously. I would guarantee I had a house that sold for more.

If the buyer is going to run a business out it, it changes the whole ball game based on many factors.

Veterinarians can make serious money. We are getting in hundreds of thousands in income. I won't rule million out.

 

[Zoe]

Zoning would likely dictate if the buyer could run a business out of it or just use it as a home office. Buyer may make so much money they don't care about a home office deduction.

They may want "she shed" or "man cave". Take a little horseback ride. Grow some animals.

Enjoy the farm life. Dig a pond. Go fishing.

 

[brokenokie]

The vet could possibly take tax deduction for home office on the out building. The vet could work somewhere else full time and maybe take home office deduction at the house.

I am curious. When you bought the house, were the buildings worth anything to you?

Yes, absolutely. This is horse country and the expectation is to use it as such for most buyers.

 

[TerryRohrer]

Deterining those values are challanging for appraisers, because of lack of data, also, how much low did the appraisal come in at? And as always i blame the seller, why do you sell your house without first hiring a prelisting appraisal? You don't know how much your house is worth, yet you want to challnage the appraisal?

A clueless comment, to be sure. So a property can’t sell at market value for cash without an appraisal? Competent appraisers can meet the challenge, even when data is limited. What appraisal regulation suggests that if a seller did not have a pre listing appraisal done, the appraiser for lhe lender is allowed to do a half-azzed job?

 

[TerryRohrer]

If the loan amount is small and can be had at the appraised value, then the sale price is irrelevant. The buyer can still get the loan, unless they had an appraisal contingency. If they can get the loan, they cannot back out. And did you save realtor money by selling it fsbo. As a buyer i would have taken that off the sale price when negotiating. The value is always more to the buyer who has a use for all that stuff.
If i didn't have a use for those outbuildings i would consider them an extra expense that i didn't need.

Is market value more reflective of buyers who prefer the property they purchase, or more reflective of buyers who purchase property they don’t want or need? How do you adjust for the difference in your appraisals?