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  #1  
Old 10-19-2011, 05:47 PM
Michael S Michael S is offline
 
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Location: Albuquerque
State: New Mexico
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Default I hate residential subdivisions

Townhome lots in a suburub at the edge of the metro area, nothing even remotely similar for ten miles. No sales that are even similar, probably no demand, definitely some HBU issues although information for alternative uses is almost as scarce. Somehow the only residential land we ever appraise is the total oddball stuff. I guess the lots in the cookie cutter subdivisons probably don't have lenders wondering how much of a haircut they're going to take when the developer finally calls it quits.

Once I have a say in what properties I'm appraising I'm not going to touch residential subdivisions with a ten foot pole. [/vent]
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Old 10-19-2011, 06:03 PM
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George Hatch George Hatch is offline
 
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I think knowing how to appraise subdivisions is a necessary skill for a CG appraiser.

I know a few appraisal companies who specialize in residential subdivision work. They do quite well for themselves.
  #3  
Old 10-19-2011, 08:43 PM
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PropertyEconomics PropertyEconomics is offline
 
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Subdivisions are among the most challenging assignments in todays market. I personally would not turn them down but I would make sure to be paid enough to do an adequate job in completing the assignment. There is always data available if one looks hard enough and talks to enough people. That is only the start of the battle, once you find the data you then have to make sense of it.

I agree with George ... in this market becoming a "specialist" or the go to appraiser would be a very good thing ...
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  #4  
Old 10-19-2011, 11:45 PM
MAIorBust MAIorBust is offline
 
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I feel your pain. Developing an absorption rate in these times is difficult to say the least. I get bid requests every now and then for a subdivision and I always turn them down. In my market, it just isn't worth the money. A local skippy is just using bulk lot sales and calling it a day.

That said, subdivisions are my favorite property type when the fee is right and absorption rates are easy to come by.
  #5  
Old 10-19-2011, 11:48 PM
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Terrel L. Shields Terrel L. Shields is offline
 
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Location: Springtown, AmeRica
State: Arkansas
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Default

They are a PITA. But lenders who have typically valued a single lot then multiplied the results by the number of lots without regard to the required discounting in their own bank rules are now well burned with their investments.

A bank just took over a subd. started by a very well respected businessman who has built a number of very profitable C stores... then he fell into the subdivision trap..
He paid $10,000 an acre for land that he only 50% developed thus had practically speaking $20,000 per acre in the land. He spent another $10,000 per lot for roads and utilities (they are all on septic, having elec. tele, and water only) and the lots are from 1.5 to 3 acres in size. Very nice ...but sold a mere 6 lots in 4 years. 60 more to go. He lost his own house and is bankrupt. I really don't see why he didn't see it coming. He is the second similar first time developer in that community. disasterous

But valuation is straightforward when you start trying to use an absorption rate of 1 lot per year and a 55 years supply...disasterous double so.
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  #6  
Old 10-20-2011, 03:56 AM
Michael S Michael S is offline
 
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Location: Albuquerque
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Over the last three years there's been an average of 25 townhome permits for all of Albuqueruqe. The most similar project was built about a year and a half ago and sold one unit a year ago and nothing since. One subdivision (national homebuilder) has accounted for about 2/3 of the townhome permits in the market over the last two years.

The data is there and it's telling me that the bank is probably going to be losing some money.

These residential subdivisions jobs always seem to take about twice as long as everything else.
  #7  
Old 10-20-2011, 09:40 AM
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Calvin the Airedale Calvin the Airedale is offline
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Quote:
Originally Posted by Michael S View Post
Over the last three years there's been an average of 25 townhome permits for all of Albuquerque. The most similar project was built about a year and a half ago and sold one unit a year ago and nothing since. One subdivision (national homebuilder) has accounted for about 2/3 of the townhome permits in the market over the last two years.

The data is there and it's telling me that the bank is probably going to be losing some money.

These residential subdivisions jobs always seem to take about twice as long as everything else.
Perhaps you should be looking for MF permits and land sales, regardless of the developer's intention to subdivide or not. IOW, look for evidence on the other side of the SF TH or cluster market and compare densities with historical cluster or TH lot projects for relevance.
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  #8  
Old 10-20-2011, 09:46 AM
PL1957 PL1957 is online now
 
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Quote:
Originally Posted by cmoneyt8ker View Post
A local skippy is just using bulk lot sales and calling it a day.
That "local skippy" is probably giving a lot more supportable answer than any appraiser trying to use an absorption/sell-out/discount rate model to value the property.

If bulk sales are available, that gives an extremely strong indication of actual buyer/seller behavior. That's what we as appraisers need to be reflecting, not an abstract, academically-correct version of a market that doesn't exist.
  #9  
Old 10-20-2011, 11:01 AM
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BigBlueGA BigBlueGA is offline
 
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Quote:
Originally Posted by PL1957 View Post
That "local skippy" is probably giving a lot more supportable answer than any appraiser trying to use an absorption/sell-out/discount rate model to value the property.

If bulk sales are available, that gives an extremely strong indication of actual buyer/seller behavior. That's what we as appraisers need to be reflecting, not an abstract, academically-correct version of a market that doesn't exist.
Man, I *WISH* I had bulk sales to use instead of DCF.
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  #10  
Old 10-20-2011, 02:40 PM
Michael S Michael S is offline
 
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Quote:
Originally Posted by Calvin the Airedale View Post
Perhaps you should be looking for MF permits and land sales, regardless of the developer's intention to subdivide or not. IOW, look for evidence on the other side of the SF TH or cluster market and compare densities with historical cluster or TH lot projects for relevance.
This is what we're going to end up doing. There are some similar size MF land sales in the market and the densities are not too dissimilar to the property we're looking at. At the prices MF land is bringing there's a strong possibility that the Highest and Best Use might be for office or retail. MF land is $3-5 while office land is $6+. The zoning department said that the neighbors really didn't like the idea of townhomes there and a zone change back to commercial use would likely be approved.
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