Value In Use

[jeff samolinski]

Ok -got a typical home on acreage but the owner is a veternarian and he has built a 10 stall good quality barn on the property which is not typical for the area. A more typical horse barn would be a 1-3 stall one, typical max would be no more than 5 stalls.

So since he is a vet he needs a larger than typical horse barn which seems to me to represents a classical value in use problem for the barn and since my scope of work does not include a value in use estimate what I normally do is state that the barn is an overimprovement. Then I attempt to find similar sales with typical sized barns(obviousely I first try to find some sales with similar sized barns) and base my value on those sales. The difficult part is in trying to estimate the contributory value-if any- to the additional 5 or so stalls for a "typical buyer".

Any ideas or thoughts?

 

[Jungle Boy]

Jeff

before proceeding too far, make sure that the bank does not have a limit on the number of stalls.
Even if you have 10 stalls, they may only want you to count 3 or 5.

"Let me see now, 5 sounds like a good number... Yeah, since we have a limit of 5 acres on the land, 5 sounds good for the number of stalls... Should we vote on this ?... No... Where's the hat, let's use the hat... throw in a 3, 5, & a 7."

 

[tommcsherry]

Jeff,
I don't do these so my opinion is virtually worthless...but let's see, your typical buyer (as evidenced by the #of stalls in the typical barn thereabouts) is going to have very little use for an extra 5-7 stalls. I would think the contributory value of those stalls is little, if any....storage space maybe? Ray Miller may be the guy to get on this one....

 

[George Hatch]

Does the local zoning authority have any restrictions on the number of horses that can be boarded on such a site? If so, there might possibly be a conditional use permit situation or even an illegal use situation in effect. I realize that not every area has such restrictive use requirements, but if we don't ask we won't know.

 

[CANative]

Guest stalls?

 

[Restrain]

If it turns out it is obslescent, hit it a percentage, say 50% for superadequacy, for the excess stalls over and above the normal. If there's no sales, you can always fall back on "general observations of the market by the appraiser" and put in the supporting verbage why it has a superadequacy.

 

[Michigander]

Horse person here (along with Ray)

How many acres is this property?
What does zoning allow for horses per acre?
Any restrictions on boarding?
Is this property near any amenties such as State-owned land? Trails?
What is the size of the barn and the stalls?
10x10 box stalls are really minimal, and depending on the type of horse (I had Thoroughbreds always) 14 x 14 could be preferred. If the stalls are small, then they don't have as much utility as the larger stalls.
What are the facilities on the property?
Lots of stalls without any facilities is an over-improvement in my mind, whereas if there are trails, riding arenas, etc, it might not be.
A ten-stall barn is not significant IMHO.
I kept a 8-stall barn with 10 acres, and had 3 horses. Was pretty perfect, especially as we backed up to 10,000 acres + of state-owned recreation area....
...too bad I moved into the city.

 

[tommcsherry]

Ahhh...Rachel....so THAT'S where you got all your "horse sense"....
:rofl:

 

[Richard Carlsen]

Jeff

First off, forget market value.

Value-in-use represents the value of the property or economic good to the owner/user in terms of productivity be it income or utility or any other use to the present owner. It has nothing to do with market value or what a buyer will pay at all. The only way that value in use could be understood to be equal to market value is if there were a bunch of buyers out there looking for this kind of setup.

You have to figure out what having this particular setup is worth to the owner and translate that into a value. That borders on shamanisum or some south-sea voodoo ritual but it can be done. (Not by me however)

My only suggestion is make sure, it this is for lending purposes, is that the lender will accept value-in-use vice market value.

 

[Ray Miller]

Rachel hit it well also.

Is the vet using the property for a commercial venture? (Equine Vet Clinic) If so then the property is producing income. And I would chase down the income approach. Maybe the value in use?

I would also check the zoning, can the vet operate a clinic there? Are there additional facilities on site for an equine vet clinic? Are the stalls larger then the average horse stall in your area. Is the stable set up for certified quarantine operations? Are there any other vet medical amenities ie: breeding stations, squeeze chute, is there a stall or room set up for radiographs. Is there a padded stall. Is there and over head sling for lifting a horse or cow.

Or dose the vet just have extra stalls because he knows in time he may buy additional livestock. He just over built for now.

Most people build horse barns to what there pocket book can afford. I seen some $200,000 to $400,000 barns built and in a couple of years they are storage buildings. Average horse owner is now in the business for less then 12 months, the next set up is 2 to 5 years, then 5 to 10 years. Very few go over 10 years. Hard core maybe 3% will keep their horse longer then the 10 years. Purnia did a study a few years back, after I published mine. That confirm my findings above. I just talk to one of there regional managers who did a clinic at our place in April that they now figure they loose 66% of there clients every 12 months. But those are replaced with new clients. That is why one of there marketing tools is Equine Wellness and Feed Clinics every year during the late winter and early spring.

There is a barn down by Barrington, Ill, that the lady built 6 years ago with inlayed cobble stones from English Horse Yards in the alley ways. Air exchange system in each stall at the bottom and top to remove stale air. Interior of the stalls was hand rub waxed oak planks, out side of the stall was finished walnut. Had two condo’s inside the barn that were 2000 GLA each for the guest that want to be with there horses when they visited her. The barn crew also had first class quarters. On the very top of the barn was a copper copula that you park a pick up truck in. Plus an indoor arena that could seat 400 friends in style. Did some work for her on her lame and sore horses for a year. The barn was a cool 4M to build.

But nothing like the Grand Dame of the Equine World had back in the 1915 thru 1973. Ms Lula Long Combs of the Long Bell lumber family. The home ranch was and part of it still is on the outskirts of KC, Mo. know as Longview Farm.