Appraising Specialty Properties

Specialty properties (AKA special purpose properties) are a diverse group of properties that are usually designed, built and utilized for a specific purpose.  Generally it is difficult or at times impossible to convert a property of this type to an alternate use economically.  Included in the group are; bowling alleys, religious buildings (churches / chapels), fitness centers, cabarets / gentlemen's clubs / strip clubs, RV parks, hospitals, theaters, schools and
museums.

Most specialty properties have markets that offer a limited supply and a limited demand.  Thus, the quantity and quality of sales needed to complete a reliable sales approach analysis is often not available.  Appraisers investigate market activity as part of the appraisal process, however with specialty properties the results of the research often provides few results.  Since the sales approach is often the most favored by Clients have no sales approach is difficult for appraisers.   

The income approach can be used to analyze some specialty properties, since some are bought and sold based on their income production.  Some specialty properties produce income because of their "going concerns" and thus both their real property and business entity must be valued together.  Appraising properties of this type requires attention being paid to assets, income and expenses.  There is often multipliers and income / expense profiles that are helpful to appraisers.

Other property types like churches are not bought and sold based on their income production.  In Las Vegas there are over 500 churches, a little known fact, and there are at least a few that are sold every few years, and in some years there are a few to several sales.  Thus, there is a limited market that does at times provide limited sales information.  In other parts of the country there is little or no church sales activity.

The cost approach is the default appraisal methodology that is used when there is a lack of a sufficient sales activity and when there is no income data or income information is not relevant.  While the cost approach is often used in conjunction with the other approaches there are times when it is the only pertinent valuation methodology.

Thus, paying attention to the details in your cost approach and providing the detail to your client in a Cost Approach Table are important.
 
Specialty properties present a challenge to real property appraisers since solving the appraisal problem can differ from one property to the next, and going concern properties require some sophistication beyond that taught in many real property courses. 

For more appraisal information contact Glenn Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada appraiser who can be contacted via email or via his business website Appraiser Las Vegas  (http://www.appraiserlasvegas.com), or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/.  

Article source: http://www.appraisalarticles.com/Real-Property-Appraisal/4388-Appraising-Specialty-Properties.html