Best Method To Determine Location Adjustment?

[Joe Flacco]

I am surprised to see you guys dismissing difference in site values. We have builders that build all over a county on tear down lots. Many build the same product in different areas of the county and the difference in sale price of the completed home is very similar to the difference in site value.

 

[DWiley]

I am surprised to see you guys dismissing difference in site values. We have builders that build all over a county on tear down lots. Many build the same product in different areas of the county and the difference in sale price of completed home is very similar to the difference in site values.

So, a 50% difference in site value means a 50% difference in the sale price of the finished homes?

 

[Joe Flacco]

So, a 50% difference in site value means a 50% difference in the sale price of the finished homes?

No, of course not. 50% difference in site value means the difference between the sale price of finished homes is the difference in site value.

 

[Mr Rex]

In my experience the contributory value of the vacant site to an improved site is not a linear contribution compared to the site sale/value.

 

[DWiley]

No, of course not. 50% difference in site value means the difference between the sale price of finished homes is the difference in site value.

See - that is what I meant by not correlating

I have seen what you note - that is, sometimes the difference in site value reflects the total locational difference. But I have also seen cases where the difference is more than just the difference in the site value. I know that if I look at homes in Belle Meade (THE old money neighborhood in my area) versus homes in Green Hills (an adjoining area that is very high end, but not quite Belle Meade), the price/value difference will be more than just the difference in the site value.

 

[Joe Flacco]

See - that is what I meant by not correlating

I have seen what you note - that is, sometimes the difference in site value reflects the total locational difference. But I have also seen cases where the difference is more than just the difference in the site value. I know that if I look at homes in Belle Meade (THE old money neighborhood in my area) versus homes in Green Hills (an adjoining area that is very high end, but not quite Belle Meade), the price/value difference will be more than just the difference in the site value.

Are the homes in Green Hills and Belle Meade the same? I think what you are observing is that the price/value difference being more than just the difference in site value is differences in the improvements or other differences unrelated to the physical location.

 

[George Hatch]

IN MY REGION the effect on value on the finished home is usually not in sync with the effect on value of the as-vacant parcels.

There is usually no overlap between the buyers for vacant parcels vs the buyers for existing homes whether new or used. The two groups generally aren't watching each others' actions that closely, either.

 

[Joe Flacco]

I am not saying group sale analysis is wrong or anything. It is a credible way to develop the adjustment. I just don't think that it is better method than difference in site values. When comparing grouped sales, it is important that the properties (site and improvements) in the two locations are very similar. That's all I am saying.

 

[Terrel L. Shields]

In our region, building costs are pretty uniform, cement, workers, etc. are charging pretty much the same. Thus the difference in site value is a good reflector of "location" adjustments. The only exception are the lakeside properties - both Beaver Lake in AR and Grand Lake o' the Cherokees in OK. Premiums are paid for property with lakeshore address that lot value seems to be inadequate to cover (but since lakeside lots are virtually gone...maybe not). I know my dad had a lakeside lot and gave $12,000 for it and the house...doubled his money in 4 years, and it would be worth about 15x what he got for it.

 

[DWiley]

I am not saying group sale analysis is wrong or anything. It is a credible way to develop the adjustment. I just don't think that it is better method than difference in site values. When comparing grouped sales, it is important that the properties (site and improvements) in the two locations are very similar. That's all I am saying.

And all I am saying is that just because vacant sites sell for $xy,000 difference (or X% difference) , that does not mean that the improved sales will sell for that same difference, or the same percentage difference, and the reason may be very simple - different types of buyers (builders or investors versus occupiers).

If its all one has, then it is better than nothing, but it would be my last resort. And there have certainly been assignments where I got down to the last resort.