Spiral Stairs & GLA Issues: What do my peers think?

[dominuzd]

Hello, I am appraising a waterfront property in Southern Calvert County, MD. Along with it being a short sale for half of its last transfer two years ago, the real problem I am running in to is this. The property was built 1958 as a rambler, 2BR/2BH, roughly 936 sqft., has two additions (20 years old at least), one on the rear of the original structure about 10'x36' (no problems there), and the second addition is a 2-story addition on the side which now houses a gourmet kitchen, laundry/utility, pantry, and breakfast area and is roughly 22'x16'. Here's where the issue is, the second story, being 22'x24' was designed to be the new master suite (when the addition was built) and has a full bath, walk-in-closet, and a balcony to view the water from. However, the only access to this area is a lone spiral staircase (2'-3' radius). There is no way to bring furniture up the spiral stairs, which limits the use of the area. The only way to move anything in and out of the area is to lower/raise it using the balcony. Also, since the purchase 3 years ago, the current owner/seller decided to remove a full bedroom and bathroom on the main level.

My Choices:

1) Do not include second floor area in GLA or room count, complete 'as-is', property becomes atypical due to the 1BR.

2) Give cost to install stairs, complete 'subject-to', although it is a short sale/default appraisal assignment.

The agent and seller told me that the sale was killed several times due to this issue, as well as another issue, unrelated to this one (the mean water depth at subject's dock is about 2 feet!).

I think it would be appropriate to not include the GLA and room count as, currently that is what it is, and as evident by the market (per the agent and seller), potential buyers voiced their opinions by not submitting offers on the property.

Of course I have advise my client of the issue and also asked for their guidance for to be completed 'as-is' or 'subject to', still waiting on a response from them. But I just wanted to try and get a sense of what my peers in my market think about this one. Thanks.

D

 

[hastalavista]

The subject certainly sounds like (based on your description and presuming the agents are accurately relating the market reaction) it suffers from functional obsolescence due to the floor plan design (specifically, access to the master suite).

The addition area is GLA, but it isn't fully functional GLA. It therefore most likely requires
A. A discount, or
B. An adjustment to bring it back to functional/market-acceptance.
(both, in theory, should equate to the same amount).

I don't think it matters which one you make. I would not just "not count" the area. My guess is it has some value (a person will pay $1 more with it vs. without it).

2) Give cost to install stairs, complete 'subject-to', although it is a short sale/default appraisal assignment.

The above doesn't make sense (to me) but maybe I misunderstand exactly what you are suggesting?
If you are going to adjust it for not having functional stairs, what is your subject-to condition? If you've made the adjustment, what are you making "subject to"?
Do you mean not make any adjustment, appraise the property as if it had functional stairs (a hypothetical condition), and then make the appraisal subject-to installation of the stairs? I don't think that is what this assignment requires.

So, you need to measure the affect the dysfunctional floor plan configuration has on value.
You can do this by trying to find other types of properties with similar (maybe not equal, but similar) functional inadequacies. But this, as a practical matter, is always very difficult to do.
You can calculate how much it will cost to cure the functionality, consider the likely incentive a typical buyer would require to take on the task, and use that as an adjustment.
You can survey market participants and see how much of a reaction this influence would have on overall value.

Your case has another interesting twist. You write that there is a water view from the addition-area. Are view amenities significant and is this particular view amenity worth a premium?
If so, then the discount to the current value of the property may be simply the cost to install the functional access (stairs). If views are at a premium and there are not a lot of them (or, they are in demand), a buyer might be willing to purchase the house and only discount the amount of the stair-installation in order to get the view.

So, while you have no perfect way to arrive at a value discount, I think you have a number of options that will reliably point in the direction of what the discount (adjustment) should be, if any.

Good luck.

 

[DMZwerg]

Sounds like functional obsolescence to me.
I don't recall any statement that GLA has to be accessible via a traditional stairwell, but rather it has to be heated, finished, and generally be above grade.

 

[AnonApprsr]

Spiral staircases are common in my area. Especially in Boston Townhouse style condos in rowhouses, as well as in 3rd Floor units, as an access to the roof deck, and in contemporary homes throughout the south shore as the only staircase in the property. It's not functional obsolescence in my area. And it's still GLA, whether you say FO or not.

I think the fact that 2nd floor is where the view amenity is simplifys it. I think the market would be willing to use the spiral stair case to access it, with no negative affects to marketing.

