Cost Appraoch Insanity!

[PropertyEconomics]

The EO *is* the solution, of that I am convinced, however, you also stated the following:

"Certainly some investor, long term minded, could see the value in having such a site."

Now there's where I do not know the answer. I can't find a single reason for anyone to buy a vacant lot in THIS subdivision due to the obvious issue of having to build a conforming home. No one would do that, hence to the builder (the most likely investor) the lot has the plague, and is worthless.

To the HOA? No, too small for anyuse there.

To the neighbor, or neighbors on either side? Maybe, perhaps they'd buy it and use it as frisbee throwing land and partytime family fun land until such a time comes when it will again be profitable to buy a lot in this market.

But here's a legitimate question: IF a conforming home must be built (and we cannot imagine the Village of Round lake saying otherwise, certainly not now), how would anyone ever be assured that anyone would ever again build such a thing? After all, it was a mistake to do so in the first place, as we are learning.

Dave...

My Bold

Dave you dont know the answer and yet you come to a conclusion. That is where I dont understand your thoughts or opinions. You have nothing to base them on ... no market data .. only speculation. I dont think that counts in good appraisal practice.
Im not fighting with you but rather showing you how you have a bias toward this property with no market evidence to support your conclusion.

 

[xmtpedprl]

I won't deny it, it is speculation. Try and prove it to be otherwise, I don't think *anyone* can, but to conclude, logically so, the answer to this issue lies in EO.

Are we okay here, or what...?

Dave..

 

[Thomas N. Morgan]

Things external have caused a loss in value to the land. When there is loss of value due to external influences, the depreciation applies to both land and improvements. The whole property suffers.

 

[Mr Rex]

Dave, the land has value. I just did a land appraisal in my hometown, lady was giving it to the City for use as a small kids park/play area because there is little to no demand for inner city lots for residential (House had burned down about 2 years ago). So I scoured the MLS for vacant land comps, none in the past year, 1- 2 years old. Spent about 6 hours at the courthouse searching through the sales and found 3 additional. 1 was purchased by the adjoining land owner as extra land area, 1 was purchased by a local rental investor for future building, when/if the market ever reverses in these neighborhoods, and lo and behold 1 has since been built on, the ladies elderly mother lived next door. So even when there is no demand, there is residual value.

 

[PropertyEconomics]

I won't deny it, it is speculation. Try and prove it to be otherwise, I don't think *anyone* can, but to conclude, logically so, the answer to this issue lies in EO.

Are we okay here, or what...?

Dave..

Well Dave ... I havent weighed in on EO .. but I dont honestly think so. If the total market is down, its a decline in values ... not attributable to some External influence ... it is the market. External Obsolescence, in the typical sense, affects one or a few properties by something outside the property boundaries. If values are declining across the board, it may very well be economic, but against what are you applying it to, past values? Values today are values today and there is nothing externally that is affecting the value today .. it is what it is. The market has declined, and in many areas continues to do so. Quite frankly, under highest and best use analysis, the property is not financially feasible to build today as there is neither incentive or profit available to do so. I think this is a function of market pricing within a specific market and not one that affects all properties across the country. Its a downturn. Values have declined. Its cyclical.
This is more of an academic arugument perhaps but it is how I feel.

Your assigning no value to a parcel of land, on the other hand, is quite different. I would ask, under your theory of EO, show me a property that has declined 100% that you have used as your basis for measurement. As you have stated you have no land sales so that wont work. Do you have home sales that show a 100% decline in values, ie they sold for ZERO?
Do you have any existing homes that have declined that you can allocate value to the lot based upon those sales?
Does the assessor say its worth zero? Do you think you could successfully argue before a tax board that the value is ZERO and they are not entitled to any taxes on the property?

Again I am not fighting with you but rather showing you without market evidence you should not sign your name to a report that you conclude value within. While there are many times you can use sound judgement and reasoning, I havent seen any within this thread that gets you to zero using any numbers or any other comparisions.

I personally think its poor appraisal practice and incorrect. I think your report will be misleading if you say the property has ZERO value as a land parcel based upon your speculation without any evidence in your file to support the conclusion.

 

[Mr Rex]

When the values get to $0 and you have closed comparables @ $0, call me, I'm all in.

 

[PropertyEconomics]

When the values get to $0 and you have closed comparables @ $0, call me, I'm all in.

Rex .. I dont even know where this lot is .. and Im all in at $5.

 

[xmtpedprl]

I did assign it a value, more than zero, but not much.

And again, no one here could do anything other than speculate as to its value, no one. If nothing else, that's one thing of which I am 100% certain.

Dave...

 

[PropertyEconomics]

I did assign it a value, more than zero, but not much.

And again, no one here could do anything other than speculate as to its value, no one. If nothing else, that's one thing of which I am 100% certain.

Dave...

If I had your data ... I darn sure could have Dave. It wouldnt be speculation but based upon market evidence. Whether you put Zero or $1,000 its speculation ... and could be misleading. That was my total point to you. But deaf ears cant hear. Sorry about that ....

 

[Mr Rex]

You expect more than speculation form folks from other parts of the country? I will speculate this, that the owners of the lot will not give it away for $0 or sell for anything close to $0. Remember you have to have willing sellers as well as willing buyers in any market. I dare say that the example I posted above is not terribly different than your situation on a macro level, and the current values with demand near 0 is roughly half what it was 8-9 years ago, when the demand began to head downward, and not nearly approaching 0, although the number of sales is near 0.