Originally posted at Cleveland Appraisal Blog on October 25, 2018
Often, when appraising homes, I see MLS listings that call a shed an out building. Ask any appraiser and they will likely say that a shed is not an outbuilding. So, are sheds outbuildings? Sometimes it’s good to just get the definition from the dictionary and then go from there.
According to Merriam Webster’s dictionary, an outbuilding is: “A building (such as a stable or woodshed) separate from and accessory to a main house.” So, technically, a shed can be considered to be an outbuilding.
According to the same dictionary, a shed is defined as: “A slight structure built for shelter or storage”. The word “slight” meaning small among its kind. So a shed is basically a small out building.
You probably think, “so tell me something I didn’t know”, right? Clearly, this is not an earth shattering issue. However, occasionally home owners will ask me if a shed adds value to their home. That’s why I thought I would write this article. As any appraiser will tell you, it just depends.
In appraising properties, there is a big difference in value between a shed and a large outbuilding. Most of the time, at least in my market, sheds really do not add any significant market value to a home. However, a large out building can add tens of thousands of dollars in value to a home.
Sometimes pole barns, stables or indoor riding areas are called out buildings. These can all add a relatively large amount of value. An appraiser will consider what the general market may consider using the building for.
A word of warning. Sheds should never be used for dealing with marital problems.
The value of an outbuilding may increase depending on its utility. Some offer multiple stories. Some have offices, bathrooms or car-lifts. Some are heated. The quality of construction can also have a baring on value. Because there are so many differences in outbuilding characteristics, an appraiser will look for comparable sales with outbuildings that offer relatively comparable characteristics.
Adjustments and Analysis
There are a number of ways to adjust for outbuildings. Often, I use multiple regression as one of the ways I derive my adjustments for outbuildings. When it comes to estimating an adjustment for an outbuilding, I have to read the notes and look at the photos of every property in which the MLS indicates a property offers an outbuilding, just to make sure it is not really a shed. Otherwise, my results might not be accurate. I also have to make sure that the outbuildings I consider in my analysis are relatively comparable. That takes a lot of time. Sometimes I have to search through hundreds of sales in this kind of analysis. This is probably why it bugs appraisers when sheds are called out buildings in the MLS.
Sheds or Outbuildings
I have seen all of the structures in the pictures below called outbuildings in some MLS listings. What are your thoughts? How much value will they add to your home? In my market, the following is generally the case…
Even small and relatively inexpensive sheds can be rather elaborate. There is a growing trend towards converting sheds into he-sheds and she-sheds which offer some fun amenities.
I’m all for it! It’s pretty amazing what you can do convert a shed into something awesome. Whether or not converting a shed into a fortress of solitude will give a return on investment, depends on how market participants are viewing something like this and if they are willing to pay more for such an amenity in the neighborhood. A local appraiser should be able to help in determining this. In some neighborhoods, this might be considered to be an over-improvement.
Whether or not a shed will add value to your property depends on the market. Whether they do or not, they are handy to have!
Ironically, while working on this blog, a tree came down and destroyed our shed. Here are a few pictures. It’s been a bad tree year. A few months ago a tree landed on my car. Par for the course when living on a lot with big trees.
Looks like we’re getting a new shed. At least that’s what he-shed. Our new 10 x 14 shed is going to cost us about $5,000. We did add some upgrades, including a metal roof, upgraded doors and an additional window. I am fully aware that we will not see any major return on investment for this new shed. However, it will look nice when we look at in our yard. The additional storage adds personal value for us! Individual value is different from market value, but value nonetheless.
Thank you for reading my blog! If you made it through this one, I am truly impressed! The topic of sheds is not very interesting. I’d like to think of this blog as less filling, taste great! Have a great day!
Since I wrote this article, our shed was replaced with a new one. Check out the video. Clearly our shed is considered to be personal property!
Jamie Owen is a State Certified Residential Real Estate Appraiser located in Cleveland, Ohio. He grew up in Denver, Colorado and moved to Ohio in 1996. He has been an appraiser since 1998 and continues to work full time as an independent fee appraiser. Jamie has completed more than 7,000 appraisals in his career. He writes a weekly blog at www.clevelandappraisalblog.com, where he writes on topics related to real estate appraising and other real estate related topics. Jamie enjoys sharing information with others about the appraisal profession, while at the same time learning from other real estate professionals.