Aspen Real Estate Appraisers World

Nuances of Aspen Real Estate Appraisal and Market Values in the Core and West End

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If you are considering buying or selling real estate in the Core or West End of Aspen, understanding some of the less often recognized and overlooked aspects that affect market value can be helpful. Aspen is one of the most amazing small cities in the world and has some of the most complex and creative rules for property use and development not found in other places. The Core and West End of Aspen in particular have an extra layer of zoning rules above and beyond those affecting the outlying areas of Aspen. Most of these rules and ordinances were created in response to the tremendous growth pressures that Aspen experienced beginning in the mid-1970s. Overall the rules have done an excellent job of balancing competing interests in Aspen and have made for a very interesting and unique real estate market.

The topic of valuation is multifaceted and so is this article. There are many factors, influences and ideas that combine to influence a property’s value.   There is no one perspective that is better than others as valuations are the blends of many ideas and points of view.  As a real estate agent specializing in the Core and West End, my perspective is gleaned from being in the field with the buying public and my various day to day brokerage activites.  I am not a real estate "appraiser" and I am not licensed to do real estate "appraisals".  My perspective is quite different from those of a typical "appraiser" who likely has not been in many of the homes that are used as reference sales in an "appraisal".

Some other experiences that also have formed my perspective include my being involved in the development of properties in the Core and other areas pre 2008.  I have represented owners selling to developers, and on the other side assisted developers buying from owners.   For the past two years, I have been representing many owners of older properties in the Core and West End.  In 2014 alone, I participated directly in two different applications involving six public hearings before the Historic Preservation Committee. My process largely involves doing the work to know both the strengths and weaknesses of properties in this segment from the perspective of the buyer. Like a buyer, I constantly adjust my perspective based upon new listings and sold postings.  I believe that the pricing, promotional, and brokerage activities of the various individual properties in the relative market all influence the values of the other properties in the segment.

My last five listings had from list to sale dates of 62 days, 111 days, 336 days, 183 days, 213 days with the average sale price of all of these of only 3.78% off of list price with the greatest discount being 7.09%.  Interpret this as you will, but when you consider that some listings that are not my own have been on the market for upwards of five years, with a steady discounting of price, my track record suggests that my perspectives have some validity.

With all this said, accurately estimating a property's market value especially in the Core and West End, is as much of an art as it is a science. Some say that a property is worth what someone will buy if for.  That is a very safe statement.  My gift to you dear reader is to go beyond the obvious undisputable and risk the condemnation of my fellow brokers as I share my ideas and perspectives! 

Some observations that I think are not always considered in valuations, but that do have an affect  on market value are:

1.Once a new price level reached in a particular broad market segment, the market value of other properties in the segment should rise. There is often the discussion about the timing of that increase in value and whether it will be the buyer or seller who should benefit from that new price level.  The argument supporting a lower price for the buyer can be supported by the fact that an appraisal is based largely upon older and lower past sales.  Once a sale is posted, it can be used as a comparable property sale for future appraisals. Supporting a higher valuation for the seller requires more arguments of interpolation.
2.One other variable to the Aspen Real Estate valuation puzzle for some properties is that the typical person buying a property for personal use and enjoyment often thinks of its market value in terms of its current condition, without changes. The largest group of buyers for older properties and vacant lots are real estate developers of some degree or another. They look at the potential of what the property may become by redevelopment. The majority of new homes or recently remodeled condominiums sold in the Core and West End were bought by a developer 2-5 years prior, redeveloped or remodeled, then sold again to an end user.
3.With all the unique zoning rules of the Core and West End many properties’ “potentials” can be overlooked. The additional rules and considerations made more challenging due to tight spaces in the Core and West End over other areas in the county include:
  1. The design and redevelopment of accessing properties as related to alley and grid patterns of streets.
  2.  Precedents set in dealing with redevelopment of non-conformities of properties; encroachments of both historic and non-historic properties.
  3.  Preservation of trees.
  4.  Considerations for drainage, water retention, and landscaping.
  5. Historical preservation efforts. To counter balance limitations placed on historic properties, there are opportunities and benefits that historic properties have that non-historic property do not have. One of these is the ability to transfer small amounts of development rights (TDRs) to certain non-historic properties within city limits.  The impact in value of the property divesting the TDR will vary depending among other things, if the property being divested of the TDR could easily and economically handle expansion. Sometimes the expansion of interior spaces can only be accomplished by diminishing some outdoor living areas and so the change in value due to an expansion is offset by a decrease in ambiance. Each case involving the divesting of TDRs has many circumstances to consider. One other benefit of historic designation is that in some instances the properties density can be increased.
4.Space is at a premium in the Core and West End of Aspen. Each square foot of living space utilized is critical. Equally important, but far more difficult to measure, is the ambiance factor.  By that I mean the combination of the collective. Does the property inspire you in many ways or not?  Small differences in property design, amenities, or location can translate to significant differences in market value.
5. New legislation and moratoriums for development in the Core and West End are introduced regularly and they too affect market value.
6.With respect to comparable sales in establishing value: If a sold property went under contract prior to being listed in the MLS or almost immediately upon being listed, it very well may have sold for less than the open market value would be, and maybe not.  Factor in your hunch.
7. Regarding property flips: Even if the physical property is the best value around, some people will not buy the property if they think the seller will be making too large a profit.

