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REAL ESTATE
APPRAISAL REPORT
s'� APPRAISAL ASSOCIATES
W_E N Real Estate Appraisers and Consultants
S r(� P.O. Box 56, Hamel,Minnesota 55340/Telephone (612)478-6068
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November 9, • 1984
John Gerhardson
Public Works Supervisor
R. 0. Box 66
Crystal Bay , MN 55323
RE: 1270 Briar 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 to expect the septic system to be in functioning
condition at the time of sale and for a period of time aftc.r
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.
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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 $53,500
AFTER installation of Public Sanitary Sewer $59, 700
If you have any questions concerning the methods or data
used in compiling this report, please contact me.
Sincerely,
Ln UL
C. Farrell c
ppraiser
JCF:cal
4
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.
1
DESCRIPTION OF THE SITE
The site is located on the East side of Briar St. with
50 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 50 x 140 x 50 x 140 7 ,000 SF
ZONING Single Family 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 Lot 10 Block 2 , Crystal Bay Addn. to Lake
Minnetonka
TAXPAYER Dianne J. Mattila Owner: Marquette Natl. Bank
Minneapolis
PID # 10-117-23-31-0038 as Trustee
ASSESSORS RECORDS
Market Value $ 53,600.00
Real Estate Taxes $ 453.08 HS
Special Assessments none
DESCRIPTION OF THE IMPROVEMENTS
The site has been improved with a 12 story detached residence
containing 1002 SF of improved living area on 2 levels . The
condition of the property is good with no major repairs required.
Regular maintenance of the property is evident throughout the 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 1920 Estimated
FINISHED LIVING AREA 690 First Floor 312 Second Floor
FOUNDATION Poured Concrete
EXTERIOR WALLS Aluminum Siding
ROOF MATERIAL Asphalt Shingle
WINDOWS Double Hung
GUTTERS & DOWNSPOUTS Galvanized Iron
INSULATION Walls and Ceiling. The R factor of the insulation
is unknown according to the resident.
BASEMENT 50/ The lower level is not finished.
LOWER LEVEL FINISH N/A
OUTSIDE ENTRANCE No
FLOORDRAIN Yes
ROOMS Living Room 1 Kitchenl Dining Room 1 Bathsl
Bedrooms 2
FIREPLACES None
PATIO, DECKS , POOL, FENCES None
HEAT Gas Forced Warm Air
FLOOR FINISH OR COVERING Carpet
WALL MATERIAL Sheetrock -
TRIM/FINISH Average
BATH FLOORS Vinyl Tile
BATH WAINSCOT Sheetrock
GARAGE None
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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 of competitive 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 buildings. 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 e
pa s 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.
V.
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
T e repalcement value is shown with the property in asis condition
and no consideration is made for incurable factors in the property .
RESIDENCE
1002 SF @ 53 PSF $ 53 ,106
FIREPLACES @ each
CENTRAL AIR CONDITIONING
PATIOS, DECKS & PORCHES
GARAGE
TOTAL REPLACEMENT COST NEW $ 53, 106
DEPRECIATION
PHYSICAL 20% $ 10,000
FUNCTIONAL
ECONIMIC
TOTAL DEPRECIATION FROM ALL CAUSES ($ 10,000)
NET REPLACEMENT VALUE OF IMPROVEMENTS $ 439106
SITE IMPROVEMENTS $ 2 ,000
"SITE VALUE $ 15 ,000
REPLACEMENT VALUE BY THE COST APPROACH $ 609106
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.
Mattila 1270 Briar
MARKET DATA-PRIVATE SYSTEMS
Sale #1
2840 Inner. Rd. Woodland MN This 12 story remodeled older
residence sold in May , 1984 for $62 ,000. The finished area
comprises 1000 SF including 2 bedrooms , 1 bath, and a 1 car
detached garage. The property has deeded lake rights to the
lake and community recreation facilities . The adjustments to
this sale are for location, lake rights and garage. The indi-
cated value for the subject is $53,500.
Sale #2
615 Clarence Ave. , Minnetrista, MN This 1000 SF residence on
a 1 acre site sold in May, 1984 for $60,000. The residence
includes 3 bedrooms , 1 bath and a 1 car tuckunder garage
constructed in 1948 . The adjustments to this sale are for
the site and tuckunder garage. The indicated value for the
subject is $55 ,000.
Sale #3
6470 Game Farm Rd. ,• Minnetrista, MN This 12 story residence
on a 2 .5 acre site sold in January , 1984 for $59,000. The
finished area contains 830 SF including 3 bedrooms , 1 bath,
3 car detached garage and 2 fireplaces . The home requires
some renovation and repairs . The sale price of $59,000 'is
adjusted for amenities including fireplaces, garage, site ,
location and condition. The indicated value of the subject
is $54,000.
The ' indicated market range for the subject is $53, 500 to
$55,000.
1 ?70 I1ririr
MARKET DATA-PUBLIC SYSTEMS
Sale #1
26175 Birch Bluff Rd. Shorewood MN This 800 Sf 12 story south
of the subject sold in March, 1984 for $55 , 700. The finished
area includes 3 bedrooms, 1 bath, no garage, fireplace and a
larger site. The adjustments made include finished area, and site.
The indicated value for the subject after adjustments is $59 , 700.
Sale #2
2088 Orchard Lane Long Lake MN This 1 story with 472 SF of
finished area sold in February , 1984 for $75,000. The f=inished
area includes 2 bedrooms , 1 bath, 1 car detached garage and central
air conditioning. The sale is adjusted for finished area, central
air and garage. The value of the subject after adjustments is
indicated .to $58 ,100.
Sale #3
1735 Watertown Rd. , Long Lake, MN This 12 story residence on a
equal site sold in July, 1984 for $65 ,900. The finished area on
2 levels comprises 1400 SF including 3 bedrooms , 12 baths , fire-
place, deck and a 1 car garage. The adjustment process includes
the finished area, fireplace, and 2 bath. The adjusted value of
the subject is indicated to be $58,600.
The market range for the subject property is deemed to be $.58 , 100
to $59, 700.
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 $53,500
After installation •of a public sanitary system $59 , 700
CERTIFICATE O1' APPRA I ;;AI,
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 oAher 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 of for
APPRAISAL ASSOCIATES
0
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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)