Lot Size Adjustment?

[ml2007]

Need help. R.E agent said, the subject lot size is over 10,000 sqft and the buyer plans to build 8 units total (currently it has duplex and zoning allows up to 8 units). She thinks, subject should be valued alot (bigger adjustment for the lot size) more than the comps which have less than 6000 sqft. Any thoughts? Have to do with Highest and Best use? Thanks.

 

[Mike B]

What is the purpose of this assignment?

 

[PropertyEconomics]

ML .. why not appraise the subject lot based upon a price per unit measure .. and measure the value indications of your comparables by this method.

If your comp has a value of say $60,000 divided by 6 allowable Units = $10,000 per unit

Your subject has an allowable density of 8 units ... value is 8 Units x $10,000 per unit or $80,000.

Just one method of measurement that you might try. Just make sure you know the densities of your sales and that allowable of your subject.

 

[ml2007]

The purpose of the assignment is for purchase. I don't quite follow you Prpertyeconomics. Let's say, your example is true and are you suggesting the lot size adjustment in this case should be $20,000 ($10,000x8-$10,000x6(6units)=$20,000) ??

 

[PropertyEconomics]

The purpose of the assignment is for purchase. I don't quite follow you Prpertyeconomics. Let's say, your example is true and are you suggesting the lot size adjustment in this case should be $20,000 ($10,000x8-$10,000x6(6units)=$20,000) ??

Yes .. lets say you have three comparables .. ok ...


No. Price Allowable Units $/Unit
1 $60,000 6 $10,000
2 $50,000 4 $12,500
3 $90,000 10 $ 9,000

And you conclude from this analysis that the land value of the subject is therefore $10,000 per unit or $80,000 ($10,000 x 8 allowalbe units)

Adjustments would be

1 +$20,000
2 +$40,000
3 -$10,000

Its the same as measureing on a price per lot basis, or price per square foot basis ... its just measurement based on price per allowable units. Its particularly useful if the highest and best use is for unit development and the property is not developed to its highest and best use. It can show the under improvment or the value of the additional value of the underutilized land.

 

[Mike B]

First off. I assume this is a SFR. That is the use you are appraising.

If its not a land appraisal and you are not appraising for a future use its just a a SFR appraisal.

The realtor just wants to make the deal close, so I wouldnt give her much credibility. But what I would do is, ask her for examples to support her statement. The added land may or may not add value but I would hesitate to make adjustments based upon a future use when the bank is loaning on it as a SFR not as a development deal.

 

[Mike B]

sorry about font!

 

[PropertyEconomics]

First off. I assume this is a SFR. That is the use you are appraising.

If its not a land appraisal and you are not appraising for a future use its just a a SFR appraisal.

The realtor just wants to make the deal close, so I wouldnt give her much credibility. But what I would do is, ask her for examples to support her statement. The added land may or may not add value but I would hesitate to make adjustments based upon a future use when the bank is loaning on it as a SFR not as a development deal.

Friend .. it has a duplex on it not a SFR unless I have missed something terribly.
I think the highest and best use of the land must be considered and valued at that .. which was the purpose of my post.
If the information I understand is not correct then I apologize.

 

[Mike B]

My bad, thought it was SFR.

Property Economics dont say sorry, I am the one that is wrong and I am sorry......I can't type nor apparently can I read today!!!!

 

[Bryan]

Market adjustment

Locate a few comparables that closely mirror the attributes of the subject. Pair these comps to smaller size lots and analyze the unadjusted price differential. From this, and based on your professional judgment, you should be able to extract and allocate a market supported adjustment. ,,,I know that you would have bracketed a good comp if one would have been available. An appraiser can travel back in time and select comparable data, develop an indicated market adjustment and carry it forward, keeping mindful to adjust for current market conditions.