What is a Barndominium?

red barndominium

Do you watch Fixer Upper? Did you see the episode of the Barndominium? I truly believe the term “barndominium” was influenced by this episode of Fixer Upper. This alternative style of home is becoming more and more popular in the past few years. Basically, a barndominium is a style of home which is typically made of metal construction similar to barns. Sometimes they are attached to barns or workshops similar to the photo above or they could stand alone. These are unique homes and offer a certain lifestyle for those that love living in the country and the country lifestyle. We have seen them as barns that have been converted into living space or built designed as living space. Most of the time they are attached to barns and stall spaces.

Although the exterior of many barndominiums look like barns the interior are typically well designed, insulated and can have average to very high grade custom finishes. Here is the interior of a finished out interior barndominium:

Finished out interior of a barndominium

This style of home has actually been around a while but we have seen a recent increase in the number of barndominiums as well as an increase in prices. I agree with this article in realtor.com that this is a good term used to describe them. We used to call them “metal constructed homes” or “barnstyle homes”. Our local MLS (multi-listing service) added the term “barndominium” as a style of home in 2016 so it is now easier to search for this style of home. Prior to 2016, it was more difficult to track them as they were listed in the MLS as various types of alternative construction. You can see this chart how within the past 2 and 1/2 years in our markets barndominiums are appreciating:

Barndominiums are a Lifestyle Choice

We have seen a rise in the number of barndominiums we have appraised as well as sales in our North Texas markets. We believe that this is a great choice for those that prefer a more country lifestyle. When the living space is attached to your barn stalls, wash rooms, and tack rooms, it is convenient to go and tend to your animals within your space. Once, David, was appraising a barndominium and the new owners had just arrived from out of town. As they were in the kitchen and David was observing the interior, they had forgotten to shut on the doors and this beautiful horse strolled in and joined them all in the kitchen. They calmly led the horse back out the door into his stall but it illustrates the lifestyle of a barndominium. I liken it to those that enjoy the sights, smells, and sounds of the city may prefer living in a high rise, those that prefer the sights, smells and sounds of the country may prefer living in a barndominium.

Sometimes the barndominium is a converted space in the barn and used as a living area until the future main house is built. Sometimes the barndominium is designed as guest quarters or for ranch hands and other times they are the main living area and designed as such from the beginning.

Appraising Barndominiums

Appraising barndominiums can be tricky as they are a more unique style of home. As more barndos (how many shorten the term), become available on the market, they become a bit less complex. Some of the things that appraisers will look for:

Main Space or Extra Space– We have appraised some properties where the barndominium is a guest house or perhaps living quarters for a ranch hand. If the living space is not a part of the main living area, it will not be included in the main living area but as an additional feature. You can read more about living area here: What Counts as Living Area in an Appraisal?

Quality– The quality of construction will be considered in the appraisal as not all barndominiums are of the same quality. Just as some custom homes have higher grade finishes and features, the same can be found in barndominiums. It is important to compare barndominiums with similar quality of construction if possible.

Lot Size– Barndominiums are typically on acreage and the size of the acreage will have an impact on the appraisal. Ideally, if an appraiser is appraising a 2,500 sq ft barndominium on 10 acres, they would love to find comparables of similar sized sq ft on as close 10 acres as possible.

Location– as always in real estate, location is the biggest factor influencing value. A barndominium located next to a river will have a much different value than a barndominium located next to a cement plant. In our markets, there are entire subdivisions of barndominiums on 5-10 acre lots. These subdivisions are designed for an equestrian lifestyle and are located in areas where the soil is of sandy loam and most suitable horses. The locations with sandy soil have many more equine properties as well as equine hospitals, supply stores and services available. Barndominiums in these locations sell for higher prices than those located outside the more suitable soil.

Additional Buildings & Features– Appraisers will also take into consideration additional improvements to a property such as workshops, mulitple barns, arenas, fencing, etc. All of the features are to be taken into consideration for contributory values.

Barndominium converted from original barn

What do you think of Barndominiums? Have I left anything out? Would this be a style of home for you?

If you have any questions about appraising barndominiums or other real estate feel free to reach out to us at www.dwslaterco.com

The Problems with the Price Per Square Foot Method

Do you know the price per square foot method for determining the value of a property? Do you use it? This is a topic that has been written and discussed much and for good reason. Real estate agents, buyers, seller’s, lenders, or investors all like an easy way to determine the value of a home. Many will use the price per square foot method.

Example: You know that a property which is 2,500 sq ft in size sold for $350,000. You take the price of the home, divide it by 2,500 and ………..(drum roll)………- the price per square foot is $140! Now, your house is 3,500 sq ft, so using the price per square foot method, you multiply 3,500 x 140 and………..(another drum roll)…… your house is $490,000! Wow! Wasn’t that easy? Well, it might be easy but there are many problems that can occur using this method for determining value. It is my desire to share some of the reasons why this might not be the best method for many, many properties.

