Appraisal Articles 2019 Free Appraisal Articles for Appraisers and the Public
Many appraisers have received a phone call from a hard money lender, bank or owner asking them to bid on a "different" type of residential property. The assignment is often to appraise a large, unique, Victorian home, an earth-sheltered bunker-like home, a geodesic dome home or a home that is huge (a mansion) and much larger than others in the market with special finishes. The building may also be located on a one-of-a-kind site. These appraisals are often challenging and you can almost bet that the owner or potential lender will be critical of your work.
One of the most difficult things about appraising atypical properties is, of course, the fact that there are few or no comparable sales. So, if you are an appraiser relying heavily on the sales approach you may feel like you are sailing into dark waters. Geodesic dome homes, for example, are so scarce that there are no selection criteria to find them in the local Las Vegas MLS. You can search the homes database by hundreds of criteria but none of them will take you to dome homes, there are just so few of them that the search would just keep saying "0" matches.
So how does an appraiser consider the value of a unique or atypical home? It's important to recognize that "atypical" properties like geodesic domes have a different shape but they still have the same use as a standard home, they are still single-family residences. If you find absolutely no dome homes it's my opinion that you can consider other residences with a similar use as a starting point.
Appraisers often go right to the cost approach to analyze the value of an atypical home, which must be considered, but the sales prices of other area homes must also be considered. You may not be able to make a direct comparison to your dome home but if you know that homes in the market are being sold in the $ 100 per square foot (SF) to $ 130 per SF range you have an indication of what typical buyers are paying and sellers accepting for a residential use.
So if your cost approach falls outside of the typical range you have to consider the fact that it may not be reasonable. If you can put in a dome home for $ 80 per SF including the land then it may be reasonable to conclude a value opinion outside of the typical range. It takes real research to make determinations about specialty homes and you have to make an effort to
Appraisers have to do considerably more work to appraise an "atypical" home than a traditional or standard home. There may not be comparable sales to rely upon but getting to a credible result may take a lot more effort.
Homes can be considered "atypical" for many reasons besides their design / construction. They can for example be "luxury homes" in the top 5% with regard to size or value, they can be on large sites, they can have unusual ancillary improvements, they can be on the water, in the mountains or on a golf course, they can adjoin federal lands, they can be affected by detrimental conditions or they could be partially completed. Appraisers listen closely to an owner's description of their home but are often surprised by what they find when they do their observation / inspection.
Some homes are special and they also have multiple problems and clients expect appraisers to consider them all and render a value opinion. It's important however to understand that appraisers are not home inspectors. When appraisers observe problems they are generally not qualified to identify the specific home defects and they are not licensed to perform that service. So most simply call for a home inspection in their report. It's an appropriate action on the part of the appraiser, but the party who hired the appraiser may have thought that this service was included in the appraisal assignment. It is no.
For more appraisal information contact Glenn J. Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada based appraiser who can be contacted via email or via his business website known as 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/
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