I like to say, there are five different values on a home.
What the owner thinks it is, the realtor, the buyer, the appraiser and the tax man.
The truth is — the value will be defined by the bank’s appraiser.
In order to determine that value, they will look at precedent. What have other similar homes sold for recently?
When we prepare a market analysis for a homeowner, we look at recent sales as well.
In many cases, determining that value isn’t terribly difficult. Most communities have similar homes and enough sales on a regular basis to offer more than enough comparable sales. The differences between homes are typically updates and finishes. In those cases, determining value is usually straight forward.
Valuing a unique property can be far more challenging. For example, a recent property we looked at is a lovingly restored farmhouse built in 1912 on a couple of acres of land.
You can bet there aren’t many homes just like that selling every day.
On the property was the original smokehouse that has been converted into a potting shed and has had a greenhouse added. The barn has been converted into a workshop as well.
Circumstances like this warrant expanding the geographical area in which you look for comparable sales.
But when you do find comparable properties to work with, you’ll have to make some judgment calls on the features. Finding properties with barns or workshops would be great, but maybe it’s a detached garage and not a barn.
How do you adjust value for a structure while trying to take into account things like character or scarcity in the case of the greenhouse?
With character, scarcity and unique restorations, you have to make some “educated assumptions.” There will be some latitude you have with values but you still must be guided by precedent. Maybe there is a sixth value for a home — what the market will bear — but it still has to pass muster with an appraiser.