The document discusses appraising luxury homes. It provides statistics on luxury home sales in Florida, including that over 1,000 homes sold for over $1 million in 2004. The top counties for million dollar home sales are identified. Methods for appraising luxury homes are discussed, including the sales comparison, income, and cost approaches. Challenges with determining depreciation and functional or external obsolescence for luxury homes are addressed.

1. Appraising Luxury Homes Presented By: Tim Wilmath, MAI Hillsborough County Property Appraiser’s Office Prepared For: Florida Chapter IAAO Fall Conference Clearwater Beach, Florida December 1st, 2005

2. Introduction Luxury Home Statistics Market Approach Conclusion 1 2 3 4 Cost Approach Obsolescence – Sometimes its obvious 5 Appraising Luxury Homes

3. Luxury Home Statistics What is a Luxury Home ? How Many Million Dollar homes in Florida? Source: U.S. Census Bureau 2004 American Community Survey ...................................> $1,000,000 ...1,034,386 ........................62,765 How Many Million Dollar homes in the United States?

4. Luxury Home Statistics Top 10 Counties with Million Dollar Homes in Florida #1 - Palm Beach County..............................................................9,558 #2 - Miami-Dade County.............................................................7,182 #3 - Broward County...................................................................5,704 #4 - Sarasota County...................................................................4,441 #5 - Pinellas County....................................................................2,935 #6 - Lee County...........................................................................2,180 #7 - Hillsborough County............................................................1,778 #8 - Orange County.....................................................................1,701 #9 - Brevard County....................................................................2,180 #10 - Duval County.....................................................................1,346

5. Luxury Home Statistics

6. Luxury Home Statistics “ Florida had 4,698 million-dollar home sales in 2004”

7. Luxury Home Statistics HOW MANY HOMES IN FLORIDA ARE CURRENTLY FOR SALE WITH AN ASKING PRICE OF: Over $5,000,000? Over $10,000,000? Over $20,000,000? Over $30,000,000? ............................................560 ............................................120 ............................................48 ............................................5 Source: Florida Association of Realtors

8. Luxury Home Statistics Top 5 Most Expensive Homes Currently For Sale in Florida # 5 . Located on Star Island in Miami. (home owners include Shaquille O'Neal and Gloria Estefan). The home contains approximately 19,500 square feet with 8-bedrooms and 8 baths on 2 acres. Other features: a gym, outdoor tennis court, indoor racquetball court, pool and 250 feet of dock space, and a separate guesthouse. The home sold for $18,800,000 in 8/2004. Asking Price? $32,000,000

9. Luxury Home Statistics Top 5 Most Expensive Homes Currently For Sale in Florida # 4 . Located in in Palm Beach This new home contains 16,600 sf of living area, with 8 BR/11.3 baths with 225 feet of beachfront on the Atlantic Ocean. The foyer contains a cascading fountain and is topped by a 25-foot-high rotunda. The master suite occupies an entire wing of the second floor. The property also contains tennis courts, a putting green, guesthouse, and yacht dock. Asking Price? $33,000,000

10. Luxury Home Statistics Top 5 Most Expensive Homes Currently For Sale in Florida # 3 . Located in Palm Beach This Italian Renaissance-style estate, known as the “Villa di Venezia” was originally built for Harold S. Vanderbilt. Built in 1929, the home contains over 20,000 sf of heated area, 9 bedrooms and 9+ baths, and 3.7 acres on the Atlantic Ocean. The property was purchased by Veronica Hearst widow of billionaire newspaper heir Randolph Hearst) in June 2000 for $29,800,000. Asking Price? $36,000,000

11. Luxury Home Statistics Top 5 Most Expensive Homes Currently For Sale in Florida # 2 . Located in Palm Beach. “ Palazzo Serena” contains contains 17,000 sf of living area on 6.5 acres with 380 feet on the Atlantic Ocean in North Palm Beach. Features include a two guest cottages, tennis court, beachside gazebo, swimming pool with waterfall and spa, and terraces, and a wet bar hidden behind a built-in bookcase in the library. Asking Price? $36,500,000

