As an investor or lender in the real estate market, you will need to secure accurate and credible valuations of residential properties in order to make correct and tactical investment and lending decisions. In valuing complex properties, you may come across very unusual and distinct single-family homes and buildings that can present serious appraisal challenges due to their atypical, unconventional characteristics. To assist you in accomplishing this process, here are a few key items that you should take into consideration when valuing complex and unusual properties:
Look Beyond Superficial Uniqueness when Valuing Complex Properties
Some characteristics, such as unusual architecture, do not impact value. Instead, focus on the characteristics that drive utility, desirability and marketability: functional obsolescence, legal constraints, environmental issues or external neighborhood influences. Identify the underlying value drivers.
Require Detailed Research and Data
Insist on more intensive research and data gathering by the appraiser. They should tap specialized sources beyond MLS listings to find comparable sales and understand the property’s distinguishing features. Subjective opinion has little place in appraising unusual homes.
Scrutinize Valuation Methods
Special attention needs to be directed to the range of appraisal methods that are applied in giving a property value. Conventional approaches, such as the sales comparison method, are commonly lacking or inadequate for properties whose appropriate comparables may not be available for comparison. It is hence incumbent to ensure that a wide range of techniques is considered, possibly including cost analysis, income capitalization, paired sales analysis, and other techniques that may specially apply to the unique characteristics and circumstances of the subject property.
Require Elaborate Explanations
Do not accept conclusory or unsupported value opinions. Demand a thorough explanation of the subject property’s uniqueness, detailed support of the reasons for adjustments, transparency into the appraiser’s data sources, and comparable selection and valuation techniques applied.
Consider Appraisal Review
Consider hiring a technically experienced review appraiser for large or highly complicated appraisals to help oversee and critique the methodology of the primary appraiser. They can find defects, test assumptions and correct deficiencies.
Evaluate Appraiser Competency
Assess the appraiser’s experience with unique properties and their reluctance to make assumptions that cannot be supported. They must be able to prove the competence to properly value singular properties by extended methods, analyses and reports.
For valuations relating to truly unique, highly complex residential properties in the Boston area, Boston Appraisal Services boasts of a number of experienced professionals on its roster. These valued members include recipient members of the prestigious MAI designation who ensure consistently superior quality valuations that are expected within the industry.
Although atypical homes can pose certain challenges that may complicate the process, it is indeed possible to achieve reliable and accurate valuations when appraisers utilize robust and solid data, customized methods, and thorough and rigorous analysis. It is essential to insist on maintaining this higher standard of practice when dealing with unusual properties in order to effectively protect your investments as well as your loans.
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