What is a "special purpose property," and what unique considerations are there in appraising it?

A "special purpose property" refers to real estate that is utilized for a specific use that is not common in the market, which can include properties like schools, churches, or unique recreational facilities. These properties often have unique characteristics and specific operational needs which require a tailored approach when it comes to valuation.

When appraising a special purpose property, traditional valuation methods such as comparative market analysis might not be applicable or effective due to the limited number of similar properties available for comparison. Instead, appraisers may need to utilize approaches like the cost approach, which assesses the cost to replace the property, or the income approach, which evaluates the income-generating potential unique to that property.

The appraiser must also consider factors such as zoning regulations, potential alternate uses, market demand for that specific type of property, and the potential for revenue generation, which can all significantly influence its value. These unique considerations underscore the necessity of employing tailored valuation methods for special purpose properties, ensuring a more accurate appraisal outcome that reflects their distinctive nature in the marketplace.