Value of Large Shop

[Georgia Hill]

I'm appraising a 1334 SQ' with attached 3 car garage SFR on .95 Acre in a development of approx. 1700 houses - most on similar acreage. Subject has a 40'x96' shop/pole shed (verified completed with permits) on the back of property. Comparables found have shops 1/2 its size and smaller - majority of residences in development have some kind of shop. There are a couple of shops in the development of equal size to the subject but there have been no sales. Would the subject shop be considered an overimproivement and how would I handle the Sales Comparison Grid as all comparables have some kind of shop. For Cost Approach, Shop's value is $137,385. Thanks for any help/insight on this one.

 

[stefan olafson]

Cost approach value is $137,385? Sometimes the cost approach gives you a very unrealistic value on buildings such as this. If the majority of the homes have some kind of shop then you can probably derive a contributory value of a shop, then you have to look to the market to determine if the larger shop is an overimprovement or the rest of the homeowners wish they would have built one so large. This in turn can provide you with either a functional or external depreciation adjustment in the cost approach. It sounds like you have lots of data available on homes with shops, you have to do the work now and complete some paired adjustments to the sales.

Good Luck, Oly in ND

 

[Mark A Rewbury]

Give it some contributory value over and above the normal sized outbuildings. Don't use the reproduction cost new for your adjustment difference. If your really sticky on it go back in time and used paired sales even it's a few years back..at least you can get some percentage difference.

 

[Lobo Fan]

You might want to look at it like a detached garage, though a 30 + car garage is a bit of a stretch. I would look hard at the sales with the smaller shops as compared to sales with no shops and see if any pattern develops. If they get you to a consistent value for the smaller shops you can apply that data towards the larger shop, knowing that it may be like a lot size adjustment. It may not be linear. Or maybe try to find a horse property with a barn?

Tough assignment. I hope you are getting some extra cash for this one.

 

[Restrain]

Pole shop at $137K???? I can buy the materials for a steel prefab shop for about $18K, add appx $15K for the slab, add about $15K for erection, and I'm at $48-50K for the shop. Electrical wouldn't add but about $1500, so step one would be to go back and look at your costs.

 

[xmrdfghap]

Your cost approach seems a bit high.

Slab on grade should run about $7.00 psf, 4000 ' = $28,000
Pre-engineered building about $14.00 psf, 4000' = $56,000
Total= $84,000.

Where is the other $60k? Lighting, heat and air is no where near that much.

 

[DB]

Even at that, the contributory value to the sale is going to have to be determined from paired sales or by extraction.

 

[Zero]

Market Value:

I do not know all of the specifics, but I have been in similar situations where there are a lot of sales with "shops" in the subject market area that are inferior/superior in size, but with all the same bells and whistles, serving similar function. I have found in my area that markets typically react to this as an overimprovement and it's value is equal to other shops with similar utility. After a point, size has neglible effect on market value. This is not always the case, just my experience.

It sounds like your subject market is full of shops, so some more research should help you sort it out. Find as much market info as you can to determine what effect (if any) size has on the value of these shops. If necessary, go back further in time to see if you can find some sales with larger shops similar to your subject. If you find that larger shops affect value, figure out how much. If there is no significant affect on value, it's likely an overimprovement and can be dealt with as such.

Cost:

I agree with the others...reevaluate. Sounds high.

 

[Terrel L. Shields]

Even at that, the contributory value to the sale is going to have to be determined from paired sales or by extraction

Yes, but locally we have Red Iron commercial builders who are 'doing' large shops for around $25/SF...and that's red iron. Black iron is barely ½ that and I just priced a 20' x 40' tube steel building on slab for $7995. Treated wood truss indoor horse arena I recently appraised was about $17/SF (7000 SF) $35 is likely well above the average costs for such shops anywhere in the heartland of America. So I suspect the building (if actually costing that) would be vastly over-improved for the average building. What percentage of the property value are we talking? I think we see market resistance to large shops if the shop exceeds 25% of the total property value...ie.- when it costs what the house costs, you have a problem.