Waterfront Appraisal

Today we have a guest post from Mr. Jim Thrower, an appraiser with Visser Appraisals Ltd. Mr. Thrower has  experience  appraising  property on many of Michigan’s lakes and rivers. We thank him for sharing his expertise with us today.

While Michigan is home to over 11,000 lakes, the supply of quality waterfront property is limited. In contrast, the demand for waterfront property is high, as evident by typically smaller lot sizes.

As an appraiser working in West Michigan, I am often presented with the challenge of interpreting this specific market. As an impartial researcher I rely heavily on sales data to discover the market.

I’d like to pass along one of the more powerful tools in my waterfront property appraisal toolkit.

One of the better barometers in approximating the value of waterfront property (besides hiring a licensed appraiser) is price per lake-frontage foot. To do this you will need to find recent comparable sales.

Below is an example of how the price per foot methodology can be used as a barometer for value.

Total Sale Price / Total Front Feet of Waterfront: Price per Front Foot

Example:

The owner’s property has 0.40 acres wi`th 102’ of Lake Frontage located on an all sports lake with normal traffic counts in West Michigan.

Comparable #1 sold for $60,000 and has 0.45 acres with 102’ of Lake Frontage located on the same lake but next to a very busy public access launch.  Price Per Front Foot: $588

Comparable #2 sold for $74,000 and has 0.40 acres with 103’ of Lake Frontage located on the same lake with normal traffic counts. Price Per Front Foot: $718

Comparable # 3 sold for $77,500 and has 0.50 acres with 103’ of Lake Frontage located on the same lake with no neighbors and a private drive. Price Per Front Foot: $752

Comparable # 4 sold for $106,500 and has 0.40 acres with 55’ of Lake Frontage located on a private drive in a peninsular with views of the entire lake. Price Per Front Foot: $1,936 Of the four comparables sold comp’s #2 & #3 are most similar with a price per font foot range of $718 – $752.

If we take $718 x 102’ = $73,236

If we take $752 x 102’ = $76,704

A range of $73,236 to $76,704 is very tight and an excellent indicator of value.

The price per font foot methodology is a very useful valuation tool; however, it does have its weakness. Often there are non-quantitative factors that should be factored into the valuation (see comparable #4).

A few examples of these would be:

1. Location

2.Views

3. Bluff

4. Proximity and conformity with neighbors.

5. Zoning Restrictions

An appraiser’s ability to interpret these factors comes from a combination of market research and experience. Maybe this weekend I’ll brush up and take the boat for a little research.