12. Luxury Home Statistics Top 5 Most Expensive Homes Currently For Sale in Florida # 1 . Located on Star Island in Miami This home contain over 20,000 sf with a total of 15 bedrooms and 17 baths. The site contains 2 acres along Biscayne Bay. Features include: A 10,000-bottle wine cellar. A gun safe room secured with a fingerprint scanner, library walls clad in silk, and a hand-painted murals on the ceilings. The swimming pool features custom mosaic tile and views of Biscayne Bay. Asking Price? $50,000,000

13. Luxury Home Statistics Highest Price ever paid for a Single Family Home in the United States occurred in October 2004 Located in Palm Beach. The “Casa Aptava” contains over 20,000 sf built in 1923. The main house consists of 10 bedrooms, 14 baths, and 2 pools. The home also includes 7.43 acres of land, with 400’ on the Atlantic Ocean and 200’ along the Intracoastal Waterway. The property was designed by Abram Garfield, son of former U.S. President James A. Garfield. The sellers were Ron Perelman, CEO of Revlon and actress Ellen Barkin. Selling Price? $70,000,000

14. Luxury Home Statistics

15. Luxury Home Statistics 2 nd Highest Price ever paid for a Home in Florida This property, the “Maison de L'Amitie” is located in Palm Beach. In December of 2004, Donald Trump purchased the residence at auction. The home contains over 43,000 sf of living area, with sunken gardens, pool and fountain, tennis pavilion, steam room, an art gallery, a conservatory and a beauty/barber salon. The renovation of the property is being led by “ The Apprentice” winner Kendra Todd. Trump intends to list the property for sale at an asking price of $125 million dollars. Selling Price? $41,350,000

16. Luxury Home Statistics Who are the buyers for these Luxury Homes? Source: Coldwell Banker Previews International 31% are cash buyers 68% are considered “New Money” #1 profession - “Large Business Executive” 67% are between the age of 35 and 55 88% of luxury homebuyers are married Designer kitchens are the top priority

17. Valuation Approaches 1. Sales Comparison Approach 2. Income Approach 3. Cost Approach

18. Sales Comparison Approach The sales comparison approach is a method whereby the appraiser estimates value by comparing the subject to similar properties which have recently sold. Adjustments are then considered for various applicable factors.

19. Sales Comparison Approach If you are appraising million dollar homes in Palm Beach, you got it made.

20. Sales Comparison Approach “ Billionaire’s Row” – Palm Beach

21. $1,481.23 9,802 Average $1,232.50 5,071 $6,250,000 Dec-04 516 S. Ocean Blvd. $771.83 8,292 $6,400,000 Nov-04 1740 S. Ocean Blvd. $1,103.31 5,982 $6,600,000 Jan-05 1902 S. Ocean Blvd. $1,758.03 4,360 $7,665,000 Jul-05 1040 S. Ocean Blvd. $1,064.10 7,941 $8,450,000 Feb-04 3090 S. Ocean Blvd. $1,466.91 5,999 $8,800,000 Jan-05 1020 S. Ocean Blvd. $1,422.44 6,263 $8,908,720 Sep-04 1045 S. Ocean Blvd. $2,065.57 4,575 $9,450,000 Jul-04 700 S. Ocean Blvd. $1,180.22 8,706 $10,275,000 Mar-04 1920 S. Ocean Blvd. $1,255.99 8,758 $11,000,000 Jul-05 500 S. Ocean Blvd. $1,330.56 8,643 $11,500,000 Aug-04 1125 S. Ocean Blvd. $1,251.82 17,894 $22,400,000 Sep-04 1370 S. Ocean Blvd. $1,790.61 17,871 $32,000,000 Jan-05 1290 S. Ocean Blvd. $1,661.80 20,219 $33,600,000 Jan-05 1960 S. Ocean Blvd. $3,317.54 21,100 $70,000,000 Oct-04 1300 S. Ocean Blvd. Price per SF Heated Area Price Sale Date Address “ Billionaires Row” Single Family Sales > $5,000,000 from 2004 to 2005

