Valuation of Improvements Only

[Ricky LaFleur]

I have an appraisal theory question, and I'm hoping some of you here might be able to humor me and discuss to further my own understanding.
Q: How would you go about valuing the improvements alone on a real property?

Before you answer, please keep in mind that this does not involve lending regulation, the sacred 1004 form, FNMA policy/rulebooks, etc.
Let me provide a hypothetical assignment so that we can better handle the appraisal development procedure:

1. Client: private estate
2. Intended user: the client
3. Intended use: assist client in making a selling decision
4. Value: Market value (from Dictionary of RE)
5. Effective date: current value
6. Characteristics of the property: 100 acres with home, shop building, and a larger hay barn. Location out of city limits, no zoning, 10 miles from nearby town.
7. EA/HC: No known EA or HC known to be needed at this time

For sake of discussion: What approaches would be applicable? How would you complete them? Are the improvements considered real property or personal property in this scenario?

 

[Terrel L. Shields]

Real property. You are valuing a partial estate. March 2008 Q & A.

 

[J Grant]

I have an appraisal theory question, and I'm hoping some of you here might be able to humor me and discuss to further my own understanding.
Q: How would you go about valuing the improvements alone on a real property?

Before you answer, please keep in mind that this does not involve lending regulation, the sacred 1004 form, FNMA policy/rulebooks, etc.
Let me provide a hypothetical assignment so that we can better handle the appraisal development procedure:

1. Client: private estate
2. Intended user: the client
3. Intended use: assist client in making a selling decision
4. Value: Market value (from Dictionary of RE)
5. Effective date: current value
6. Characteristics of the property: 100 acres with home, shop building, and a larger hay barn. Location out of city limits, no zoning, 10 miles from nearby town.
7. EA/HC: No known EA or HC known to be needed at this time

For sake of discussion: What approaches would be applicable? How would you complete them? Are the improvements considered real property or personal property in this scenario?

It does not matter who the client is or what form is used or if no form is used.
MV is MV

Idk how you would value improvements without any land. As scrap material? As a house and a barn and a shop building that could be moved off the property? Per your example, the 100 acres does not matter if you are only valuing the improvements and not the improvements on the land

 

[Ricky LaFleur]

Real property. You are valuing a partial estate. March 2008 Q & A.

Good source. I also believe they are real property, and that this is a segment of the property. Valuing the land only is pretty simple, as we do that in any cost approach, however, valuing the improvements only bring up some interesting (to me) questions.

It does not matter who the client is or what form is used or if no form is used.
MV is MV

The last similar post I could find had form fillers constantly bickering over why they can't do this on a URAR, why they can't use the agencies definition of value, blah blah. So I gave some details in order to move past any of those issues.

Idk how you would value improvements without any land. As scrap material? As a house and a barn and a shop building that could be moved off the property? Per your example, the 100 acres does not matter if you are only valuing the improvements and not the improvements on the land

Which is why I'm posting the question. IMO, if you were considering their value when being moved to some other location, almost as if they were personal property, then I think that brings up a whole other set of issues, and really is answering a different question (essentially a different assignment). What they are worth would likely be intimately connected to the cost to move them, no?

Again, I gave details of a hypothetical assignment so one could discuss how this would be done.

Q: How would you go about valuing the improvements alone on a real property?

Do you value the tract as improved with the land, then back out the land value? In this case, the location of the property would be relevant, therefore improvements located on the edge of town might be different than those 20 miles from town. Also, in this case, how would the characteristics of the land underneath not affect the value of the improvements? If you were valuing the improvements on a 10 acre land tract vs the improvements on a 200ac land tract, the improvement value may well differ, would it not?

 

[Terrel L. Shields]

Building residual and land residual methods. Are you valuing land with improvements (land more valuable than the improvements) or valuing improvements on a land site?

As for why, insurance companies are interested in the loss value. Appraised a house on 20 acres. Burned the following night. Vacant and robbed a TV not much else in the house. Insurance wanted a copy of report but didn't get it. I get many assignments where a MH is financed by dealer source but bank financing on land. Bank only wants the land value. I have separated land and building values in estate divisions.

In any case value the land as vacant and available for it's HBU and the contributory value of improvements. All functional obsolescence belongs to the improvements but external obsolescence may be divided with the land or not. Depends and that is why they hire you.

 

[J Grant]

I have an appraisal theory question, and I'm hoping some of you here might be able to humor me and discuss to further my own understanding.
Q: How would you go about valuing the improvements alone on a real property?

Before you answer, please keep in mind that this does not involve lending regulation, the sacred 1004 form, FNMA policy/rulebooks, etc.
Let me provide a hypothetical assignment so that we can better handle the appraisal development procedure:

1. Client: private estate
2. Intended user: the client
3. Intended use: assist client in making a selling decision
4. Value: Market value (from Dictionary of RE)
5. Effective date: current value
6. Characteristics of the property: 100 acres with home, shop building, and a larger hay barn. Location out of city limits, no zoning, 10 miles from nearby town.
7. EA/HC: No known EA or HC known to be needed at this time

For sake of discussion: What approaches would be applicable? How would you complete them? Are the improvements considered real property or personal property in this scenario?

The conditions of your assignment contradict themselves.
You state the value if of the subject improvements ONLY; then you act as if the 100 acres are part of the subject being assigned. If the subject being valued are the improvements only, that means no land is included. That means the improvements do not include the land they currently sit on . That means they would be only worth X$ as scrap material or as a structure with the potential to be moved from the site.

Especially as you specify no EA or HC/. I believe the improvements only are personal property if they do not include the land.

Valuing the improvements only is not the same appraisal problem as developing a cost approach for the improvements. You can develop a cost approach as part of the development if you want but the assignment purpose as you describe it is to value the improvements only, severed from the land and not including the parcel it sits on.

 

[Tom D]

maybe they are thinking of selling off ground. did you ask them what they were thinking about to do with the property. maybe their thinking is way off, or they have a purpose that they didn't tell you properly about. depending on what they are thinking, would that affect how you approached it. also, can the house be moved.

 

[sputnam]

Simple... in theory... maybe not so much in practice. You are not appraising the fee simple interest in the property. Some of the bundle of rights are not included in your valuation. Probably the easiest approach to valuing the improvemens is a thorough cost analysis.

 

[Jerry Bone Jr]

Value: Market value (from Dictionary of RE)

Market Value of the whole minus MV of the land equals MV of the improvements, therefore DSC approach.

 

[J Grant]

Market Value of the whole minus MV of the land equals MV of the improvements, therefore DSC approach.

What you desribe sounds like a residual cost approach value.

But for MV, your scenario, where the land is minused from the whole and then the improvements, all by themselves, have a supposed residual "Market value " of x$ -where do the severed-off improvements exist? Where does the imagined buyer paying market value for them find them? Are they floating around somewhere? Hovering 2 feet in the air above the site?f