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. However, many single-family home appraisals are considered complex assignments. Below, we provide the definition of a complex property and dig into the three types of residential complex properties.
What makes a complex property?
- The property to be appraised is atypical
- The form of ownership is atypical
- The market conditions are atypical
Below we dig a little deeper into each type of complex property outlined above, providing detailed descriptions and examples of properties that would fall under each of the three categories.
The three types of complex properties
The property to be appraised is atypical
The subject property may be an outlier, oddball, or simply not common for its market area. Of all the characteristics that can make a property complex, physical features are the ones that are most obvious. An appraiser can often spot a complex property while driving down the street. 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 or construction (higher or lower than the norm)
- Architectural design
- Adequacy of HVAC, electrical systems, well and/or septic
- Additional living unit(s)
- Non-conforming zoning
- Mixed-use property (for example, it is used as both a business and residence)
- Waterfront properties
Keep in mind that what is considered a complex residential property in one market might not be considered complex in another market. For example:
- A mansion in Beverly Hills is not atypical; a mansion located somewhere in rural America might be
- A log cabin in the mountains of Virginia is common; a beach-front log cabin in VA, not so much
- Manufactured or mobile homes with additions are common in rural areas, but generally not in cities
A complex property may be an atypical property, including:
- Dome houses, A-frames, or other homes with unusual architectural styles
- Converted barns
- Partial house—for example, half the house or the basement—is built, and the owners will finish the rest after they have saved enough money to do so
- A house with an unfinished addition
- A house that has been added onto and remodeled and is excessively large and/or its amenities are atypical in its market
- “In-fill” homes, i.e., a new construction house in an area of older houses
- A new construction house that is over-improved for its market (luxury homes)
- A house situated on a larger than typical site, or a commercially-zoned site
- A property that has been stigmatized from an event that occurred there (death or notorious crime)
- A property with outbuildings situated on rural acreage
- A property that is in poor condition (if it is atypical for an area or there are no sales of poor condition properties)
The form of ownership is atypical
In this case, circumstances involving ownership are uncommon or make the property complex. For example:
- The owner has limited or no access rights on a waterfront property
- A life estate exists on the property (i.e., the owner of a property transfers the legal ownership and use of the property to be used by another person for the life of that person)
- A partial ownership interest in the property exists
- The ownership interest is leasehold (i.e., a ground lease exists) in a market area where such interests are uncommon
The market conditions are atypical
Atypical market conditions may make a property complex and increase the difficulty level of the appraisal. For example:
- The property is located in an area where there are no sales of properties that are comparable to the subject
- There is no market for the house; no sales are occurring for some reason (e.g., the property is near a nuclear waste cleanup site)
- The property is a market area in severe decline as the result of a housing bust
- There is a lack of sufficient data, or market reaction is not easily measurable
- The market conditions are rapidly changing
- The neighborhood is in transition, e.g., single-unit houses are being converted to offices or multi-unit dwellings
- Conflicting information, such as comparable homes selling for wildly different prices for no apparent reason.
Learn more about complex residential properties
Complex property appraisals can be both challenging and profitable for the residential appraiser. It’s important to consider that a complex property will require more time and expertise, and you will want to set the fee accordingly. For additional insights, enroll in our appraisal continuing education course, Complex Properties: The Odd Side of Appraisal.
Editor’s note: This post was originally published on March 16, 2021 and updated in May 2023.
