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HomeMy WebLinkAboutReal Estate Appraisal Report - 1984 QQRAIs9 nag s : � soelAc REAL ESTATE APPRAISAL REPORT QJIM's'� APPRAISAL ASSOCIATES y W+EN ReQ1 Estate Appralsers and Consultants �sOcP.O . Box 56, Hamel, Minnesota,55340/Telephone(612)478-6068 ,pr(� November 9, • 1984 John Gerhardson Public Works Supervisor R. 0. Box 66 Crystal Bay, MN 55323 RE: 1285 Arbor Street Dear Mr. Gerhardson: At your request and in coordination with Mrs . Joanne Lattin of the City Office, I inspected the property referenced above as part of the sampling of the proposed residences included .in the City of Orono Sanitary Sewer Project. At the time of my inspection I found no evidence of incurable deficiencies -in. the residence. I did not make a determination as to the suitability or functioning of the private septic system in this property. Since it is common practice for any buyer t6\ expect the septic system to be in functioning condition at the time of sale and for a period of time after the sale, the property was appraised in that light. The appraisal includes the two common methods of finding value. The cost approach presents the replacement value of the improvements less depreciation. The Market Data section presents two sets of sales data, one with private septic systems and one with public sanitary sewer. They are presented as such in the data section. Finally a conclusion of value is arrived at for each method of sewage disposal. � w�s b �t► s �b so��a4 As a result' of the data analysis included in this report and other information developed during the appraisal process the conclusions of value are as follows : BEFORE installation of Public Sanitary Sewer $80,000 AFTER installation of Public Sanitary Sewer $849900 If you have any questions concerning the methods or data used in compiling this report, please contact me. Sincerely, dJhn C. Farrell praiser JCF:cal PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the fair market value of the subject property as if free and clear of all liens and encumbrances. DEFINITION OF MARKET VALUE Market - value has been defined as follows : 1 . The most reasonable price estimated in terms of money which a property is expected to bring if exposed for sale in the open market, allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which it is adapted and for which it is capable of being used. 2. Frequently, it is referred to as the price at which a willing seller would sell and a willing buyer would buy, neither being under abnormal pressure. 3. It is the price expectable if a reasonable time is allowed to find a purchaser and if both seller and prospective buyer are fully informed. The essential difference between market price and market value as defined above lies in the premises of intelligence, knowledge, and willingness, all of which are contemplated in market value but not in market price. Stated differently, at any. --given moment of time, market value connotes what a property is actually worth, and market price what it may be sold for. DESCRIPTION OF Till,` SITE The site is located on the West side of Arbor St. with 65 feet of frontage on the street. Zoning for the property is Single Family Residential and -the current use is deemed to be the highest and best use of the property. Following is a summary of site data for the subject property : SIZE 65 x 140 x 65 x 140 9, 100 SF ZONING Single Ramily Residential UTILITIES Public electric service, public gas service, private well and septic system. STREET ACCESS The street is accessible by the public. The surface is blacktopped and maintained by the City Public Works Department. TOPOGRAPHY Level at street grade. SHAPE Rectangular VIEW Average DRAINAGE Appears to be adequate FLOOD PLAIN INFORMATION There is no indication that this site is in the designated flood plain. LEGAL DATA AND PUBLIC RECORDS LEGAL DESCRIPTION South z of Lot 4 and North 40' of Lot 5 Block 2, Crystal Bay, Minnetonka. TAXPAYER Jay and Barbara Wood PID # 10-117-23-31-0034 ASSESSORS RECORbS Market Value $ 609600.00 Real Estate 'faxes $ 519.08 H. S . Special Assessments none DESCRIPTION OF THE IMPROVEMENTS The site has been improved with a 12 story detached residence containing 1320 SF of improved living area on 2 levels . The condition of the property is good with no major repairs required . Regular maintenance of Lhe property is evidunL Lhruugho uL Lite, House and all service units are in good to average condition. There is no evidence that the lower level has been flooded in recent years . A summary of construction detail follows : AGE Approximately 1920 FINISHED LIVING AREA 748 SF on Lower Level 542 SF on Upper Level FOUNDATION Poured Concrete rXTERIOR; WALLS Wood Siding ROOF MATERIAL Asphalt Shingle WINDOWS Double Hung Combination GUTTERS & DOWNSPOUTS None INSULATION Walls and Ceiling. The R factor of the insulation is R13 R38 according to the resident. BASEMENT 70 % The' lower level is not finished. LOWER LEVEL FINISH N/A OUTSIDE ENTRANCE No FLOORDRAIN Yes ROOMS Living Room 1 Kitchen 1 Dining Room 1 Baths 12 Bedrooms 3 Front Porch FIREPLACES No PATIO, DECKS , POOL, FENCES Deck 14 x 20 HEAT Gas Hot Water FLOOR FINISH OR COVERING Carpetir.g and Vinyl WALL MATERIAL Sheetrock TRIM/FINISH ,Average BATH FLOORS Ceramic Tile BATH WAINSCOT Ceramic Tile GARAGE 1 Detached Wood b• WV DjEs W, s �J M•. c� i I ti ' N i n s g , vine � 461 r= I o 0 o 52 3. .! l23, _a 2 ff? e eso ic Ifo " P W•I N _ =h 1.. �I I ✓ � � � I ZO"� `• -19 J Wl � • �J ` s BRIAR r W"s�Ee w SBRIA ST. s� ' �• • t ST. r r•• Io o .I 5e Ao LZ s ARBOR ST. I:o o e ,, '�'•+ a ARBOR - R�OGE 3! N - s • I r ST. A = Rp - �� s� a e - o q0 ryDRTh BRpH,N N `� J J 3„ 6 m .