In any given year — certainly when the economy is down — you can count on one hand the number of homes that sell for more than $1 million in counties around the midstate.
And different commercial property types — golf courses, for example — trade hands even less often. When they do, it's often for residential development.
What are they worth? Whatever someone is willing to pay.
But how do you establish the fair market value when the market is not exactly littered with comparable properties?
"The hard one would be a golf course. There are not many sold. In Lancaster County, there are not any," said Mary Clinton, owner and partner of Lancaster-based Appraisal Associates Inc.
If an owner went to borrow for improvements, the lender would require a full appraisal of the golf course.
"I would have to go to surrounding counties," Clinton said.
The determination looks at when a property sold and for how much per hole. It asks what the base was and whether the location is comparable.
"People will say, 'There is no such thing as a comp for my property.' There has to be," Clinton said, no matter how unusual the use or characteristics associated with it.
The rule of thumb is to compare residential properties sold within the same year that are as close in proximity as possible. Comparing homes in the same subdivision and school district should produce the best result.
The more rare the property is, the further back and out you go, Clinton said. Maybe it's looking for a similar neighborhood type, then something with comparable square footage or the same functionality.
"Urban versus suburban is a tough one. You (obviously) look for other urban locations before suburban," she said.
When dealing with commercial types, the key indicators are what the property could rent for and who would rent it. Utility costs are equally important, Clinton said.
'Starting to see more activity'
Two and three years ago, high-end properties weren't moving at all. But the market has improved, Clinton said, although some homes are still selling for less than what owners might have paid for them.
The down market, which slowed new construction, has helped limit inventory, however, so homes are not sitting as long.
"We're starting to see more activity in the market because of a lack in recent years. You're seeing a loosening of the market," said Jeff Walters, president of Harrisburg-based Walters Appraisal Services Inc.
Appraisals are a reflection of the marketplace, he said. Because it is in a constant state of change, meaning appraisals are really only as good as the day they are issued, it's important to try for a historical market perspective, Walters said.
"Any special-purpose building is going to be difficult to appraise," he said.
If that purpose goes away, the value is going to be harder to calculate.
One example would be surplus school buildings that might have unique architectural characteristics that a developer or investor wouldn't be able to adapt easily for a new use.
Apartments and senior houses are plausible uses for school buildings, but the question might be about market absorption and cost to convert.
"At the right price, everything will sell," Walters said. "It's a matter of tolerance of the seller."
Some sellers had artificially high expectations when the market dipped at the end of the last decade, he said. Perspectives have slowly changed, and activity is picking up again.
The recession also has driven appraisal activity on the banking side, Walters said. Appraisals are now being required on a more frequent basis to indicate performance of real estate assets, he said.
"As a result of the economic crisis and the significant losses many banks experienced, they have improved their collateral valuation policies and procedures," said Jim Ridd, chief credit officer for Swatara Township-based Metro Bank.
That means more frequency and the segmenting of collateral properties by risk, as well as limiting the use of "drive by" or in-house valuations of real estate, he said.
"Depending upon the economic cycle and trends in values, banks may require annual appraisals for all property types, with those properties deemed of higher risk receiving the most scrutiny," Ridd said.
Incorrect calculations on a bank's allowance for loan and lease losses, or ALLL, can adversely affect its earnings and, therefore, stock price.
"Transparency in loan asset quality is paramount," Ridd said.
What are the highest-priced home sales so far this year in Central Pa.?
We found out:
• Cumberland County: $1.45 million on a Deerburn Court property in Silver Spring Township (June)
• Dauphin County: $900,000 on a Moline Lane property in Lower Paxton Township (September)
• Lancaster County: $1.13 million on a Millpond Drive property in Manheim Township (February)
• Lebanon County: $750,000 on a Spangler Road property in West Cornwall Township (July)
• York County: $925,000 on a Siddonsburg Road property in Carroll Township (April)
Sources: Local real estate associations and professionals, as well as county Recorder of Deeds offices. Listed sales based on highest recorded considerations, excluding farm properties.
It is common to find $1 listed in the consideration column regarding local deed transfers.
The quit claim deed is often used in family transfers as a way to gift a property; in divorce or marriage situations to add or remove names from the title; or in the creation of a trust.
That consideration also can give the perception that high-end property transfers are few and far between. But just because it was listed as a $1 sale doesn’t mean there aren’t properties changing hands that are worth $1 million or more. Look for a statement of value form.