Earth berm home located on primary lake front property-how to find the value

Wow. I just looked at an earth berm home the other day. Here is the situation. This home is located on primary lake front property with its very own boat dock. This is a beautiful setting. The views of the lake are spectacular. Now here is the kicker. The home is built under ground. From the front drive all you see is a garage and a roof. You can walk up to the home and walk directly onto the roof. That means there are no windows on three sides of the home.

My assignment is to determine the value of this home. Here’s what happens when you have two major influences of value. The two main influences of home value is the location of the home (Lake Frontage property) and the berm home (a home buried underground).

I searched for all of the homes in the area and searched for berm homes, green homes, earth homes and homes underground. I searched for all homes located on primary water frontage located on the same lake as the subject. Next I compared the two.

Here is my conclusion in a nut shell. The water frontage home is lifting the home value upward; however the berm home is pulling the value downward. The value is somewhere in the middle. The value range was staggering. Lake Frontage homes are selling for around $400,000 or more and berm home were selling for around $200,000 or less.

When you have these types of assignments, the cost approach to value and the listing and sales history becomes incredibly important. If you have good land sales in the area, you can get an idea of what it will cost to build this home starting with an empty lot. This price will set the under end of the price range and in some cased, this might be your best indicator of value.

Listing history is extremely important because this tells you what the market thinks of the location, the design and appeal and if they like homes similar to the one you’re appraising. As it turns out, this home was listed at several different price points for an extended period of time. This indicated that the market is not willing to pay those price points which will tell you what the subject is not worth. Sometimes this is just as important as trying to figure out what the subject is worth.

I completed two studies in this area to determine the percent difference for lake front homes and other homes located on similar sized lots in the area. Next, I completed an additional study to compare primary water frontage land and land that is not located on primary front to determine the value difference.

I found all of the berm homes going back eight years in time and I use the most recent, relevant berm homes in the sales comparison approach to value in my appraisal.

Next, I reviewed the listing history, the cost approach, the sales comparison approach, the current sales contract any other sales that I did not use in the report and I came to a conclusion. This is how I find the value of a lake front home that is a berm home.

The moral of the story is if you’re buying or building a home that offers a high demand are such as primary lake frontage property, don’t combine it with a building structure that creates less demand and pulls the value of your home downward. How do you know this? Drive around your neighborhood. If your plans are weird, strange, completely different or unique, this could be a disadvantage.