appraising luxury homes

Appraising Luxury Homes

Presented By: Tim Wilmath, MAIHillsborough County Property Appraiser’s Office

Prepared For: Florida Chapter IAAO Fall ConferenceClearwater Beach, FloridaDecember 1st, 2005

Introduction

Luxury Home Statistics

Market Approach

Conclusion

11

22

33

44 Cost Approach

Obsolescence – Sometimes its obvious55

Appraising Luxury Homes

Luxury Home

Statistics

What is a Luxury Home?

How Many Million Dollar homes in Florida?Source: U.S. Census Bureau 2004 American Community Survey

...................................> $1,000,000

...1,034,386........................62,765

How Many Million Dollar homes in the United States?

Luxury Home

Statistics

Top 10 Counties with Million Dollar Homes in Florida

#1 - Palm Beach County..............................................................9,558#2 - Miami-Dade County.............................................................7,182#3 - Broward County...................................................................5,704#4 - Sarasota County...................................................................4,441#5 - Pinellas County....................................................................2,935#6 - Lee County...........................................................................2,180#7 - Hillsborough County............................................................1,778#8 - Orange County.....................................................................1,701#9 - Brevard County....................................................................2,180#10 - Duval County.....................................................................1,346

Luxury Home

Statistics

2003 Total 2004 Total

Sales Volume Sales Volume

California 1 $12,624,537,202 $19,958,968,283 58%

Florida 2 $2,008,970,243 $3,037,526,890 51%

Massachusetts 3 $1,362,212,903 $1,997,908,899 47%

Illinois 4 $990,207,302 $1,320,085,874 33%

Connecticut 5 $839,105,004 $1,315,635,586 57%

New Jersey 6 $928,679,672 $1,241,335,774 34%

New York 7 $590,013,162 $865,705,111 47%

Washington 8 $452,174,738 $684,680,735 51%

Hawaii 9 $469,544,650 $646,087,234 38%

Arizona 10 $353,281,162 $488,318,097 35%

Source: www.coldwellbankerpreviews.com* Home sales in excess of $1,000,000

TOP 10 STATES WITH THE MOST COLDWELL BANKER

LUXURY HOME SALES BY DOLLAR VOLUME

JANUARY 1 to DECEMBER 31, 2004

% ChangeState 2004 Rank

Luxury Home

Statistics

“Florida had 4,698 million-dollar home sales in 2004”

Luxury Home

Statistics

HOW MANY HOMES IN FLORIDA ARE CURRENTLYFOR SALE WITH AN ASKING PRICE OF:

Over $5,000,000?

Over $10,000,000?

Over $20,000,000?

Over $30,000,000?

............................................560

............................................120

............................................48

............................................5

Source: Florida Association of Realtors

Luxury Home

Statistics

Top 5 Most Expensive Homes Currently For Sale in Florida

# 5. Located on Star Island in Miami. (home owners include Shaquille O'Neal and Gloria Estefan).

The home contains approximately 19,500 square feet with 8-bedrooms and 8 baths on 2 acres.

Other features:a gym, outdoor tennis court, indoorracquetball court, pool and 250 feet of dock space, and a separate guesthouse.

The home sold for $18,800,000 in 8/2004.

Asking Price?

$32,000,000

Luxury Home

Statistics

Top 5 Most Expensive Homes Currently For Sale in Florida

# 4. Located in in Palm Beach

This new home contains 16,600 sf of living area, with 8 BR/11.3 baths with 225 feet of beachfront on the Atlantic Ocean.

The foyer contains a cascading fountain and is topped by a 25-foot-high rotunda. The master suite occupies an entire wing of the second floor. The property also contains tennis courts, a putting green, guesthouse, and yacht dock.

Asking Price?

$33,000,000

Luxury Home

Statistics

Top 5 Most Expensive Homes Currently For Sale in Florida

# 3. Located in Palm Beach

This Italian Renaissance-style estate, known as the “Villa di Venezia” was originally built for Harold S. Vanderbilt.

Built in 1929, the home contains over 20,000 sfof heated area, 9 bedrooms and 9+ baths, and 3.7 acres on the Atlantic Ocean.

The property was purchased by Veronica Hearst widow of billionaire newspaper heir Randolph Hearst) in June 2000 for $29,800,000.

Asking Price?

$36,000,000

Luxury Home

Statistics

Top 5 Most Expensive Homes Currently For Sale in Florida

# 2. Located in Palm Beach.

“Palazzo Serena” contains contains 17,000 sf of living area on 6.5 acres with 380 feet on the Atlantic Ocean in North Palm Beach. Features include a two guest cottages, tennis court, beachside gazebo, swimming pool with waterfall and spa, and terraces, and a wet bar hidden behind a built-in bookcase in the library.

Asking Price?

