Unique properties pose challenges for both agents and appraisers. A property may be deemed unique for various reasons:
It may be larger or occupy a bigger lot than is typical for the area.
Its condition or finishes might be significantly superior or inferior compared to local norms.
It could include special features such as green buildings, extensive equestrian facilities, or other amenities that are rare in the area.
Listing agents and appraisers often have to search extensively and beyond typical boundaries to find comparable sales. Identifying comparable sales is challenging due to their scarcity. Our mission is to identify the most likely substitute for the subject property.
The sales comparison approach has its weaknesses. The lack of comparable sales and the significant differences between the most likely substitutes for the subject can result in large net/gross adjustments, which are not ideal. Appraisers increasingly rely on the cost approach in addition to the sales comparison approach for unique properties. The cost approach involves estimating the cost to replace the improvements made to the property with those of similar utility and then subtracting any depreciation. This method is often used when sales comparison data is weak.
How do you approach valuing unique properties in your market?