Many Factors Contribute to Value

One of the problems with using the price per square foot method is that it does not consider any of the other factors that contribute to the value of a home. When you use the price per square foot method, you are only considering the size of the home and nothing else. You could over price or under price a home looking at only the square footage. Here are some of the other factors that contribute to the value of a property and should be considered when determining value:

  • Location – the location of a property can have either a positive or negative impact on the value of a home. A property located with a beautiful view of a lake will have more value than a property located with a view of the local trash dump. A property located in a gated private community with access to a community pool, clubhouse, tennis courts, and a private lake will have more value than one that is not located in such a development. Would you love drinking your coffee and listening to the birds with the view below or next to the noisy highway that drowns out the sounds of the birds each morning?
This back porch view would contribute to overall the value of the property.
  • Amenities- There are so many additional features or amenities that also contribute to the overall value of a property. Some common amenities in our markets are swimming pools, pool houses, workshops, guest houses, barns, or party rooms. For lake homes, boat docks, lifts, and boathouses give added value. When you look at only the price per square foot, you are not considering any of these amenities.
  • Condition-One very important factor that impacts value is the condition of a home. If your neighbor’s house sold for $225,000 and it is the same size, same age and located next door then your house should be worth $225,000 right? Well, it would except that before their house sold, it had a new roof, all of the flooring replaced, the kitchens and bathrooms updated with new fixtures, and the interior and exterior was repainted. Your house still has the 1970’s avocado green appliances, shag carpet, popcorn ceilings, and original roof. The conditions of the two homes are not equal. Using the price per square foot method does not consider the condition of a home.
  • Quality of Construction– Similar to the condition of a home, the quality of the construction is also a factor when determining the value of a home. Understandably, a home with a much superior quality of construction will sell for more than one that is less. Real estate appraisers look for the quality of the construction in such things as the flooring, custom cabinets, high grade or commercial grade appliances, built-ins, custom trim, and finishes. Price per square foot does not consider the quality of construction.
  • Age-Related to the condition of a home is the age. It is best to compare homes that are of similar age. One of the things that appraisers determine in the appraisal process is the economic life of a property. At some point, a property will reach the end of its economic life, most of the contributory value of a property will be in the land alone. At this time, the highest and best use will be for it to be demolished. That is not to say that all older homes have reached the end of their economic life. We see many that are remodeled, preserved and well maintained. The point is that when finding homes that are comparable, having homes of similar age is important. Price per square foot does not consider the age of a home.

Law of Diminishing Returns

Another reason that price per square foot will give you inaccurate and false results has to do with the “Law of Diminishing Returns”. The law of diminishing returns is defined as” the premise that additional expenditures beyond a certain point ( the point of decreasing returns) will not yield a return commensurate with the additional investment.”- The Dictionary of Real Estate Appraisal 4th Edition.

Let’s go with the example I began with and that the house that sold for $350,000 is located right next door to my house. Both are in the same location, have the same view, are the same age, are in the same condition, have the same quality of construction and amenities. All is the same except for the size, so the price per square foot method should be great, right? Well, unfortunately since my house is 3,500 sq ft and the house next door is 2,500 square feet. That is a very large difference in size. The law of diminishing returns would factor in here and my larger house is going to sell for a smaller price per square foot than my neighbor’s house.

Do you ever shop at Sam’s Club, Costco? The price per unit goes down the more that you buy in bulk. Back when we had all of our 7 kids at home, it was so beneficial for us to buy in bulk as the price per ounce or price per pound was less. I mean we went through a gallon of milk and a loaf of bread each day! One of the best analogies that many of you can relate to is from appraiser Ryan Lundquist as he used the analogy for Starbucks and the price per square foot–the price per ounce differences in the Tall, Venti and Grande at Starbucks diminish as the size increases. Same principle.

Price Per Square Foot and Trends

One of the reasons, I decided to write this post is because I had a reader ask me about the price per square foot trends that we publish in our monthly newsletter. Our company publishes a monthly newsletter with market updates and trends. One of the metrics that we look at is the price per square foot trend. (if you are interested in our monthly newsletter you can sign up at our website or on the sidebar of this blog) Someone wrote to me to ask about if his property had a horse barn and was on five acres would the price per square foot trends we reported apply? The answer, of course, was no.

The trends are a broad look at larger market areas and not his specific smaller market area. Plus of course, it didn’t consider his larger lot size and amenities. The trends are really just a metric to look at to see what the overall market is doing. It is one of the many things that we look at. The next time you read a headline about prices up 25% or homes selling at $125, please do not use those numbers for your own home. Each property is unique and will require an expert in valuation to help you in knowing what your home is worth.

Here is a trends chart from our newsletter-(Hover over it and you can see the numbers for each month)

So, I hope you find this helpful. Know that using the price per square foot method can get you inaccurate results. I have only shared some of the problems that would change the result of the price per square foot method. Unless a home is similar in every way, chances are there are factors that will skew the result of price per square foot. What did I leave out? Do you use this method? If you have any questions about this, appraising or real estate appraisals please contact us at www.dwslaterco.com

Helpful Resources:

Starbucks and the price per square foot – Ryan Lundquist, Appraiser from the Sacramento Appraisal Blog

Why price per square foot can be an agent’s worst enemy when pricing a home- Tom Horn, Appraiser from the Birmingham Appraisal Blog

Price Per Square Foot is a Poor Value Indicator– Bill Gassett , Realtor from the Maximum Real Estate Exposure Blog