$36,500,000

Luxury Home

Statistics

Top 5 Most Expensive Homes Currently For Sale in Florida

# 1. Located on Star Island in Miami

This home contain over 20,000 sf with a total of 15 bedrooms and 17 baths. The site contains 2 acres along BiscayneBay.

Features include:A 10,000-bottle wine cellar. A gun safe room secured with a fingerprint scanner, library walls clad in silk, and a hand-painted murals on the ceilings. The swimming pool features custom mosaic tile and views of Biscayne Bay.

Asking Price?

$50,000,000

Luxury Home

Statistics

Highest Price ever paid for a Single Family Homein the United States occurred in October 2004

Located in Palm Beach.

The “Casa Aptava” contains over 20,000 sfbuilt in 1923. The main house consists of 10 bedrooms, 14 baths, and 2 pools. The homealso includes 7.43 acres of land, with 400’ on the Atlantic Ocean and 200’ along the Intracoastal Waterway.

The property was designed by Abram Garfield, son of former U.S. President James A. Garfield.The sellers were Ron Perelman, CEO of Revlon and actress Ellen Barkin.

Selling Price?

$70,000,000

Luxury Home

Statistics

Luxury Home

Statistics

2nd Highest Price ever paid for a Home in Florida

This property, the “Maison de L'Amitie” is located in Palm Beach. In December of 2004, Donald Trump purchased the residence at auction.

The home contains over 43,000 sf of living area,with sunken gardens, pool and fountain, tennispavilion, steam room, an art gallery,a conservatory and a beauty/barber salon.

The renovation of the property is being led by “The Apprentice” winner Kendra Todd. Trump intends to list the property for sale at an asking price of $125 million dollars.

Selling Price?

$41,350,000

Luxury Home

Statistics

Who are the buyers for these Luxury Homes?

Source: Coldwell Banker Previews International

31% are cash buyers

68% are considered “New Money”

#1 profession - “Large Business Executive”

67% are between the age of 35 and 55

88% of luxury homebuyers are married

Designer kitchens are the top priority

Valuation Approaches

1. Sales Comparison Approach

2. Income Approach

3. Cost Approach

Sales ComparisonApproach

The sales comparison approach is a method whereby the appraiser estimates value by comparing the subject to similar properties which have recently sold. Adjustments are then considered for various applicable factors.

Sales ComparisonApproach

If you are appraising million dollar homes

in Palm Beach, you got it made.

Sales ComparisonApproach

“Billionaire’s Row” – Palm Beach

“Billionaires Row” Single Family Sales> $5,000,000 from 2004 to 2005

Address Sale Date Price Heated Area Price per SF

1300 S. Ocean Blvd. Oct-04 $70,000,000 21,100 $3,317.54

1960 S. Ocean Blvd. Jan-05 $33,600,000 20,219 $1,661.80

1290 S. Ocean Blvd. Jan-05 $32,000,000 17,871 $1,790.61

1370 S. Ocean Blvd. Sep-04 $22,400,000 17,894 $1,251.82

1125 S. Ocean Blvd. Aug-04 $11,500,000 8,643 $1,330.56

500 S. Ocean Blvd. Jul-05 $11,000,000 8,758 $1,255.99

1920 S. Ocean Blvd. Mar-04 $10,275,000 8,706 $1,180.22

700 S. Ocean Blvd. Jul-04 $9,450,000 4,575 $2,065.57

1045 S. Ocean Blvd. Sep-04 $8,908,720 6,263 $1,422.44

1020 S. Ocean Blvd. Jan-05 $8,800,000 5,999 $1,466.91

3090 S. Ocean Blvd. Feb-04 $8,450,000 7,941 $1,064.10

1040 S. Ocean Blvd. Jul-05 $7,665,000 4,360 $1,758.03

1902 S. Ocean Blvd. Jan-05 $6,600,000 5,982 $1,103.31

1740 S. Ocean Blvd. Nov-04 $6,400,000 8,292 $771.83

516 S. Ocean Blvd. Dec-04 $6,250,000 5,071 $1,232.50

Average 9,802 $1,481.23

Sales ComparisonApproach

So what do you do if you have no sales?

Listing Search Tools

Sales ComparisonApproach

LuxuryRealEstate.com

LuxuryHomes.com

DuPontRegistry.com

UniqueHomes.com

PlanetRealtor.Com

Sales ComparisonApproach

Sales ComparisonApproach

Sales ComparisonApproach

Sales ComparisonApproach

If you have no recent luxury home sales in your market –

.....Go Back in Time

Sales ComparisonApproach

If you have noluxury home sales (even older ones) –

.....Go out geographically

Sales ComparisonApproach

Resist the temptation to use “standard” homes as comps for luxury homes!

