What If There Are No Direct Comps in the Same Zip?
Comparables (recent sales of nearby homes that are similar, or comparable, to the home that’s the subject of an appraisal) are important when assessing an appraisal, as they help develop a credible opinion of value. At the end of the day, it’s up to the appraiser to find the most relevant comps that exist and deliver a credible opinion of value.
So what happens when a home has a unique feature unlike any other property sold in the same zip code in the last few years? That’s the question we’re looking at today…
“How you would value a detached workshop on the property? There is a model match comp for $400k (adjusted for sellers concessions) without a workshop, but it's on a corner lot. The subject home has a completed 38x38 ft. shop (dry-walled, insulated, no A/C).”
This is a difficult question to answer. The reason is, this home is located in a (HOA) subdivision where additional shops are rare.
After searching the MLS for sales in the entire master community over the past 5 years for home sales with separate shops and home sales with 5+ garages, I only located one sale and it was for a home with a detached casita that has a 2 car garage attached to the casita which is superior to a detached shop.
This presents several challenges.
The first is to demonstrate that there is a market and demand for a separate shop in this residential setting, and whether a typical buyer is willing to exchange a large portion of the rear yard for it.
With no sales in the neighborhood with a separate shop through the MLS, the next step would be to research if there are any that have not sold or sold privately. This would entail extensive research in county records in conjunction with examining the neighborhood via Google earth to locate any homes with similar shops to determine if they exist. If they do exist then the next step would be to research the last sale of the property with a separate shop and extract a value that can then be adjusted to the current market.
If there are no sales the next step would be to look in similar neighborhoods throughout the area for sales of homes with shops (in HOA subdivisions) to locate any sales that can be used to extract an adjustment for the subject shop. The difficulty in this is that if a sale is found in a subdivision where separate shops are prevalent the adjustment may not be accurate as conformity commands a higher value.
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