Pigeon Forge STR Appraisal Question

[Jon Lostetter]

Hello BP! My wife and I are looking at purchasing our first short term rental property in the Gatlinburg/Pigeon Forge TN area and were curious about comps/appraisals.

What we seem to be finding is the houses/cabins used for STR are priced higher than comparable properties in the area. Does this hold true for an appraisal? Will an appraisal come back higher because they would factor in the potential income or would an appraiser stick to the facts ie property size, br/ba, sq ft, finishes etc.

We're excited about getting our first deal under contract. Thanks in advance!

[Parker Borofsky]

@Jon Lostetter alright - a little late to the party here but hopefully this will help LOL...  Appraisers in the Smokies are well aware of the income potential on cabins and the value they hold and why.  Most appraisals reflect value based on a couple approaches i.e. income approach/sales approach/cost approach however they will hang their hat on the sales comparison approach 99.9% of the time.  

I don't recommend you try too hard to determine if a cabin you like is "worth it" because there are too many variables in the Smokies.  The most difficult one is that many of the cabins have "below grade" sq. footage/bedrooms/bathrooms and above grade sq. footage/bedrooms/bathrooms and you won't be able to tell by comparable listings the sq. ft above/below because they just aren't listed that way.

Additionally, appraisers have to take 82 hours of required coursework and complete 2 years (I believe) as an apprentice.  There are way more factors that go into this than I could even begin to explain.  

All of that being said, if you like a cabin, go for it! By the time you analyze it and try to figure out the value, someone else will have snagged it. If you have an appraisal contingency, you won't end up having to pay more than it would reasonably sell for or it's actual value. If the value was low, you would have the option to terminate the contract, pay the difference, or hopefully the seller would come down to the appraised value. Lately, most appraisals have been coming in slightly over sales price, but I've had a few come in a bit under, and on rare occasion, a few come in way under value. 

Whatever you do, DO NOT TRY TO USE PRICE PER SQUARE FOOT!!  This does not work for many many reasons.

Hope this helps!