• — _ . — flza AA4 1. i d 41,IL M040 A0 N „ 4 04 ;are • ` W $ Cf? - `''� t '• tip, �� t� 0 3` �� �r. �• 1 f• ,,��11 i Y ;L COJ � M � • � i le w � �•�` � ,• Z J ln3S• �Y o u r 00 THE APPRAISAL PROCESS The valuation part of the appraisal process is a series of "checks" on the appraiser' s judgment. The "checks" are used as a guide in arriving at a final estimate of "value". The first appraisal procedure is an estimate of the value of the vacant land or underlying land in the case of improved properties , recognizing its highest, best , and most profitable use. This , then is the "estimate of value" in vacant land. The market place normally recognized three approaches as guides for calculating "value" of improved properties . Any and/or all of these three methods are used, as applicable. The first appraisal procedure if known as the Cost Approach to Value. This approach is an emphasis on cost , realizing that a buyer for the property being appraised has an alterna- tive of erecting all-new facilities of his choice. After the cost of all-new facilities has been estimated, the appraiser then related the subject property to the all-new facilities , applying "depreciation" factors where applicable. The second appraisal procedure is known as the Direct Compari- son Approach to Value, sometimes called the "Market" approach to value. This approach is a consideration of the subject property as it competes with sales of other already improved properties , with the emphasis placed on market sales and/or offerings ofcompetitive property . This procedure is also the normal approach to estimating value of vacant or under- lying land. The third approach to value is known as the. Income Approach to Value. In this estimate the emphasis is placed on the investment potential for the subject property, recognizing the past , present and future income potential for the property. In this appraisal the value of the subject site, if vacant, has been estimated. After that estimate all three of the approaches to value have been considered and applied where applicable, or explained where not applicable. Following the application of the approaches is a correlation of the various approaches and a statement as to the final estimate of value. THE COST APPROACH One method of estimating the replacement cost of a building is the use of a National Cost Service. We have used the Marshall Valuation Service, which is compiled and published by Marshall and Swift Publications Company. The cost data presented is based on years of valuation experience, thou- sands of appraisals and continuous analysis of the cost of new buildingg, This publication has been nationally recog- nized as an authority in the appraisal field over thirty- five years and covers 50 states and Canada. Current cost multipliers are furnished to keep costs up to date by monthly supplements and revised pa es in each of three districts (Eastern, Central, Western and local modi- fiers convert the costs to specific localities . Depreciation, if any, must also be recognized in arriving at a 'value" of improved property. In real estate, depreciation usually results from one or more of three sources . These sources are known as physical deterioration, functional de- preciation and environmental depreciation. Physical depreciation is generally considered to be wear and tear of the building due to age or from sources which cause the building to wear out . Functional depreciation is obso- lescence in the building due to layout, design, use of material, etc. Economic depreciation or obsolescence is a reduction in value of the total real estate caused by factors outside the property itself ; i.e. , from proximity to other properties which create depreciation in the subject property. .1 In the case of a new or proposed building there will be, of course, no physical depreciation. Also, a prudent and informed person should not normally "build in" functional or economic depreciation. THE COST APPROACH LAND The land value is estimated based on sales of unimproved sites in the subject community and surrounding communities . Consider- ation is given to the absence of public sanitary sewer value. IMPROVEMENTS The repalcement value is shown with the property in asis condition and no consideration is made for incurable factors in the property. RESIDENCE 1320 SF @ 48PSF $ 63,360 FIREPLACES @ each CENTRAL AIR CONDITIONING PATIOS, .DECKS & PORCHES 840 +-ARAGE 4 ,000 TOTAL REPLACEMENT COST NEW $ 689200 DEPRECIATION PHYSICAL 10% $ 6, 800 FUNCTIONAL ECONIMIC TOTAL DEPRECIA"'ON FROM ALL CAUSES ($ 6 , 800) NET REPLACEMENT VALUE OF IMPROVEMENTS $ 617400 SITE IMPROVEMENTS $ 2 ,000 SITE VALUE $ 20,000 REPLACEMENT VALUE BY THE COST APPROACH $ 83,400 MARKET DATA