Maybe you are wondering how we’ll determine the sales price of the Tiny House. This is a little tricky, because to date, no tiny houses have been built in Pittsburgh or in Garfield, so what is the Tiny House worth? But wait, you say, isn’t it worth the amount it cost to build? Not at all. It is worth what someone will pay for it, and what someone will pay for it is generally established through an appraisal.
An appraisal is a written estimate of a property’s market value. The bank that lends money to the eventual owner of the Tiny House, will only want to lend an amount that is in line with the existing market and the appraisal.
How does an appraiser establish the market value of the Tiny House (or in fact any house)? Since the house is not yet built, first they will review the construction drawings and the construction estimate to determine the quality of the construction. Second they review the value of the land. And third they will review comparable properties in the area. Since there are no tiny houses, in this instance comparable properties might include studio rentals where the comparison will be made between monthly rent installments versus the homeowner’s PITI (principal, interest, taxes and insurance) payments.
We’ll have an appraisal soon, thanks to a generous donation of this work by Integra Realty Resources (http://www.irr.com/About/Office.asp?RefItem=PittsburghPA. Thank you Integra!