22. Sales Comparison Approach So what do you do if you have no sales?

23. Listing Search Tools Sales Comparison Approach LuxuryRealEstate.com LuxuryHomes.com DuPontRegistry.com UniqueHomes.com PlanetRealtor.Com

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25. Sales Comparison Approach

26. Sales Comparison Approach

27. Sales Comparison Approach If you have no recent luxury home sales in your market – .....Go Back in Time

28. Sales Comparison Approach If you have no luxury home sales (even older ones) – .....Go out geographically

29. Sales Comparison Approach Resist the temptation to use “standard” homes as comps for luxury homes! ≠

30. 2005 Median Price per SF Waterfront non-Luxury Home - $168.73 2005 Median Price per SF Waterfront Luxury Home - $392.87 Sales Comparison Approach

31. 2005 Median Price per SF Non-Waterfront non-Luxury Home - $115.62 2005 Median Price per SF Non-Waterfront Luxury Home - $267.71 Sales Comparison Approach

32. Cost Approach If you have no sales whatsoever – Go to the Cost Approach 1. Replacement Cost 2. Depreciation 3. Land Value

33. Cost Approach Marshall and Swift Cost Options

34. Cost Approach

35. Cost Approach Standard single-family residences High-Value residences

36. Cost Approach According to Marshall & Swift the Economic Life of a High Value Residence is 65 years Paul Revere bought this house in 1770, when it was already 90 years old! (built in 1680)

37. Cost Approach A luxury home’s land value is straight-forward using comparable sales.

38. Cost Approach The Cost Approach requires an accurate estimate of depreciation – especially if you have no help from the Market Approach.

39. Cost Approach Two Most frequent appeal arguments for Luxury Homes: Functional Obsolescence - Too large – Super-adequate - Over-improved for neighborhood, too lavish – no buyer would pay cost for extras External Obsolescence – No buyers exist for this home

40. Cost Approach The 66,000 sq. ft. compound contains a 60 foot long swimming pool with underwater sound system. The property is assessed at $140 million resulting in taxes of $1.1 million per year

41. Functional Obsolescence In 1985 Donald Trump purchased “Mar-A-Lago” in Palm Beach for $7,000,000 . The following year , the Palm Beach Property Appraiser assessed Mar-A-Lago for $11,500,000. You’re Fired!

42. Palm Beach County Property Appraiser v. Donald Trump 549 So. 2d 1098; (1989) “ The difference between the appraisals was the additional deduction from the market price for the “Superadequacy” of Mar-A-Lago. It was not for the trial court to consider which method was superior as long as the property appraiser’s valuation took into consideration the statutory factors” Functional Obsolescence

43. Includes 15 waterfront homes sold in Palm Beach for > $5 million between 2004 - 2005 Functional Obsolescence-Size

44. Functional Obsolescence-Size Includes 65 homes sold in Avila S/D between 1994 - 1999

45. External Obsolescence “ No buyers exist for this home” Turnley v. City of Elizabeth 68 A 1094 (NJ 1908) “ We are not disposed to give much force to the argument that because there are very few actual buyers for so costly a residence the valuation to be placed upon it under the statutory criterion should be correspondently depreciated. The criterion established by the statute is a hypothetical sale; hence the buyers therein referred to are hypothetical buyers, not actual or existing buyers”

46. Cost Approach Obsolescence should be obvious!

47. Functional Obsolescence

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69. External Obsolescence

70. Functional Obsolescence

71. Functional Obsolescence

72. Cost Approach A Quick Review

73. Luxury Home Statistics Highest Price ever paid for a Single Family Home in the United States occurred in October 2004 Sold for $70 Million!

74. Sales Comparison Approach

75. Sales Comparison Approach If you have no recent luxury home sales in your market – .....Go Back in Time

76. Sales Comparison Approach If you have no luxury home sales (even older ones) – .....Go out geographically

77. Sales Comparison Approach Resist the temptation to use “standard” homes as comps for luxury homes! ≠

78. Luxury homes sell for more per square foot than standard homes! Sales Comparison Approach

79. Cost Approach

80. Large doesn’t automatically mean obsolete! Functional Obsolescence-Size

81. Thank You! [email_address]