One of the more difficult specialty markets facing appraisers today in Manhattan is estimating market values of townhouses. Based on the Manhattan Townhouse Report I author for Insignia Douglas Elliman, the average sales price in 2001 was $3,538,000 and there were 89 one to five family sales. These numbers indicate that information concerning each sale used in an appraisal is critical.
The appraisal process includes several key steps that will help result in a credible report. Firstly, the highest and best use of the property should be determined. In other words, what would a typical purchaser do with the property? In many cases, it is the eventual conversion to a one family house. One to five family townhouse properties are usually not bought and sold for their potential rental income. Also, the more units in a property, the more costly it is to convert to a one family. In 2001, the average sales price of a one family house was $4,089,598 or roughly double that of a three to five family house at $2,044,318.
The second step is collecting data through inspections and research. Some of the key amenities that differentiate each house are probably familiar to the reader: size, location, layout (number of units) and condition. Other important amenities include: frontage, architecture, number of stories, outdoor space and elevators.
However, the difficulty lies in having access to enough information about the sales data to render an informed opinion. Sales data is generally available in public record. However, much of the information is dated, inaccurate or incomplete. For example, it is common for properties designated as legal two and three family houses to actually be configured as a one family house.
In addition, public record only includes the main building dimensions and not the rear extension, if any. The reported number of stories usually excludes the first level, termed an “English Basement”, because it may be a few feet below street level or grade. As a result, the actual square footage may be significantly different and thereby inhibit correct comparisons between houses without inspecting each sale.
The square footage of a townhouse is calculated by multiplying the building dimensions (goes to the outside wall) times the number of stories, including the English Basement, if any. The amount is added to the rear extension which is calculated the same way. The information on extensions is not generally available in the tax records and requires additional research.
For comparison purposes, if the reported square footage between a coop and a townhouse are the same, the coop would likely have 15% to 20% more usable space than the townhouse because coops are measured from the inside walls and their calculations do not include common areas.
The frontage of a building is often one of the most widely used classifications of apartments and is truly unique to Manhattan residential property. The wider the house is, the more value it tends to have above and beyond its often larger size. The average width of a Manhattan townhouse is 18 to 20 feet. Houses wider than 25 feet are often called “trophy” properties because they are limited in availability. Houses as narrow as 13 feet are not uncommon and there is actually a 9.5 foot wide house in Greenwich Village.
The final step in the appraisal of townhouse properties is to compare sales of similar houses “side-by-side” with your property and make adjustments reflecting differences in the amenities, but that’s a whole other topic.
Unlike turn-of-the-century townhouses, an appraisal is perishable product due to ever changing market conditions. Collection and recognition of key amenities and data is essential in providing a reliable townhouse market value estimate.