two guest houses

[drstetson]

I have an assignment to appraise a property on acreage with a main unit, two guest houses, a maid's unit, an office with a bath, a craft or hobby room, and a small mediation room. All of the areas are heated and cooled and are livable area; however, the meditation room, the office w/bath, the craft room and the maids quarters are all accessible only from the exterior via a large courtyard in the middle of the improvements. All of the improvements are under the same roof.

The question is should I adjust for the additional living area of the guest units and all of the other rooms as a lump sum adjustment utilizing a price per square foot? Or should I make a separate adjustment to reflect perceived utility or contributory value attributable to having these areas separated from the main unit and guest units?

 

[Mike Kennedy]

Or should I make a separate adjustment to reflect perceived utility or contributory value attributable to having these areas INCLUDING the detached guest units separated from the main unit AS/IF indicated by the market.

http://www.nahbrc.com/bookstore/bd1003w.aspx

 

[drstetson]

ok, so if i understand correctly, the right way would be to adjust the comps for the GLA of the main unit utilizing a PPSF and then make an additional adjustment to reflect the living area of the other attached rooms?

 

[CANative]

There's no real "right" or "wrong" way to deal with this type of property (except don't mislead or confuse the reader by lumping all the structures into one big GLA calculation).

I wouldn't even worry about GLA adjusments because you're going to be hard pressed to find anything ideally comparable. If you find another property on similar acreage with a "similarish" main residence and a collection of accessory buildings you might hang your hat on this sale and call it a day. Fill in the other two grids with whatever.

You're job is to provide an opinion of most probable price for an improbable property.

lol.... Appraisal is an art.

 

[Michigan CG]

ok, so if i understand correctly, the right way would be to adjust the comps for the GLA of the main unit utilizing a PPSF and then make an additional adjustment to reflect the living area of the other attached rooms?

First thing to do is make sure your fee is at least $1,500. :new_smile-l:

What you are looking for is the contributory value of the additional improvements. This will not be across the board adjustments.

Most likely this property is a regional property unless you are in a large population area.

If I were to be appraising this type of property I would most likely be looking in about six counties.

P.S. This type of assignment requires extensive narrative analysis. The last complex home assignment I did was about 50 pages.

 

[prasercat]

All of the improvements are under the same roof. The question is should I adjust for the additional living area of the guest units and all of the other rooms as a lump sum adjustment utilizing a price per square foot? Or should I make a separate adjustment to reflect perceived utility or contributory value attributable to having these areas separated from the main unit and guest units?

You state that its all under one roof - Sounds like one of those Spanish Style homes that are built around a central courtyard (or rectangular doughnut hole). My first reaction would be to do a cost approach on each accessory units carefully factoring in any obsolescence issues. [Aside: I would also be interested in knowing if there are shared walls with all these units and how hard it would be connect them together into one home. Does it look like an easy thing for a future buyer to do based on floor plan? Is quality and finish level similar throughout all units? ].

Anyway (to avoid going into that possibly complex issue - assuming a connection of all units would not be readily accomplished) the most straight forward way would be just treating them as accessory structures and costing them properly (so your report would have three cost approaches, one for the main house and two (without land value) that are summed for the accessory units and added into the site improvements section of the main home cost approach). If you properly assessed depreciation and any obsolescence to these structures, that will also be the contributory value in the sales approach as a lump sum item.

You would also have to consider how the subject conforms to other homes in the neighborhood in regard to obsolescence - considering that accessory structures can have multiple uses with some modifications. Acreage properties tend to have more flexibility in uses.

 

[David Mescon]

You're job is to provide an opinion of most probable price for an improbable property.

lol.... Appraisal is an art.

I like that! Can I use it?


I have extensive experience with properties like the one the OP is describing. Posts #4 and #5 are both excellent and informative.

Remember, you are reflecting the actions of the subject's market - what does the market tell you? If you don't know, ask someone who does. It's a simple problem, however the solution will be complex, (but not complicated). It is likely, but not certain, that the most difficult part of the direct sales comparison approach will be determining the presence of, (and if necessary, quantifying), any applicable incurable functional superadequacy. It's especially difficult to pin the tail on that particular donkey, as it tends to be a non-linear, downward slope of diminishing returns. If, on the other hand, your subject property is not determined to be functionally superadequate, the problem should be pretty easy to solve. I'm going to go make some popcorn and wait for you to let us know what happens. Good luck!

 

[drstetson]

I suppose I really did not know what I was getting myself into, lol. I understand the use of the Cost Approach to derive a value to be utilized in the Sales Comparison Approach as a lump sum adjustment in this case. Obviously I am not going to be able to find a comparable with the same number of accessory units that have the same GLA. In terms of functional super adequacy, I don’t see the subject being super adequate based solely on its design or layout and the division of the total living area into small rooms or units accessible only from an exterior courtyard. In terms of total GLA, the subject is at the higher range for the market; however, I was able to produce a sale of a property approximately 1/3 mile down the road that had around 3,000 square feet on my subject. My point is that custom homes with a large GLA are typical of the area. My subject is located within a suburban area with conveniences to every-day services or amenities. I would not understand the use of comparables located in different counties given the locale of my subject. And I also understand that extensive narrative analysis is needed; however, in this case it will be in the way of a large addendum as the assignment is a summary appraisal report.

 

[David Mescon]

Please, please don't misconstrue this as a putdown in any way. You need help on this one. Find an appraiser who is experienced in appraising large, estate type properties in your area. The education you receive will more than pay for whatever amount of money you give to the other appraiser. Best of luck!

 

[prasercat]

My point is that custom homes with a large GLA are typical of the area. My subject is located within a suburban area with conveniences to every-day services or amenities. I would not understand the use of comparables located in different counties given the locale of my subject. quote]

If suitable properties are in diverse neighborhoods, you can use them if you understand the differences in land value with respect to yours with recent land sales (at least three) supporting the subject and each comp's land value (you may also use extraction in lieu). When neighborhoods are very distant or diverse, one would not use a relative methodology (view, site size and location) are netted into one number, which I typically put on the site line with brackets to the left showing the value determined for that particular land (based upon market evidence for that particular comp). The idea that homes have to come from similar neighborhoods, is a basic practice for a number of reasons, but it doesn't put a fence around how you can value a property.

Commercial appraisers sometimes must go to other counties, states or even countries to value property where you can't use a relative methodology. Its simple math, you know the land value + improvements, it gives you the total value, even if the contributions to land value are from diverse sources or amenities (If you can assume construction costs are the same or similar, if not then this makes it more complicated). Naturally, you don't want to find properties where transitional forces or rapid changes in obsolescence or externalities are at play. You need to include your data for the individual land valuations in the report narrative. If your doing an "at net" valuation for the land, you wouldn't mix it with the relative system on the grid. This is a really time consuming method and requires good market evidence;

This is a good technique for unique properties where you must go great distances or to very different neighborhoods to find good comparable improvements (where a simple relative adjustment method for view, site size and location doesn't work).

Unfortunately, with the credit crisis came a dramatic slowdown in land sales and needed data.

- I should mention that the land value for the comp has to be as of the pended date for the comp's sale.