APPROACH Market Data is good evidence of value ,because it represents the actions of users and investors . In this approach to value the appraiser compares the subject property with recent sales and offerings of similar properties. This approach to value is based on the principle of substitution, which states that "when a property is replaceable on the market its value tends to be set by the cost of acquiring an equally desirable substitution" . Thus, sales in the open market of properties with generally similar characteristics and utility are good indicators of value. This data was adjusted to the subject property, relating factors such as time, location, age and condition, utility and special features , in order to indicate a value range for the subject property on a per unit basis , usually per square foot or cubic foot of gross building area, including land, and when possible obtaining a gross income multiplier which is calculated by dividing the sale price by either the monthly or yearly gross. rent. This figure, times the gross income, produces an estimate of value of that property, usually monthly gross for residentail properties and yearly gross for income and/or commercial. properties . This approach is a process of correlation and analysis of similar recently sold properties . The reliability of this technique is dependent upon, (a) the degree of comparability of each .property with the property under appraisal, (b) the time of sale, (c) the verification of the sale data, and (d) the absence of unusual conditions affecting the sale. The following pages show recent market transactions indicating date of sale, sale price, size of building, and the adjustments to the subject property. Wood - 1185 Arbor St . MARKET DATA-PRIVATE SYSTEMS Sale #1 1950 Shoreline iDr. , Orono, MN This 12 story residential property east of the subject sold in September, 1984 for $84,900. Included in the sale are 2 cabins which generate rental income,. the amount is not known. The residence con- tains 3 bedrooms, 1 bath and a total of 1330 SF of finished area. The rental units comprise 553 SF and 482 SF respec- tively. Zoning for the property is R-1 . Adjustments are made for finished area, condition, garage, 2 cabins and the age of the improvements . The indicated value of the subject is $81 , 900. Sale #2 3568 Bayside Rd. , Orono, MN This 2 bedroom, 1k bath with expandable upper level sold in February, 1984 for •$83,000. The site and condition are equal to the subject. The upper level finish of the subject warrants an adjustment and indicates a value of $81,000. Sale #3 1110 Willow Dr. , Orono, MN This older 12 story residence sold in November, 1983 for $75,000. The residence comprises 1200 SF of living area including 3 bedrooms , 12 bath, 2 car detached garage. The site is larger, interior finish is not equal to the subject. Adjustments are made for the site and condition. The indicated value after adjustments is $80,000. These comparable sales indicate a market range for the subject of $80,000 to $80,900. Wood - 12Sr► A► lmr ,;L . MARKET DATA-PUBLIC SYSTEMS Sale #1 1966 Shad wood Rd. Orono MN This 12 story older residence in need of repairs and renovation sold in July , 1984 for $91 ,000. The finished area contains 1135 SF of finished area including 3 bedrooms , 2 baths , fireplace, and family room. The site is inferior to the subject, the location is superior. The sale also includes a one car detached garage. Adjustments for this sale include location, fireplace, condition and the site on a channel of Lake Minnetonka . The indicated value after adjustments is $82 ,300. Sale #2 2901 Cambridge Ave. Mound MN This 1160 SF 1z story was sold in February, 1984 for $84,000. The finished area contains 2 bedrooms, 12 baths , 2 car detached garage. The property abuts on a commons area. of the city with access to the lake. Included in the residence is a 3 season porch, fieldstone fireplace and some recent renovations . The site is equal to the subject. We make adjustments for the fireplace, porch, location and garage. The indicated value of the subject is $84,900. Sale #3 1337 Rest Point Circle, Orono, MN This residence with 1385 SF of finished area sold in October , 1983 for $87 ,500. The finished area contains 3 bedrooms , 1 3/4 baths, 1 car tuck- under garage and 2 fireplaces . This property is in equal condition as the subject. The sale requires adjustment for finished area, lot size, location and garage. The adjusted value of the subject is indicated at $82 ,000. The market range indicated after adjustments to the comparables is $82 ,000 to $84,900. CORRELATION AND FINAL CONCLUSION The subject property is appraised as tho free and clear of all encumbrances and in fee simple. The two approaches to value are the generally accepted methods of determining the fair market value of the subject. The cost approach develops the replace- ment cost of the improvements at current construction costs. The market approach reflects the current real estate resale market and the actions of buyers and sellers in that market. Both approaches are comparative work-ups inasmuch as the infor- mation comes from both direct and indirect comparisons in the market. The cost