The differing Ideas of Value. The top Aspen real estate appraisers and Aspen real estate brokers have the knowledge and skills to give fairly accurate opinions of the market value in the Core and West End even though the task is approached from different perspectives. With the plethora of variables involved, there will typically will be disagreement of at least +/- 10% regarding the value. In estimating value some interpolation is always required. The small amount of new product in Aspen and the highly segmented nature of the market rarely present the opportunity to compare two like-kind properties.

Some brokers will weigh sales records of the specific property heavily while others may place more emphasis on the present available competitive inventory. Some consider development potential heavily and others do not.
An MIA appraisal that is undertaken for a Core or West End property will provide a valuation typically based primarily upon past sales. If the market is moving quickly as it is now, the value arrived at by the appraiser may be outdated quickly as it may not have considered some developing trends. With all of this said, the typical approach to estimating the market value of a particular property, which works fine in other parts of the country, often falls short due to ignoring many of the unusual variables specific to the Core and West End. If it is not apparent by now, the local established firms in Aspen have seen a lot and should give the most accurate valuation.

My Way: I start the process first by determining into which of the following 3 types the property exists today, in its present state.

The three categories are: move-in ready; need some degree of work; teardown or lot. 

1) Move-in-Ready: New Construction and Recently-Remodeled
New Construction properties are the easiest to evaluate. Such properties are in tip-top condition in nearly every way and are as desirable now as they will ever be. No amount of expansion or renovation will increase the market value in any significant way. Such properties do not require any major functional or decorative changes. They tend to be less than 10 years old. There are rare cases of older properties falling into this category.

 2) Need Some Degree of Work: Properties ranging from approximately 10 - 30 years old
Depending on buyer preferences, these typically are thought to range from excellent to “tired” condition but may benefit from some level of interior redesign/decorating, finishes, remodeling, rebuilding, or expansion.  The properties in the midrange of age range from slightly - somewhat out of date, but still very comfortable.  A few basics ideas that I use in valuing properties in this group are that homes in Aspen are normally built out to the largest size that zoning allows. If an existing home is structurally marginal and significantly smaller than zoning allows, chances are, especially in the better locations, the improvements might not have much value because a new owner will want to start from scratch so as not to compromise design by having to work with an existing structure. If a home has open space that is an integral part of the ambiance, less interior square footage might be more attractive and valuable that trying to build as large as possible.  A stellar, smaller home in the Core and West End with stellar outdoor living spaces often can be sold for a higher price per square foot of interior improvements, than the larger contiguous neighboring homes without the outdoor living areas.   

 3) Tear-Down or Lot: I dislike this term but am using it here as a category. Many homes that should be in the group above are by default given the dubious title of being a tear down when in fact if all aspects were considered the structure would have value. Tearing down often is the least creative option, and the term is often thrown about loosely and carelessly.
A tear down to me is a home with sub-standard improvements with no possibility that buyers would use them without total redevelopment or remodel. 

The market value of tear-down homes and vacant lots is driven largely by what the finished value of the property with its improvements is projected to be. To estimate the lot's present value, a keen understanding of development costs for high-end consumers and required developer profits is necessary, as well as what the finished product would be worth. 

In Summary:

We can never understand all the factors influencing each sale and so can never be sure about each and every decision or opinion of value made.  In the end, the only statement we can express with absolute certainty, as mentioned previously, is that a property is worth what a buyer is willing to pay.  To this I would emphatically add, it is also what a seller is willing to sell for.

By Mark Kwiecienski, real estate broker in Aspen since 1985.  He is not a real estate appraiser and does not do real estate appraisals, which require a special license issued by the state of Colorado.  He does provide unique valuation insights and opinions of value.   The views contained herein are those of Mark Kwiecienski and not necessarily those of all members of Aspen Core Realty.  He invites  sellers to call to discuss their real estate ideas or for a no obligation consultation or opinion of value of your Aspen property. For Sellers, Mark is able to  provide exclusive Seller reresentation for his listings.  If you wish to own real estate in Aspen, Mark is available to act as your exclusive agent representative, and will look out for your interests exclusively, in the evaluation, negotiation and of purchase of all properties listed with other Real Estate Companies.  The views contained herein are those of Mark Kwiecienski and not necessarily those of all members of Aspen Core Realty.  He invites both buyers and sellers to call to discuss their real estate ideas.

Copyright Aspen Core Realty 2015

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