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Superadequacy and Fannie Mae

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Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
:oops:

Someone once posted
Fannie guideline stating if you can't extract something from the market, they will accept 25% of the items estimated cost.

Anybody know where?

I cannot find this refence and am flat out of time on a report... I have a 2 year old fully awesomly finished outbuilding way larger than the house, which has extraordinary amenity to the 'right buyer' and significant amenity to near any guy with stars in his eyes when he thinks 'workshop' or 'work from home'.

No sales anywhere in 5 county area from which to extract, the outbuilding is about twice the size of any similar structures found on less than the 8 million dollar property 8O !

Any suggestions? I am particularly interested because the 25% figure is probably realistic based on my wild gyrations using extraction with the smaller structures! :oops: I'd RATHER not hang my hat on those figures talk about SWAG :roll: sure be better to cite 25% of cost :D
 

Restrain

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Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
To say that there is a flat 25% figure is like saying the sky is always blue...it's not. Why don't you do what we do when considering a market resistance for other odd issues - call the local realtors and do a survey. If they say "No they wouldn't pay $20k, but might pay $10K, then you have a probable range and some support other than reaching up in the sky and pulling out a number.

Second suggestion: You say,"the right buyer". You might consider the superadequacy like you would a pool. With the right buyer, the pool would give 70-100% of value, but to the typical buyer, he would give 50% of value. Given that a barn of X size returns 100% of value, and the subject barn is twice that and you know it won't return 100% of the excess size, you might consider it vs. other items like a pool superadequacy. A pool contributes 50% of value, so you can say that the excess of the barn would contribute 50% of the excess size.

Yes, I'm stretching logic, but it's something to hang your hat on.

Just a thought

Roger
 

Bill_FL

Senior Member
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Aug 23, 2002
Professional Status
Certified General Appraiser
State
Florida
Where's Austin???

Could you do an extraction that shows the relation ship of contribution value of an outbuilding to GLA?
 

Mike Garrett RAA

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Jan 14, 2002
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Certified Residential Appraiser
State
Colorado
I can't find anything like that any where? Do what you need to do and explain what you did, why it was important to do, and why you did it.
 

Farm Gal

Elite Member
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Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Roger:

Thanks for the advice, but I am stuck with one of those things on which there is exactly NOTHING on which to base adjustment, no basis for extraction. Even interviews or any other 'last ditch effort' for basis for an adjustment have utterly failed: Yup I was grasping at straws.

I am aware of exactly one other home in the county with remotely similar 'amenity', it was a new construction build job (unlike the 25+ year old subject, and guess what: it hasn't been sold.

So now I go do my best tapdancing which says I have no real data on which to base this adjustment but I really really think it s $X

caus I are a professional.

I did do interviews of the folks most likely to be involved in a sale like this, but the general response to date has been : " :? I dunno".
 

Terrel L. Shields

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May 2, 2002
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State
Arkansas
I don't think such a 25% rule applies nor is in Fannie mae literature. I do recall an old rule of thumb that excess Sq. footage normally is adjusted between 25% and 50% of the RCN of the subject dwelling.

I would look at what complex sales you can. Farm sales are good areas. In analysis, deduct land value, then deduct DCN of house and whatever left over is for the outbuildings. In the case of only one or two buildings, you can estimate the contribution, RCN, and the age. If simple age/Total life x RCN is more more than the contribution left over the difference must be loss from economic or functional obsolescence.

I do this frequently for rural properties where poultry houses have been abandoned. A PH costing $8/SF new and 16,000 SF may only contribute $4,000 or 25 cents a SF. Actual remaining life may be 25% so roughly 20% of the RCN is functional or economic obsolescence.

I know a listing where a property has asked $250,000 for a house costing $200,000 (+ lot) is overbuilt as it was. Owner spent $85,000 building a pool with lights and gee-gaws, pool room, with change and sauna. He is asking his actual costs back, as he is a builder and basically will get nothing for his labor. He even recognized at the time, he wasn't going to get more than 50 cents on a dollar back for the pool.
 

John Hassler

Senior Member
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Jul 23, 2002
Professional Status
Certified Residential Appraiser
State
California
Lee Ann

Don't worry about the 'right buyer' value, your job is 'market' value unless, of course, you have been asked to determine 'right buyer' value (you may have to discount for an extended marketing time for that job though).

This is how I would approach it.

1) Determine what the typical range of "finished outbuilding" is. Say it's 500 to 2,000sf with a market value of $50/sf. Designate the first 2,000sf of your "finished outbuilding" at full market value for this item ($100,000).

2) Is is common to have a finished outbuilding AND some other 'lesser structure' (shed, dry storage)? If so, I would use the $/sf of the 'lesser structure' for the next increment of value. Say 1,000sf of dry storage at $25/sf is common. Isn't it reasonable that your "finished outbuilding" should have at least the value of of a typical 'lesser structure' which is common for the area? Value the next 1,000sf of your "finished outbuilding" at that rate ($25,000).

3) Now we are at the same point your were at before but the first 3,000 sf (in my example) has been valued and accounted for, and hopefully there isn't much of a remainder left. You can discount the remainder area of your "finished outbuilding" or say it has no market value, up to you. Bottom line, who can make an educated guess at this point any better than you can?

4) Hope this helps.

John Hassler
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
:lol:

Thank you, John!

I had appraised this beast a couple years ago, but the outbuilding was not at that time fully finished, I applied your logic and actually had a few sales with 1/2 size outbuildings and a few sheds, used EXACTLY that logic progression.

Having the thing finished to the level it currently is, does add a new twist, but I am not sure any significant more $$ to the outbuilding portion of the equation. I am (for once) GLAD that the thing cannot be legally lot split 8O because that would throw a whole nother set of issues into the haggis.

Around here folks ARE willing to pay more for a fully finished heat and air conditioned workshop, regardless of size, but this beast exceeds the 'bag limit'.

I think I am going to go back to my prior figures and toss a swag into the mix and as always rewrtie "War & Peace" explaining what where when why and how... :roll:
 
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