When it comes to valuing property, it doesn’t take much to be exceptional. Appraising unique homes can be tough because they stand out from the norm. Because of the importance of comparables for making valuations, when there aren’t any, this often means extra work—and additional headaches. Let’s take a look at some of the atypical homes out there and what they might mean for appraisers.
Different types of unique homes
A berm home is built on flatland construction or a tiny hill, and earth covered to form one’s own mountain. It could have one face open and three faces covered. There are two advantages to berm homes: They are energy efficient and less expensive to build. Disadvantages include their propensity toward mold and air quality issues, as well as a lack of windows on each side of the house.
A geodesic dome home is a structure based on a geodesic polyhedron. Because the triangular elements of the dome are structurally rigid and distribute the structural stress throughout the structure, a geodesic dome can withstand a hefty load for its size.
The dome home was invented by the mathematician Buckminster Fuller, who patented the geodesic dome in 1951. Some of the features of the dome home include its triangular framing and wind resistance. (It can survive a category 5 hurricane!) These unique homes are about 15 to 20 percent cheaper to build than traditional “box” homes.
Panel homes are built using structural insulated panel (SIP), which is a form of sandwich panel used in the construction industry. SIP is a sandwich-structured composite consisting of an insulating layer of rigid core sandwiched between two layers of structural board and used as a building material. Exterior walls, interior walls, and insulation are all-in-one pieces.
Panel homes have the advantage of being quicker to construct, with on-site assembly taking only three or four days. Cheaper than traditional construction methods, they are also energy efficient and hurricane resistant.
The term barndominium (think “barn” meets “condominium”) may refer to the living space above a barn—similar to a condo—or it an entire barn built or renovated to create an entirely new home. Barndominiums are usually made of a metal and wood hybrid construction, and they are cheaper to construct than traditional houses. Their construction allows for very open floor plans with plenty of options. Barndominiums are most commonly found in rural areas and the state of Texas.
If you don’t think a “barn house” sounds very attractive, here is a piece of advice: Don’t judge a book by its cover. If you watch the HGTV show Fixer Upper, you might have already seen the beautiful transformation Chip and Joanna Gaines did for their clients in the bardominium remodel.
What do these atypical homes mean for appraisers?
If you’re an appraiser of traditional properties, you might have to do additional research and look at the broadest possible picture when you are faced with an unusual property. You’ll have to go farther afield to come up with comps. This could mean going farther out in area and farther back in time than usual. Using older-than-normal market data is still better than trying to force homes into comparability that really aren’t comparable. Depending on the nature of the property, you might even have to look out of state for comps. You may also want to enlist the help of other professionals with more experience.
Take our highly-rated course, Complex Properties: The Odd Side of Appraisal, to dive into a variety of unique property appraisals.
What are the appraisal requirements for unique homes?
When completing your appraisal, you must be consistent when calculating and reporting the finished above-grade room count and the square feet of above-grade gross living area. For consistency in the sales comparison analysis, you should compare above-grade areas to above-grade areas and below-grade areas to below-grade areas. You may need to deviate from this approach if the style of the subject property—or any of the comparables—does not lend itself to such comparisons.
For example, a property built into the side of a hill may require the gross living area to include both levels if: the lower level is significantly out of the ground, the interior finish is equal throughout the house, and the local market accepts the flow and function of the layout. But in such instances, you must be consistent in your analysis throughout the appraisal and explain the reason for the deviation, clearly describing the comparisons.
Loans on these types of properties are eligible for delivery to Fannie Mae, provided you have adequate information to develop a reliable opinion of market value and the property meets other eligibility requirements. Fannie Mae does not have minimum requirements for size, width, roof pitch, or any other specific construction detail for modular homes and factory-built homes.
Because quality can account for differences in the values of factory-built homes, it is essential that you become familiar with the features that affect the quality of a factory-built home so that you can include the information in your appraisal report, if needed, to support your opinion of value. The process of selecting comparable sales for factory-built housing is the same as that for selecting comps for site-built housing. Fannie Mae requires you to address both the marketability and comparability of factory-built housing.
When the subject property is panelized, comparable sales do not have to be the same type of factory-built housing. However, using comparable sales of similar types of homes enhances the reliability of your opinion of value. On a case-by-case basis, both you (the appraiser) and the underwriter must independently decide whether there is enough information available to develop a reliable opinion of market value.
Takeaways for appraising unique homes
When you’re facing a challenging appraisal assignment, you must think out of the box, using common sense, sound judgment, and creativity. It’s important to consider the broadest possible picture in coming up with useful comparables. Through all of this, of course, you must meet professional standards.
Want to learn about other types of unique or odd properties? Check out our articles on tiny homes, green homes, and stigmatized homes. Take our highly-rated course, Complex Properties: The Odd Side of Appraisal, to dive into a variety of unique property appraisals.
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