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Can You Solve this Complex Property Appraisal: Over-Updated Flipping Edition

Appraisals of complex and non-conforming properties require knowledge of many different types of appraisal techniques, creativity, and a positive attitude.

If you ask appraisers to provide examples of complex appraisal assignments, many will focus on commercial or mixed-use properties, or two- to four-family properties.  But many single-family home appraisals are considered complex assignments.

Let’s take this flip in Michigan, for example. In this case, we’re going to be looking at the what role key physical features play in complex property appraisals.

complex property over-update
Photo Credit: http://www.davekooistra.com

This plantation-style mansion was originally built for almost $6 million. The house had three bedrooms, 9,183 square feet, complex fencing that housed a small herd of zebras and a giraffe (yes, you read that correctly), and dated decor. The house lingered on the market for several years. After several price drops, it sold for $900,000 to someone who flipped the house.

The investor who flipped the property gutted and updated the entire house with modern finishes—and took out some of the quirks installed by the original owners. The listing description highlights the high-end physical features:

Originally built for nearly 6 MILLION this 2 story home is completely remodeled and move in ready. Extremely high quality construction. Kitchen was a complete overhaul including cabinets, counters, appliances, flooring, paint, and fixtures. Bathrooms were all gutted and remodeled with the highest quality available. All new Kohler faucets and toilets. Insanely high quality trim…I was told the original trim bill when built was 1.4 Million. Home features 2 fireplaces, 2 elevators, heated 4 stall garage with epoxy flooring and staircase to daylight level, Marvin windows, all heating and AC units are updated to the highest efficiency available (very reasonable bills considering the size). Touring this home is a delight and the grounds are amazing. Fountains, waterfalls, wildlife, and there are two easy ways to add additional bedrooms; wardrode closet can be made to nursery and/or kids hang out area upstairs could be a HUGE suite or 2 more bedrooms. Grand foyer with crystal chandelier that might take your breath away. Inlaid porcelain crown moldings in some areas. Literally every square inch of the walls has been repainted and all hardwood flooring refinished. Some areas of wood flooring are laid in a herringbone pattern. Exterior repainted with 3 coats for long life. Driveway resealed. Literally every single thing on this home has been updated for new owner. Home also has an enormous generator to keep things running. In floor heat in daylight level, wet bar, recreation room, steam shower, non-conforming bedroom with walk-in cedar closet, preparation kitchen with elevator to kitchen area. Do not miss your opportunity to purchase one of the finest homes in Kent County. Disclosure required: Owner is licensed Realtor in the State of Michigan.

The property is now listed for $1.899 million. And with very few comparable properties in this rural area, combined with high-end key features, we’d consider it complex. For the fun of it, here are some before and after photos.

Michigan complex property
Before: Bathroom (Photo Credit: Cory Morse, MLive)
Michigan complex property
After: Bathroom (Photo Credit: Cory Morse, MLive)
Michigan complex property
Before: Grand foyer (Photo Credit: Cory Morse, MLive)
Michigan complex property
After: Grand foyer (Photo Credit: Cory Morse, MLive)
Michigan complex property
Before: Kitchen (Photo Credit: Cory Morse, MLive)
Michigan complex property
After: Kitchen (Photo Credit: Cory Morse, MLive)

 

The role of key physical features in complex properties 

Of all the characteristics that can make a property complex, physical features are the ones that spring most readily to mind.  Some of the key physical features that can make an appraisal assignment complex include:

  • Size – significantly larger or smaller than typical for market
  • Floor plan – there may be functional obsolescence
  • Unique custom features
  • Quality of workmanship – higher or lower than the norm
  • Architectural design (e.g., log house, dome house, berm house)
  • Unfinished construction
  • Improvements in poor condition
  • Adequacy of HVAC, electrical systems, well and/or septic
  • Additional living unit(s)
  • Non-conforming zoning
  • Mixed-use property

This assignment is complex, and it will require the appraiser to provide a detailed description of the quality of the materials used in the construction of the subject, and also to make appropriate adjustments for the differences. It will also involve analysis of the higher-cost amenities and a determination of their contribution to total value.

So, how will you go about appraising this complex property?

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