Anecdotal but I have sold a house twice with a shop. One I built myself, the other was purchased with the home.Originally Posted by Jonathan Jung
The one I built was 75X40, stick built, on a concrete slab, 4/12 pitch truss roof with shingles, 400 amp single phase service. 480 feet of conditioned air office space with a full bathroom and washer/drier connections. This one was on a separate septic tank from the house. I built it myself in the early 90s. When we sold that property the appraiser added $10K to the appraisal for that shop. It would cost, at that time, around $70K to have it built.
The second one was 60' X 80' with 18 foot ceilings. Metal building on a slab. Had a 960 square foot 1 bedroom apartment - kitchen, laundry, on a mezzanine and corresponding office space on the ground floor. That 1920 feet of space was conditioned. The building had a 800 amp 3 phase service. Had one full bath in the apartment, a half bath in the office and 2-half baths in the shop. Separate water line, separate septic system, private concrete drive 30 feet wide and about 1700 feet long - concrete. Zoning was rural residential which allowed for any commercial practice that the county would license. I had an oil company leasing this shop for $3500 a month (12 month auto renewing lease). We had a buyer going through the process of buying this property which of course required an appraisal. During this process the oil company made us a stupendously stupid offer on the property....nearly 4 times what the buyer had offered. When the buyer's appraisal came back it missed the offer by the buyer by nearly 25%. The buyer was looking at coming up with another 25%. The appraisal had $0 in it for the shop, which would have cost close to a million $ to build on a separate lot at that time (oil boom will do that). The buyer appealed the appraisal, pointing out that the oil company was under contract for at least the next 15 months at $3500 a month (they had missed the auto renewing lease and were content to have done so). No consideration for the fact that the property produced an income of $40K+ a year. Even more galling...$0 for the shop....the appraiser actually said the shop reduced the value of the property. The shop was behind the house, behind a 8 foot tall block wall that screened the house from the shop, in a neighborhood where every house had a similar building and situation....buyers in the area would not consider buying a home without such a shop. We would have honored the buyers contract at the original offer and countered with a reduction of 10% despite having another offer in hand for nearly 4 times what the buyer had offered. They could not come up with the extra money and had to back out. The oil company paid cash for the property and closed it in less than 30 days.
I say all of that to say that in my experience a shop is like a swimming pool....no matter where you're located if your buyer is a typical buyer with a mortgage the shop will add no value and may even reduce the value because it narrows the pool of perspective buyers. That seems counter intuitive, who doesn't want a 4800 square foot income producing property? But believe it or not many buyers would not know what to do with it and the mortgage system is geared toward typical buyers, not those who would love to own said property.
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