Special-Purpose or Special-Use Properties by definition require an individualistic approach to valuation for each specific property.
A Special-Purpose Property is one with a limited market and a unique design or layout that restricts the use for which it was constructed. This type of property often has few potential buyers at a specific time often due to changing market conditions or unique design features. In the case of churches, schools, theaters, or public utilities, potential buyers can also be limited due to high costs required to convert the building into a more traditional commercial use.
Typically, two types of value are sought in appraisal assignments of Special-Use Properties. The first is Value In Use. The Appraisal Institute defines this value as “The value a specific property has to a specific person or specific firm as opposed to the value to persons or the market in general”. Or, in other words, the attribution of value to goods and services based upon their usefulness to those who consume them.
The second value often required in the appraisal of a Special-Use Propertyis a Going Concern Market Value. The Appraisal Institute defines this value as “The value of a property as it is currently used, not its value considering alternative uses”. This value is not intended to represent the amount the property might sell for on the open market. Specific criteria that must be considered when estimating this type of value include:
- What is the remaining economic life?
- Is conversion to an alternative use economically feasible?
- Do the net earnings of the business show a fair return on the asset’s value?
- Does the property fulfill an economic need?
- Is current ownership acting responsibly?
- Has consideration been given to the property’s functional utility?
We have provided valuations for many Special-Purpose properties throughout the Midwest. If you are in need of a Special-Purpose Appraisal in Illinois, Indiana, Ohio, Michigan, or Kentucky, let us assist you with your valuation needs.
