Welcome to the world of cool real estate. Today’s feature: the barndominium. In other words, the hippest living alternative for farmers and farmer-wannabes alike. They’re stylish, roomy, and relatively affordable to build — making them a great alternative in a time of sky-high home buying prices and mortgage rates (the highest in 22 years). Here’s what you need to know about appraising these special structures that are neither barn nor condo, but something in between.
What Is a Barndominium?
Forget the shiplap and chicken couture. The barn-condominium (aka, barndominium or “barndo”) brings the whole barn and leaves room to get creative. They are constructed almost exactly like a classic barn, using metal and concrete. This makes them structurally sound as well as fire resistant. They also boast the following features, which make them an attractive housing option for modern homebuyers:
Now a popular feature on HGTV’s “Fixer Upper,” the barndominium was first conceptualized by Karl Nilsen in 1989 as a way for horse people to live above their stables, and create the opportunity for them to thrive in horse-centered communities. Though this community idea didn’t quite take off, what resulted is a low-maintenance alternative to the traditional home. And this idea, especially post-pandemic, is finding its crowd. (See ya later, “neigh” sayers!)
Factors Affecting the Appraisal of Barndominiums
A bit of a black sheep in real estate, the barndominium calls for several considerations in the appraisal process. Luckily, most of these factors are fairly standard in your appraisal practice.
Location
Since 2023, barndominiums have been exploding in popularity in semi-rural areas — especially in the south and southeast — due to the availability of large plots of land. States where they are most popular include Texas, Arkansas, Oklahoma, Georgia, Tennessee, and North Carolina. That means finding comparable sales in these states should be easier than, say, a barndo in the pacific northwest.
Size
Thanks to their grandeur, a barndo could appraise a little higher than your traditional 3-bedroom suburban home. Of course, each property will vary as there is a lot of freedom in the building and design of a barndominium. Also, a larger property can mean a more challenging appraisal process, as there are likely more features, rooms, and details to take into account as you collect your data.
Age and Condition
Most barndominiums are relatively new, having gained most of their popularity from the 2010s to now. Thanks to their recent emergence, you’ll likely find most of them to be in good condition and up-to-date on building regulations and codes. There should also be recent sales data available to help inform your comps.
Design and Features
Because there are so many ways to customize these structures, this is where the appraisal could get tricky. One barndo might have a fully functional event space for ballroom dancing and dinner parties. Another might include a workshop for sports cars or carpentry. Or maybe there are spiral staircases that lead to loft offices. While the customizability is the appeal, it might also pose challenges in their valuation.
Zoning and Permits
During your appraisal process, it’s best practice to consider the property’s highest and best use, but this must also align with what use is actually possible (physically, financially, productively, and legally). If a property is built for commercial use, but wasn’t constructed in the right zone, this will knock its value.
Comparable Sales
This part is a little trickier and depends on the age and location of the property. You may need to expand the scope of your search to properties out of town or even out of state, since the barndo you’re appraising could be one of a kind in the area. As always, be thorough when you report these comps, and make sure to note all differences in your report (since they are quite unique).
Appraisal Methods for Barndominiums
There are a handful of good methods you can use to appraise a barndominium. Using these in conjunction with one another — the hybrid approach — will help you make the most accurate valuation.
Cost Approach
To perform a cost approach analysis on a barndo, you’ll need to consider the construction costs of one of these properties. This will include all material costs, labor costs, square footage, and any special features. Barndominiums are relatively affordable to build, and their materials are unlikely to depreciate much over time, being constructed of metal and concrete. Land value might be the most valuable part of the property, and since barndos are becoming hot commodities, these factors could be major benefits.
Income Capitalization Approach
If zoning permits a barndominium to be used commercially, the income capitalization approach is a great, math-based approach to determining its value. Even if the property won’t be used as a rental, this approach can help determine the unique income potential.
Sales Comparison Approach
Though potentially difficult to obtain for these properties, the sales comparison approach will help ensure the most accurate valuation possible. As previously mentioned, your search might go far and wide based on barndominiums’ popularity where you’re conducting your appraisal. But don’t feel the need to analyze ‘til the cows come home — there’s one way you can get the best, broadest overview of the property’s value…
Hybrid Approach
Using a hybrid approach in appraisal ensures you get the most data and the best cross-filter of information you need to determine a property’s value — and it’s especially useful in cases like these where you’re dealing with unique types of properties! Each barndominium is one of a kind, even down to their primary function. So, making the most of your appraisal methods will give you the biggest advantage in finding the highest and best use as well as the fairest value for each property.
Bring Home the Bacon
Most of us weren’t born in a barn, but with barndos on the rise, we kind of wish we were. Barndominiums are a cool new answer to affordable, modern living with a rustic flare. Appraising them, however, can start to feel muddy, especially as a new appraiser.
