Extraction Method

[alebrewer]

Were it me, I'd probably cite the tap fees, and then briefly discuss why you chose to include them (resulting in a modest decrease in value) or not include them (as their impact on the overall value is nominal and might not be a significant concern to the typical buyer?).. that's just me.

 

[Michigan CG]

Here is my question in this context; Vacant Ready for improvement. Do i subtract the tap Fee's?

Tap fees are relatively expensive $3000-$3500 Once paid they are always paid. but as a percentage of the lot sale prices averaged $200,000 for each lot they are fairly low.

Tap fees is most likely something local. If everyone pays it that buys vacant land then it is just like a transfer tax or something similar and therefore I would not include it. But either way, as long as you are consistent it really doesn't matter. 1%-2% is a rounding error.

 

[Carnivore]

Tap fees is most likely something local. If everyone pays it that buys vacant land then it is just like a transfer tax or something similar and therefore I would not include it. But either way, as long as you are consistent it really doesn't matter. 1%-2% is a rounding error.

Thank you both ! On much lessor valued lots it would have a fair amount of impact. and should be deducted to obtain Vacant Ready for Improvement -

Here you don't pay it unless you need it...if its already been paid then it transfers with all future sale.

In the assignment I had it was a AS-IS/AS-RENOVATED. Prop was listed for sale at $240k, Hard Money lender did want me to see offered price. No Problem really i just explained. So AS-IS was opined at $218,000, and AS-Renovated(and enlarged GLA) was as i recall my report $455,000

Later I looked and buyer had paid $230,000 AS-IS. So i was not to far off considering the condition C5-6. Renovator was keeping a portion of orig house and adding addition and total top to bottom renovation.

 

[jay trotta]

OK, question little off track from the extraction method. But I do use multiple new construction if possible or a mix or just existing. I really depends on whats available.

But i have a question related to vacant lot sale. I have one area where its getting bat chit crazy where buyers are desperate to buy anything. Demand is way above supply. It is a mix of mostly old 1920'2+ bungalow, craftsman, and some mid fifty's style.

In this area I have four recent vacant lot sale. The price paid per sft is pretty consistent between them. OK, so this seems like the Gold Standard.

Here is my question in this context; Vacant Ready for improvement. - Do i subtract the tap Fee's?

Tap fees are relatively expensive $3000-$3500 Once paid they are always paid. but as a percentage of the lot sale prices averaged $200,000 for each lot they are fairly low.

On the vacant land sales (comps), have the Tap Fee's been paid ?
In some of the assessment appeals cases I've done, the assessor will add, 10-30% for improvements; IMO are we then getting into Line Items that would require support for that and may open a can of worms for the development stage; (IE: costs of permits etc) and how the potential Buyer/Lender perceives these.

What is interesting in the RC is the depreciation, many factors to consider and age/life methods.

Just a thought, but if your Mortgage is $200,000 the Insurance covers that amount; it does not separate out the Land Value, it covers the debt.

 

[alebrewer]

Just a thought, but if your Mortgage is $200,000 the Insurance covers that amount; it does not separate out the Land Value, it covers the debt.

I'm not claiming SME AT ALL on the insurance thing, but that is interesting. Shouldn't it be for the replacement cost of the improvements? Sorry, but I have to claim ignorance on insurance stuff - other than knowing what I have to pay each year...

 

[George Hatch]

If my clients want an opinion insurable value I give them that. The off-label usage of the CA to MV is not something I want to enable. This is where playing the 20 questions game to suss out their expectations becomes useful. I also never do the 60-second CA.

 

[alebrewer]

I get insurable value from our perspective - I just wasn't sure what the insurance covered. Doesn't seem like we'd have to pay insurance for the lot value as well, but I certainly could be wrong about that.

 

[Terrel L. Shields]

The insurable value is up to the property owner and their insurance agent to figure out.

Also, notable is that the reconstruction cost of a partial loss is much higher than the replacement cost new of a building and that is recognized by cost books that contain costs for new construction and costs for remodel and reconstruction values.

The bank isn't interested in the value of the house. They concentrate on the total money lent. The HO, otoh, should be concerned about the cost to reconstruct the house if it burned to the ground and that often if more than the cost to build a building on a bare lot. The RCN does not cover removing the burnt debris, etc.

 

[Terrel L. Shields]

Quantifying accrued depreciation is always the weak spot.

And that applies to the SCA when you attempt to determine the condition, effective age, etc.

 

[George Hatch]

I never really thought of it like that, but yeah, you're right. Now that you mention it that goes for the Income Approach too.