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  #1  
Old 05-12-2012, 11:09 AM
Ward Dresser's Avatar
Ward Dresser Ward Dresser is offline
 
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Default Would value increase if 2 parcels were combined into one?

Two separate parcels I appraised earlier this year:

(1) Improved lot: 8,721 sf with 70 year old 800 sf SFR (C4 condition) house on it. Zoned Rd 5 SFR. Appraised value: $96,000



(2) Vacant lot: 7,066 sf zoned Rd 5 Vacant-Residential. Appraised value: $40,000

Both parcels next to each other and own by same person.

Private party (my client, potential buyer) wants to buy just vacant lot, but owner will only sell both together.

My client wants to know if the value would increase if both lots were combined into one. Client says, but I have not verified, city would allow this.

My question: how would I apprise both lots as one?

Use hypothetical and look for similar sized homes on a larger lot (~15,800 SF)?

Thanks!!
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Old 05-12-2012, 11:25 AM
Denis DeSaix Denis DeSaix is online now
 
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Hey, Ward-

Haven't seen you post in a while (maybe I've just missed it!).

I think there are two things to consider in your scenario:

Yes, you can appraise the parcel as-if it were one site for purposes of the analysis you outline. That would require an HC (and I'd recommend some additional diligence like trying to confirm that a merger is not an issue).

But the H&BU would be the interesting analysis on this problem. If the second lot is excess land, and if it has its own H&BU, then the value of the 2nd lot would be its value as-if it were vacant and ready to develop.... just like you already valued it.
And it is possible that once the two lots are merged, the value of the new site is worth more than the value of the site with its older improvement (say, sites that size were being developed with newer, modern homes and were worth $200k to a developer).

But, to answer your basic question, an HC would allow the analysis of the subject as-if the two lots were merged.

Good luck!
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Old 05-12-2012, 12:43 PM
leelansford leelansford is offline
 
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Based upon your recent analysis, the market is not going to pay $96k + $40k = $136k for the "subject" as if the two were one (and the vacant parcel not having its own separate H&B Use).
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  #4  
Old 05-12-2012, 09:15 PM
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The question is rather simple ..... you have a vacant lot at $40,000 thus we can assume the improved lot is also worth $40,000 .... together would they be worth more than $80,000? Doubtful in my mind .. in fact I would venture to guess their value is significantly less than $80,000 if combined ... its simple to find out ... find sales of lots which are the combined size and see how much they are worth and then you have an answer to your question.
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  #5  
Old 05-13-2012, 01:03 AM
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Quote:
But the H&BU would be the interesting analysis on this problem. If the second lot is excess land,
How can a separate lot be excess land?

Or do you mean if you merged the lots would the second lot then be excess labnd? In which case you would value it separately...

I suppose the OP has to figure out what can be done with the lots as though one lot. In the end it probably doesn't matter if one could "unseparate" them should they desire that. But say they are substandard lots and have been grandfathered, e.g. you need 10,000 sf for new lot creations and once combined can't be separated again. That could be problematical.
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  #6  
Old 05-13-2012, 09:20 AM
Denis DeSaix Denis DeSaix is online now
 
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Quote:
Originally Posted by CANative View Post
How can a separate lot be excess land?
If it is analyzed under the HC that it is not a separate lot.
Using that HC, it is not separated, but it may still be excess.

Quote:
Or do you mean if you merged the lots would the second lot then be excess labnd? In which case you would value it separately...
Exactly!


Quote:
I suppose the OP has to figure out what can be done with the lots as though one lot. In the end it probably doesn't matter if one could "unseparate" them should they desire that. But say they are substandard lots and have been grandfathered, e.g. you need 10,000 sf for new lot creations and once combined can't be separated again. That could be problematical.
That's another potential question to be answered.
If there is demand for 15k sf lots (unusual as that may be, but a question that needs to be analyzed nonetheless... and may take all of 3 minutes) that create a value in excess of the separate pieces, then that is part of the valuation analysis.

So, let's read into the original post a little more.....
There are two parcels for sale; one vacant and one improved. The client (who is the buyer) wants to purchase the vacant lot but the seller wants to sell both parcels together.
The client wants to know if the value would increase if both lots (unimproved and vacant) were one parcel. Ward wants to know if an HC is the appropriate vehicle to solve this type of problem.
The short answer is "yes", an HC can be used to solve this type of problem.
There may be additional wrinkles to the situation from the market's perspective; such as if the lots are substandard as-is (Greg's point), such as if there is some demand for 15ksf lots which adds additional value that exceed the value of two 7,500sf lots (a point that I raised), and if those are not a factor, then PE provides additional insight as to where the value of the two lots may be (individually worth $40k as-if unimproved, then combined it is doubtful they are equal to or exceed $80k).

An additional wrinkle may be this: The seller may only want the underlying value of the land considered, and not the contributory value of the old house on the 2nd lot (which would appear to contribute $50k or so... unknown how much value is attributable to improvements of the site and on the site other than the structure itself).

That's how I see the basic outline of the valuation problem.
  #7  
Old 05-13-2012, 12:27 PM
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Ward Dresser Ward Dresser is offline
 
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Thanks Denis, Greg and others for your helpful responses. Appreciate your time on this.



After further research in MLS, I could find no market base data that would support an increase in value if the two lots were merged into one.



I could not find any sales in MLS with lots over 15,200 SF, and that was just one property that sold in Nov 2011 with a larger, superior condition home on it.


Thanks again guys!
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Old 05-13-2012, 07:51 PM
Jim Onderisin Jim Onderisin is offline
 
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I hope you got paid a big bag of money on that assignment.
  #9  
Old 05-15-2012, 07:04 AM
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Can the client buy both parcels and then sell off the parcel with the home on it and keep the lot he wanted to buy in the first place?
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