≠

Median Price Per SF of Waterfront Single Family Homes in Florida

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

$450.00

2000 2001 2002 2003 2004 2005

< $1 million Sales Price

>$1 million Sales Price

2005 Median Price per SF Waterfront non-Luxury Home - $168.73

2005 Median Price per SF Waterfront Luxury Home - $392.87

Sales ComparisonApproach

2005 Median Price per SF Non-Waterfront non-Luxury Home - $115.62

2005 Median Price per SF Non-Waterfront Luxury Home - $267.71

Median Price Per SF of Non-Waterfront Single Family Homes in Florida

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

2000 2001 2002 2003 2004 2005

< $1 million Sales Price

>$1 million Sales Price

Sales ComparisonApproach

CostApproach

If you have no sales whatsoever – Go to the Cost Approach

1. Replacement Cost

2. Depreciation

3. Land Value

CostApproach

Marshall and Swift Cost Options

CostApproach

CostApproach

Standard single-family residences

High-Value residences

CostApproach

According to Marshall & Swiftthe Economic Life of a High Value Residence is 65 years

Paul Revere boughtthis house in 1770, when it was already

90 years old!(built in 1680)

CostApproach

A luxury home’s land

value is straight-forward

using comparable sales.

Cost

Approach

The Cost Approach requires an accurate estimate of depreciation – especially if you have no help from the Market Approach.

Cost

Approach

Two Most frequent appeal arguments for Luxury Homes:

1. Functional Obsolescence - Too large – Super-adequate - Over-improved for neighborhood, too lavish – no buyer would pay cost for extras

2. External Obsolescence – No buyers exist for this home

Cost

Approach

The 66,000 sq. ft. compound contains a 60 foot long swimming pool with underwatersound system.

The property is assessed at $140 millionresulting in taxes of $1.1 million per year

Functional

Obsolescence

In 1985 Donald Trump purchased “Mar-A-Lago” in Palm Beach for $7,000,000. The following year, the Palm Beach Property Appraiser assessed Mar-A-Lago for $11,500,000.

You’re Fired!

Palm Beach County Property Appraiser v. Donald Trump 549 So. 2d 1098; (1989)

“The difference between the appraisals was the additionaldeduction from the market price for the “Superadequacy” of Mar-A-Lago.

It was not for the trial court to consider which method was superior as long as the property appraiser’s valuation took into consideration the statutory factors”

Functional

Obsolescence

Price Per SF of Palm Beach Home Sales

$0.00

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

$3,500.00

4,360 5,071 5,982 6,263 8,292 8,706 17,871 20,219

Price per SF

Includes 15 waterfronthomes sold in Palm Beach for > $5 millionbetween 2004 - 2005

Functional

Obsolescence-Size

Price Per SF of Palm Beach Home Sales

$0.00

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

$3,500.00

4,360 5,071 5,982 6,263 8,292 8,706 17,871 20,219

Price per SF

Linear (Price per SF)

Functional

Obsolescence-Size

Includes 65 homessold in Avila S/Dbetween 1994 - 1999

Price per SF of Avila Home Sales 1994 - 1999

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

Price per SF of Avila Home Sales 1994 - 1999

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

External

Obsolescence

“No buyers exist for this home”Turnley v. City of Elizabeth 68 A 1094 (NJ 1908)

“We are not disposed to give much force to the argument that because there are very few actual buyers for so costly a residence the valuation to be placed upon it under the statutory criterion should be correspondently depreciated.

The criterion established by the statute is a hypothetical sale; hence the buyers therein referred to are hypothetical buyers, not actual or existing buyers”

Cost

Approach

Obsolescence should be obvious!

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

External

Obsolescence

Functional

Obsolescence

Functional

Obsolescence

Cost

Approach

A Quick Review

Luxury Home

Statistics

Highest Price ever paid for a Single Family Homein the United States occurred in October 2004

Sold for$70 Million!

Sales ComparisonApproach

Sales ComparisonApproach

If you have no recent luxury home sales in your market –

.....Go Back in Time

Sales ComparisonApproach

If you have noluxury home sales (even older ones) –

.....Go out geographically

Sales ComparisonApproach

Resist the temptation to use “standard” homes as comps for luxury homes!

≠

Median Price Per SF of Waterfront Single Family Homes in Florida

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

$450.00

2000 2001 2002 2003 2004 2005

< $1 million Sales Price

>$1 million Sales Price

Luxury homes sell for more per square foot than standard homes!

Sales ComparisonApproach

CostApproach

Large doesn’t automaticallymeanobsolete!

Functional

Obsolescence-Size

Price Per SF of Palm Beach Home Sales

$0.00

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

$3,500.00

4,360 5,071 5,982 6,263 8,292 8,706 17,871 20,219

Price per SF

Linear (Price per SF)

Wilmatht@hcpafl.org