 

[CANative]

I did a funky house exactly as you describe. Estimate the market reaction to the functional problem and pull the trigger. Your guess is as good as anyone elses. Perhaps reconcile to the lower range of similar size houses.

 

[Webbed Feet]

Hello, I am appraising a waterfront property in Southern Calvert County, MD. Along with it being a short sale for half of its last transfer two years ago, the real problem I am running in to is this.

LOL A short sale for "half of its last transfer,"........ what was the other half of the transfer?


<....snip.....>
My Choices:

1) Do not include second floor area in GLA or room count, complete 'as-is', property becomes atypical due to the 1BR.

Nice try. If you do not include what exists in a so-called "as is" then it is not an as-is. It's an "as if" what exists doesn't exist. That is called a hypothetical condition.

2) Give cost to install stairs, complete 'subject-to', although it is a short sale/default appraisal assignment.

Pray tell, how do you intend to "give cost" to install stairs? What about the removal of the old stairs? That could end up to be a fairly major remodeling job. Got your contractor's license handy? It surprises many forum appraisers to find out they are not allowed to create their own sets of "Plans and Specs" on the fly in any ol way they want to. It also seems to surprise many of them to find out they are not architects nor are they the jurisdictional authority that grants permits for structural changes. Oh, by the way, were all these additions put on when permits were required, and does the permit records show finaled permits with occupancy certificates?

The agent and seller told me that the sale was killed several times due to this issue, as well as another issue, unrelated to this one (the mean water depth at subject's dock is about 2 feet!).

Gosh! Duh! ..... The other appraisers probably tackled this as a complex assignment (as they should have) and estimated the functional obsolesence instead of using hokey ways that would result in misleading appraisal reports.

I think it would be appropriate to not include the GLA and room count as, currently that is what it is, and as evident by the market (per the agent and seller), potential buyers voiced their opinions by not submitting offers on the property.

So.... why didn't any of them just pretend that area wasn't in the GLA or room count and make an offer on a smaller house that doesn't exist?

Of course I have advise my client of the issue and also asked for their guidance for to be completed 'as-is' or 'subject to', still waiting on a response from them. But I just wanted to try and get a sense of what my peers in my market think about this one. Thanks.

D

What I think is that it is YOUR job to identify the problem, look at the intended use, and TELL (some appraisers call that "advising.") your client what you have determined the SOW has to be for the appraisal report to be credible for the intended use. I call your idea of simply "pretending" the area is not part of the GLA "The Magic Butter Knife Approach," with attention to the word "Magic." We don't handle functional obsolesence by wishing it away. We find other sales of SFR properties with messed up floor plans and we extract the market reaction to it for a F.O. adjustment against comps lacking the issues. We also don't guess at major remodeling jobs to correct the F.O., we obtain plans and specs from qualified contractors and the involved parties for our work file, if everyone wants to go in that direction, to "base" our HC on. That way we don't find out, in court later, that our hypothetical staircase replacement cut right through main structural supports, could not be done according to building codes, and we stupidly under-estimated the costs by 187% as well as arrived at a "value" that didn't hold water with absolutely no work file documentation for how we pulled all that out of our tail feathers.

If you are "Licensed" and your state limits you on "Complex" assignments you'd better stop right this instant and consider if you are out of scope of your licensing on this one or not before you proceed.

Welcome to the forum! ..

 

[Webbed Feet]

<....snip....>
I think the fact that 2nd floor is where the view amenity is simplifys it. I think the market would be willing to use the spiral stair case to access it, with no negative affects to marketing.

<....snip......> and as evident by the market (per the agent and seller), potential buyers voiced their opinions by not submitting offers on the property.

Both listing agent and seller says this, and your learned opinion is the market area worked by some other appraiser will accept it with no negative affects?

 

[AnonApprsr]

Perhaps the view isn't worth it. Why did the first buyer/builder do it like this? They're the only ones, along with Massachusetts, that don't find SS a problem?

 

[Webbed Feet]

<....snip....>But I just wanted to try and get a sense of what my peers in my market think about this one. Thanks.

D

Sometimes, appraisers try entirely too hard to solve lending issues by turning them into appraisal issues, forgetting the limits of our licensing, undercutting ourselves on fees and time for complex assignments by coming up with our own ideas, or using the ideas of other appraisers, that breach good methodology to short cut what shouldn't have been short cut.

Don't fall into those traps. They can cost you dearly with a state appraisal board.

 

[Mike Boyd]

I agree with The Duck. There are lots of technical issues when you plan to add an interior staircase.