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.
So you’re probably think, “so tell me something I didn’t know”, right? Clearly, this is not an earth shattering issue. However, occasionally home owners 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.
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.
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…
NO
MAYBE
YES
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 in 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!
Here are some other articles and videos I enjoyed this week! I hope you will also…
In Housing Analysis, You Have To Get Up Early To Be A Talking Head So Save Your Changes – Housing Notes by Jonathan Miller
When there’s no other manufactured homes in the neighborhood – Sacramento Appraisal Blog
Bracketing – The Appraiser Coach
What is Actionable Education – George Dell’s Analogue Blog
October Newsletter – DW Slater Company Appraisal Blog
Buying Time – The Appraiser Coach
Loved this post Jamie. I think your images were perfect and made it so fun to read. So sorry to see your “shed” destroyed. This just goes to show how much words matter. I was just talking with someone on Twitter how “remodeled” and “renovated” mean two different things.
Thanks so much Ryan! I know it’s not a deep topic, but I figured I would write about it because there is some confusion out there. Words definitely matter. Thanks also for you kind words about our shed. I was planning on installing a new roof and maybe siding next year to the old shed. This situation freed me from having to do so.😃 I’m looking forward to the new one being built soon.
I think the best topics often highlight common concepts in new ways. Being able to “shed” light on basic things is an art. So great job.
Thank you so much! I really appreciate you saying that! Nicely played pun!😁
In general, I don’t give value to outbuildings not on a permanent foundation. If it’s a shed sitting on the ground, it’s not much different from personal property.
Your yard looks nice. Too bad about the falling trees. Maybe a future post about the impact on your insurance
Hi Joe! Great point! I feel the same way. To your point, the company that is replacing our shed said that they can literally pick up our existing damaged shed with a machine and remove it in one piece because it is not on a foundation. So it really is personal property. Thanks for your kinds words on our yard. We back to a park system so we enjoy the wooded view from the back. We will see how our insurance is effected!😂 It might make a good post indeed!
Hi Jamie, have seen your blog before, but not commented. Big fan of Ryan Lundquist. Been appraising 26 years, appreciate your ability to put out this information. I would like to give a quick comment on the regression analysis for outbuildings. Since I live in an area with tract homes, manufactured homes, large custom homes on acreage, horse ranches and as I like to say wannabe horse ranches, I find that looking over MLS ( I know it takes time, but I charge for it) and finding not paired sales but other sales in the market that have some outbuildings (not sheds) and finding the contributory value is a good way to approach this. Usually with properties that have your big red barn/outbuilding they typically have a significant number of other features and trying to extract that out of the market through regression, may not give you all the facts. But since I ain’t no techno specialist, just ask Ryan, I find that interviews with agents and finding other properties that may not be similar but with similar features (outbuildings) can help support my adjustments. Just thought I would through that out as a general suggestion. Great article and you have definitely developed a great Blog. Continued success.
Hi Brad! Thank you so much for brining that out. I agree that regression doesn’t always work. There are numerous ways to determine the contributory value of an outbuild. To your point you have to compare apples to apples when it comes to outbuildings. I have definitely used your approach as well. Great suggestion! Thank you for your kind words as well! I appreciate your taking the time to comment.
Feel free to do so any time. We all benefit when we share our experiences and expertise. By the way, I am also a big fan of Ryan! He’s an awesome guy and an awesome blogger!
Thank you and my best wishes to you and your family during the upcoming holidays. By the way what the heck happened to 2018. Whew
Thank you so much! I know! This year did fly! It was a busy year. Yikes!
Someone else has brought up the matter of a shed being personal property in some cases. There is another layer of complexity in my market area as well, and that is, that the shed may be leased! There is a popular trend in my area of large beautiful sheds and even small garages that are constructed elsewhere and trucked to the site and dropped off on a lease or rent to own agreement. If the property owner does not make the payments, the shed or garage can be repossessed and literally towed away. Appraisers are well advised to examine the method of affixture and be certain they are valuing only real property.
Hi Christine! I had never heard of that before. Thank you so much for mentioning that! Anything that could be repossessed would definitely be considered personal property. Yet one more question to ask in the appraisal process.😃
Great post. I love the use of photos and videos to show that some small sheds can be absolutely amazing but still be personal property. But sometimes, a shed is an outbuilding and the market will respond, Keep up the great work!
Thanks so much for your kind words Michael! Sheds are a funny thing that way. We just have to know how the market is reacting to them. Some are
Pretty awesome!😃