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HomeMy WebLinkAboutReal Estate Appraisal Report - 1984 QPRx 9 a Sam sE r 9�soesA�v� REAL ESTATE APPRAISAL REPORT )A'WN APPRAISAL ASSOCIATES WReal Estate Appraisersand Consultants P.O. Box 56, Hamel, Minnesota 55340/Telephone (612)478-6068 socia November 9, • 1984 John Gerhardson Public Works Supervisor R. 0. Box 66 Crystal Bay, MN 55323 RE: 1390 Railroad Avenue 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 theproposed residences included in the City of Orono Sanitary Sewer Project. Y At t''he 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 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. QQRN�s9 � w�E b I' S► s �h s0C1W 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 $569100 AFTER installation of Public Sanitary Sewer $62,400 If you have any questions concerning the methods or data used in compiling this report, please contact me. Sincerely, J n C. Farrell A praiser JCF:cal I 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 THE SITE The site is located on the East side of Railroad Av. with 60 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 60 x 130 x 60 x 130 79800 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 Offsite 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 TAXPAYER Olai Hanson PID # 10-117-23-31-0005 ASSESSORS RECORDS Market Value $ 43 , 100.00 Real Estate Taxes $ 358. 78 Special Assessments none Hanson LEGAL DESCRIPTION Commencing at a point in the easterly line of the Great Northern Railway right-of-way a distance of 297 .06 feet southwesterly from the SW corner of Lot 6 , Elbridge S . Barnes subdivision of Section 10, Township 117 , Range 23. DESCRIPTION OF THE IMPROVEMENTS The site has been improved with a 1 story detached residence containing 884 SF- of improved living area on 1 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 nd evidence that the lower level has been flooded in recent years . A summary of construction detail follows : AGE 1953 FINISHED LIVING AREA 884 SF FOUNDATION Concrete Block EXTERIOR WALLS Fiber Board ROOF MATERIAL Asphalt Shingle WINDOWS Double Hung GUTTERS & DOWNSPOUTS Galvanized Iron INSULATION Walls and Ceiling. The R factor of the insulation is good according to the resident. BASEMENT 100 % The lower level is not finished. LOWER LEVEL FINISH N/A OUTSIDE ENTRANCE No FLOORDRAIN Yes ROOMSLiving Room X Kitchen X Dining Room Baths 1 Bedrooms 2 FIREPLACES None PATIO, DECKS , POOL, FENCES None HEAT Gas Forced Warm air FLOOR FINISH OR COVERING Carpeting WALL MATERIAL Plaster TRIM/FINISH Average BATH FLOORS • Vinyl BATH WAINSCOT Plastic Tile GARAGE None Hanson •1 Railroad q It Ali DNO Mv Ip + rlRWW ti.NSI� �w�•. t /(I 4 /Tr Ir1. 1.__V-.'-1- ----.. `- _ .- _ - .._..-------� ---. . ._. _ \ --71 LV oD x:, .SfyZi r ,i' J0 •, I.....i r "E ,i Ip � V. f I ,4v O• �/� QP��_ \ v IR ... •,f, _ i,AN ,. . � fu r .���e, �'j fir. ♦. 1•"' � �.�!`'• ' .\\\ K % J ft o•\\N � ,� QQ h N• 4 ii co • V �w Y.ior • r W or ..r s r a it I •'� N .K N °� ir�a � P ' � T, �a _� _ oH ,� H1 OAF0 N V1 ••� ILI 11 �y IS •R °s • Q <M_�'" Gx - '$ N fE �vO�V r �f►. �s is > VOGVV s % = r r o I I Na r^ � v v N_ _ 31 mI� N 04 e - - -V `C1 V J • JL R •IS Its Io 'K , �.•. •LS rues ° YitY A adlaa W 2 f0 I , wf N r • R„ v Eb �l i 9, N 05 .11 'f2i f o f K 25 0 o o f •u � N .R� ,n O�y n vj• tip o `I g I N I M I , 5, N I I Y 1 , 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 pa es in each of three districts (Eastern, Central, Wgstern 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. t 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 as is condition and no consideration is made for incurable factors in the property . RESIDENCE 884 SF @ 55 PSF $ 48 ,620 FIREPLACES @ each CENTRAL AIR CONDITIONING PATIOS, DECKS & PORCHES GARAGE TOTAL REPLACEMENT COST NEW $ 48 ,620 DEPRECIATION PHYSICAL 20 $ 9, 724 FUNCTIONAL ECONIMIC TOTAL DEPRECIATION FROM ALL CAUSES ($ 9 , 724) NET REPLACEMENT VALUE OF IMPROVEMENTS $ 38 , 896 SITE IMPROVEMENTS $ 2 ,000 SITE VALUE $ 20,000 REPLACEMENT VALUE BY THE COST APPROACH $ 60,896 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 Llie wbnthly 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. 