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4-3-2-1 Rule

Discussion in 'Commercial/Industrial Appraisals' started by Artyman1200, Dec 10, 2008.

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  1. Artyman1200

    Artyman1200 Sophomore Member

    0
    Jun 21, 2004
    Professional Status:
    Certified General Appraiser
    State:
    Tennessee
    Has anyone used this in a report (eminent domain especially)? How do you support it?

    For those that don't know, it applies to land value -

    First Quarter of depth - 40% of value
    Second Qrt of depth - 30% of value
    Third Qrt of depth - 20% of value
    Fourth Qrt of depth - 10% of value
     
  2. PropertyEconomics

    PropertyEconomics Elite Member

    1
    Jun 19, 2007
    Professional Status:
    Certified General Appraiser
    State:
    New Mexico
    Daniel .. I have seen it espoused for years but I personally have never been able to find the market data with which to support the analysis.
     
  3. Caligirl

    Caligirl Senior Member

    0
    Jan 27, 2006
    Professional Status:
    Certified General Appraiser
    State:
    California
    It came from the same text book that explains the 10% cap rate rule. :icon_lol:
     
  4. Howard Klahr

    Howard Klahr Senior Member

    136
    Oct 4, 2004
    Professional Status:
    Certified General Appraiser
    State:
    Florida
    The concept is somewhat similar to that of rent zones in a retail center. Anchor space typically is the destination generator receiving a benefit for this characteristic as well as the large size. Smaller in line spaces at a higher rent with units like end-caps or proximity to anchor tenant reflecting higher levels. Pad sites with superior visibility at even higher levels.

    One issue however is that the use of the site is a factor. It is obviously more reliable where location/visibility is a greater influence. For a residential property (subdivision) the weighting may be less or just different. In this case an interior lot may be superior versus on on the road frontage or near the development entrance.
     
  5. Pittsburgh Pete

    Pittsburgh Pete Elite Member

    113
    May 6, 2008
    Professional Status:
    Certified General Appraiser
    State:
    Pennsylvania

    In PA the Strip Appraisal--partial take form includes the following verbiage:

    The value of the land being acquired or affected shall be based on the contributory unit land value of the entire site. The total value shall also include the contributory value of any site improvements located upon the land areas being acquired or affected, including, but not limited to, paving, fencing, trees, shrubbery, etc.

    Haven't heard tell of the 4-3-2-1 approach in a dog's age--first heard it from my father who retired years ago.

    Currently working on a Penndot project involving strip takes and we apply the above cited methodology--different jurisdictions may have different requirements.

    Please note that this approach assumes no severance damages.
     
    Last edited: Dec 10, 2008
  6. EDWARD BERRY

    EDWARD BERRY Senior Member

    0
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Arkansas
    Caps Are For My Old Eyes.

    It Come Over With Colombo.

    It Is A "prospective" Tool. Might Be Accurate Or Might Not Be.

    I Usually Plot It And Try At Least To Find Sales Indicating The Lower (10%) Value.

    One Time I Was Able To Graph The Size From Really Deep To Normal And Show A Correlation.

    Use It, If It Works-write It Up.

    Arkie Ed
     
  7. George Hatch

    George Hatch Elite Member

    457
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    I've used it before. I mostly see it when I'm looking at sites that are very narrow in relation to their overall size. I have also seen a few examples of it with sites that had minimal depth and lots of frontage relative to their overall size.
     
  8. Artyman1200

    Artyman1200 Sophomore Member

    0
    Jun 21, 2004
    Professional Status:
    Certified General Appraiser
    State:
    Tennessee
    For DOT projects, I have the occasional property owner that believes their .25 acre of road frontage is worth more than the other 5 acres of their property. Sometimes this is true and other times it's not depending on the property as Howard pointed out.

    For those that have used this approach how do you support it and/or explain it?
     
  9. George Hatch

    George Hatch Elite Member

    457
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    If the data shows a trend then I note it, if it doesn't then I note that.
     
  10. Ken B

    Ken B Elite Member

    187
    Feb 18, 2004
    Professional Status:
    Certified General Appraiser
    State:
    Florida
    I suppose they don't realize that, assuming the take is a straightforward strip take along the boundary fronting the road, and assuming that the total site area is 5.25 acres, they will still have .25 acre of frontage and only 4.75 "back" acres after the take.
     
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