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Appraising city lots or city acreage???

Discussion in 'Urgent - Help Needed' started by Donny Lindner, Feb 24, 2006.

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  1. Donny Lindner

    Donny Lindner Junior Member

    0
    Aug 3, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    I am to do an appraisal on a 2.49 acre tract which is comprised of 8 city lots. I have a survey showing the total acreage. The survey does show the plotted lots within the 2.49 acres. The tract is inside the city limits. The city where the property is located is +/- 300 people. Lots of bed and breakfast and remodeled old homes. This is a rural town. The property was priced as if it were 8 city lots. There have been several lot sales recently.

    The tract has city utilities on one lot where there is an old farm house. Little value in the house. The other lots would have to have the utilities brought to them. +/- 1500 per lot.

    Please provide some input on how to appraise this tract of land.
     
  2. Pat Butler

    Pat Butler Senior Member

    12
    Jan 17, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    Seems to me like your assignment might involve 8 different appraisals if the site has been subdivided already into 8 parcels??
     
  3. Donny Lindner

    Donny Lindner Junior Member

    0
    Aug 3, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    From what I understand from the Mayor is that they were originally 8 lots. They were sold and then became 2.49 acres. The survey shows 2.49 acres, but that is comprised of 8 city lots.

    Do I make an assumption that the tract can be divided back into 8 lots via individual surveys and sold off?
     
  4. Donny Lindner

    Donny Lindner Junior Member

    0
    Aug 3, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    Also, would not my HBU be to subdivide and sell as single family lots?
     
  5. DTB

    DTB Elite Member

    56
    Jun 11, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois

    Not too sure about that in a town of 300 +/-.

    Could be 2 or 3 lots combined would fetch the most.
     
  6. Pat Butler

    Pat Butler Senior Member

    12
    Jan 17, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    I had assumed from what you provided that they were already subdivided. In our area, if someone wanted to sell them as one larger parcel then they would just put the legal descriptions all on one deed to make the transfer. Yet, the parcels themselves would still be separate.

    Whether or not yours are like that is a major point. I'd get a qualified opinion from the building department as to whether they can be subdivided, or are already subdivided, or whether the entire parcel has to stay together. THEN, report that opinion as an assumption. But I wouldn't just make the assumption without looking into it- that wouldn't help your client too much if you make an assumption that is proved to be faulty by just making a simple phone call to zoning.

    Despte the legal feasability of subdividing this parcel, you'll still obviously want to find out what the HBU use it anyway.
     
  7. Donny Lindner

    Donny Lindner Junior Member

    0
    Aug 3, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    According to the Mayor, who is the city authority, the 2.49 acres is 8 plotted city lots. I asked if they could be individually sold. He said they could. I replied if they were survey out. He said correct.

    There are other city lots similar to the size of the 8 individual lots which are being marketed and sold at a premium. There had been an acre lot which was subdivided into 3 city lots. Paid 33,000 for the one acre and developed the three lots. Sold individual lots for 17,500. This tells me, the HBU would be to divide the larger 2.498 acres into 8 lots and sell.

    It appears what had happened was there were 8 city lots and someone had sold all 8 lots to one person and the 8 tract were surveyed into 2.49 acres. Per the Mayor, a long time ago, this city block was pasture land. Demand in the area has increased so and there are very view city lots available. The city utilities is unable to handle much more of an increase. Demand shows that land inside the city is of a premium.
     
  8. Stephen J. Vertin MAI

    Stephen J. Vertin MAI Senior Member
    Gold Supporting Member

    10
    Jan 17, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Illinois
    Donny:

    Welcome to the forum. What is driving the demand for lots? Does it appear this force will continue? Have employment opportunities in the area increase? How long do you think it would take to sell of the lots individually? Could it be done in less than a year?

    Steve Vertin
     
  9. Donny Lindner

    Donny Lindner Junior Member

    0
    Aug 3, 2005
    Professional Status:
    Certified Residential Appraiser
    State:
    Texas
    The town is a small bed and breakfast town. People buy property in the area to capture a piece of small town rural life. The town has a town square area and everything has an early 1900s appeal. The demand comes from metropolitian people wanting to buy a small piece of rural America. There is minimal employment in the area. These lots are some of the few remaining city lots. It does appear that demand will remain strong.
     
  10. Stephen J. Vertin MAI

    Stephen J. Vertin MAI Senior Member
    Gold Supporting Member

    10
    Jan 17, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Illinois
    Donny:

    It sounds like your on the right tack. Given subdividing is maximally productive it sounds the way to go. You did not answer if you believed the lots would sell within one year. If you do believe the individual lots can all be sold within one year, all you would need to do is deduct the cost of utilities or any other development cost. That is, if the comparable lots had utilities and other amenities when sold. Just make sure you are comparing apples with apples and if not adjust. Then add the values of the 8 lots and conclude a final number. If you think it will take longer than a year you may have to apply a discount rate. Typically for raw land it is about 15 to 20 percent. However, do not worry if sell off is expected to be under 1 year. Good luck.

    Steve Vertin
     
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