101) Id;i i l 1 mill MARKET DATA-PUBLIC SYSTEMS Sale #1 5857 Grandview Blvd. Mound MN This 3 bedroom rambler sold in August, 1984 for $60,000 on FHA insured loan. The location is inferior to the subject , the site is equal iii size . '11)V finished area on the main level is equal to the subject, there is some lower level finished. An adjustment for the finished area and location is warranted in addition to the 2 car garage of the comparable indicating a value for the subject of $60,900. Sale #2 2949 Dit:kens Ln. , Mound , MN This 960 SF rambler with attached garage -sold in May , 1984 for $64,000. The property is a 1973 average quality construction and includes 2 bedrooms and one bath, central air, and lower level walkout. The site is equal to the subject in size, location is inferior. Adjust- ments to this sale include garage, central air and lower level walkout . The indicated value of the subject property is $60,400. Sale #3 � 4441 Lamberton Rd. , Mound MN This 988 SF rambler sold in May, 1984 for 66, 500.. The improvements include 3 bedrooms , 1 3/4 baths, lower level walkout, 'fireplace , 2 car detached garage. The location is inferior, the site is equal . Adjus- ting for differences include the garage, location, lower level walkout, bath, family room in lower level and fireplace. The indicated value for the subject after these adjustments is $62 ,400. Based on the analysis of the sales shown and the required adjustments to those sales when compared to the subject property , the market range for the subject is $60,400 to $62,400. Hanson 1390 Railroad MARKET DATE-PRIVATE SYSTEMS Sale #1 4605 Balsam St. Medina MN This ,3 bedroom rambler sold in June, 1984 for 66,000. The finished area is 960 SF and is in equal condition as the subject . There is no garage with the property . The location is better than the subject, there is professional landscaping on the lot. The residence has 2 fireplaces . The lot size is larger than the subject. Recent renovation includes new carpeting, new exterior paint and interior paint . Adjustments for this sale include condition, screened porch, fireplaces , location amounting to $9 ,700 indi- cating a value for the subject of $57 , 300. Sale #2 615 Clarence Ave. , Minnetrista, MN This 3 bedroom 1000 SF residence on a 1 acre site west of the subject, sold for $60.000 in May . 1984. The property has a one car tuckunder garage. The location is equal to the subject, the site is larger but has no advantage over the subject. The condition is equal to the subject with regular upgrading of the interior - having been accomplished in the past 4 years . The adjustment of $1 ,000 indicates a value for the subject of $59,000. Ad- justments include finished area and garage. Sale #3 290 Crestview Ave. Orono MN This 2 bedroom rambler sold for T59,900 in August, 1984. The location is equal. to the subject. The site is larger, the finished area is larger than the subject, and includes a 2 car garage. Adjustment for the location, site and finished area amounts to $6 ,800 indicating a value for the subject of $53 , 100. Based on the analysis of the sales and the required adjust- ments to those sales when compared to the subject property, the market range for the subject is $56 ,100 to $57 ,300. 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 $56, 100 After installation of a public sanitary system $62,400 ` t 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 of �,�ti�i /y�'s� for 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. 4 t 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)