approach, typically the higher of the two, is a "check" for the appraiser in the search thru the market. data available. The truest test of the value conclusion is the market data approach. Some of the properties appraised are currently experiencing varying degrees of failure of the private septic systems. While information was avialable to your appraiser as to the systems which were failing and those that could be expected to fail in the future, no consideration was given in the analysis of "before" and "after" values. Inasmuch as each situation would require different methods of correcting those failures, it was not possible to reasonably estimate cost of the replacement of the septic system. In addition, in a market sale, the septic system is required to be working in proper fashion and is guaranteed as such for a 6 month period after the sale. The value estimate in the "before" and "after" therefore considers that the system is in working order at the time of the inspection of the property. The value conclusion estimate. for the subject system is based on the theory that a property with a private system would sell in the lowest range of the estimates . Conversely, a residence with a public sanitary system and new roadways .would sell in the higher end of the range. Therefore, based on the information developed in this report, it is my opinion that the subject has a "before" and "after" value as follows: Before installation of a public sanitary system $80,000 After installation of a public sanitary system $84,900 CERTIFICATE OF APPRAISAL The undersigned does hereby certify as follows : a) I have inspected the property. b) I have no present or contemplated future interest in the real estate that is the subject matter of this appraisal report or the parties involved. c) I have no personal interest or bias with respect to the subject matter of this appraisal report of the parties involved. d) To the best of my knowledge and belief , the statements of fact contained in this appraisal report , upon which the analyses, opinions and conclusions expressed herein are based, are true and correct . .e) This appraisal report sets forth all of the limiting conditions (imposed by the terms of my assignment or by the undersigned) affecting the analyses , opinions and conclusions contained in this report. f) This appraisal report has been made in conformity with and is subject to the requirements of the Code of Pro- fessional Ethics and Standards of Professional Conduct of the Society of Real Estate Appraisers . g) No one other than the undersigned prepared the analyses, conclusions and opinions concerning real estate that are set forth in this appraisal report . h) The real property which is the subject/ of this appraisal report was valued as offor APPRAISAL ASSOCIATES ASSUMPTIONS AND LIMITING CONDITIONS We assume no responsibility for matters legal in character nor do we render any opinion as to the title which is as- sumed to be good. All existing liens and encumbrances have been disregarded unless specifically identified. The property is appraised as though free and clear, under responsible owner- ship and competent management. The sketch in this report is included to assist the reader in visualizing the property. We have made no survey of the property and assume no responsibility in connection with such matters . The legal description and/or survey furnished us is assumed to be correct. We believe to be reliable the information identified in this report as being furnished to us by others , but assume no responsibility for its accuracy. Possession of this report or a copy thereof does not carry with it the right of publication, nor may it be used for any purpose by any but the applicant without the previous consent of the appraiser or the applicant in writing, and in any event only with proper qualification. We are not required to give testimony or attendance in court by reason of this appraisal with reference to the property in question unless arrangements have been previously made therefor. QUALIFICATIONS OF JOHN C. FARRELL, CRA EDUCATION New York State University - Accounting and Marketing Rutgers University - Principles of Real Estate Law Rutgers University - Marketing and Advertising Society of Real Estate Appraisers Course 101 Minnesota Real- Estate Law Farm and Land Institute Appraisal Course - Agricultural Valuation AIREA Seminar - Going Concern Valuation EXPERIENCE Site Use Appraisals - Mobil Oil Company Cost Analysis and Project Planning - General Electric Company New Business Acquisitions - 3M Company Real Estate Planning - Specialty Development Company Land Purchasing for Resale & Development - Product Consultants , Inc. PROFESSIONAL MEMBERSHIPS Society of Real Estate Appraisers Farm and Land Institute National Association of Review Appraisers APPRAISAL EXPERIENCE Appraisal Review Residential Appraisals Commercial Property Investment Property Condemnations Mortgage Appraisals Agricultural Investments Consultant DESIGNATIONS Certified Review Appraiser (CRA) Certified Appraiser Dept. HUD State of Minnesota approved: a. Department of Natural Resources b. Department of Transportation C. General Services Minnesota Housing Finance Agency (MHFA)