Remaining Economic Life

[alebrewer]

Like I said, I almost never do it. Land value by extraction is a last resort. That you seem to defer to the method in this discussion is (IMO) a problem all by itself. Just because there are a lot of donkeys who shortsheet the bed that way doesn't mean that's the only way to do it.

Haven't we discussed you projecting your ideas about what someone does and doesn't do before? You're creating a straw man where none exist. For the record, I believe the SCA to ALWAYS be the most supportable, most intuitive, and most accurate (to use a word you disdain) method of estimating site value. You may not be aware, but in many situations, there are no recent sales of vacant sites from which to perform an SCA, though. What do you do in that situation, good sir? Please don't say allocation - or we'd have yet another problem all by itself...

And surely you're not referring to me as a donkey? Hee haw!

 

[gregb]

Land value by extraction or allocation are usually last resorts in my area. There are always vacant land sales, created by fire or scraping of older residences. Back in time or geo expansion usually works here to find vacant land sales to solve the CA. Although this would not be the case with GH's condo CA.

 

[alebrewer]

Wish that were the case in my market... I think that holds true in older, established markets. In markets where the preponderance of sales are new construction, the subdivision is generally purchased by a developer, then subdivided, then vacant lots are sold (off market) to builders - or the subdivision is just purchased by the builder and subdivided. There are MANY markets in north Texas where there just are ZERO comparable vacant site sales.

 

[alebrewer]

Also from The Appraisal of Real Estate: "Because of the relatively large number of sales needed to support the analysis, allocation is rarely used as the primary method of land valuation."

Of course, on the non-residential side, an alternative approach to SCA would be income capitalization. Doesn't work so well on the resi side, though...

 

[gregb]

Also from The Appraisal of Real Estate: "Because of the relatively large number of sales needed to support the analysis, allocation is rarely used as the primary method of land valuation."

Of course, on the non-residential side, an alternative approach to SCA would be income capitalization. Doesn't work so well on the resi side, though...

60+% of residences in the city of Santa Barbara are occupied by tenants...which trade on a regular basis.

 

[alebrewer]

60+% of residences in the city of Santa Barbara are occupied by tenants...which trade on a regular basis.

Yes, but how do you separate ground rent from overall rent on a residential property?... I guess you could use allocation, but then we're back to that circular reasoning issue.

 

[George Hatch]

Haven't we discussed you projecting your ideas about what someone does and doesn't do before? You're creating a straw man where none exist. For the record, I believe the SCA to ALWAYS be the most supportable, most intuitive, and most accurate (to use a word you disdain) method of estimating site value. You may not be aware, but in many situations, there are no recent sales of vacant sites from which to perform an SCA, though. What do you do in that situation, good sir? Please don't say allocation - or we'd have yet another problem all by itself...

And surely you're not referring to me as a donkey? Hee haw!

All RE is local and I don't pretend to be familiar with most other markets. Besides, on the conceptual basis it doesn't matter if there are areas where there truly are no land sales data, whether recent, proximate or otherwise. The point remains that if there are areas where it can be done then that demonstrates the application, whether you think its common or not.

We are all familiar with the types of assignments we do. Appraising land - including parcels located in the dense urban areas and orphan lots in residential subdivisions - that's a property type I've been appraising on a regular basis for many years. So while the answer isn't 'always', I know for a fact that its also not 'never', either.

 

[George Hatch]

Wish that were the case in my market... I think that holds true in older, established markets. In markets where the preponderance of sales are new construction, the subdivision is generally purchased by a developer, then subdivided, then vacant lots are sold (off market) to builders - or the subdivision is just purchased by the builder and subdivided. There are MANY markets in north Texas where there just are ZERO comparable vacant site sales.

The "market" for different property types tend to have different geographic boundaries. As in, not the same as the market area for the house on the parcel next door to the lot you're appraising.

If I'm appraising a specialty property type (like a church or a bowling alley) I can be crossing county lines to find a comparable and then have to figure out how to account for the difference in location.

 

[alebrewer]

All RE is local and I don't pretend to be familiar with most other markets. Besides, on the conceptual basis it doesn't matter if there are areas where there truly are no land sales data, whether recent, proximate or otherwise. The point remains that if there are areas where it can be done then that demonstrates the application, whether you think its common or not.

We are all familiar with the types of assignments we do. Appraising land - including parcels located in the dense urban areas and orphan lots in residential subdivisions - that's a property type I've been appraising on a regular basis for many years. So while the answer isn't 'always', I know for a fact that its also not 'never', either.

Just for demonstration purposes, I selected 'Residential' as the only criteria, and searched back to 1/1/2015 for the section of McKinney, TX below - said section being roughly 2 miles x 3.5 miles. You can see all the vacant site sales returned...



So, while in your experience, the answer isn't 'always', I must say that, in some cases, the answer is, in fact, never. Now, could you go even further back in time, maybe, but I'd proffer that the ensuing analysis would be MUCH more subjective than doing an extraction. Or, could you go even further outside the subject's neighborhood? Again - maybe - but again, the ensuing analysis would be MUCH more subjecting than doing an extraction.

To quote someone who likes straw men, "All RE is local."

 

[alebrewer]

Anyways, if you're so confident in the credibility of your CA's, extraction should be a breeze, and should return site values that are spot on accurate...