Non-Lender Retrospective Land Appraisal -- no comparable sales

[KeyWhiz]

I have accepted a private party assignment for a retrospective appraisal of a parcel of land for estate/tax purposes. The effective date is 2002. It is located in a remote community with no other nearby communities from which to draw comparables. There were some other land sales around this time in the community but they are all much smaller parcels -- all under 1/2 acre while this is a 15 acre parcel, most of which is sloping up a mountainside.

The only way I can figure to approach this is I have the value the parcel sold for in 1975. I also found another property -- a single family residence --in the community which sold in 1975 and then again in 2002. I could use the increase in the market based on this sale to estimate the value of the subject property and write up a narrative report.

But -- is this a valid approach to appraising? Could this be considered a form of Sales Comparison Analysis? Or would I be out of compliance with USPAP for not utilizing one of the 3 approaches to value?

 

[J Grant]

I have accepted a private party assignment for a retrospective appraisal of a parcel of land for estate/tax purposes. The effective date is 2002. It is located in a remote community with no other nearby communities from which to draw comparables. There were some other land sales around this time in the community but they are all much smaller parcels -- all under 1/2 acre while this is a 15 acre parcel, most of which is sloping up a mountainside.

The only way I can figure to approach this is I have the value the parcel sold for in 1975. I also found another property -- a single family residence --in the community which sold in 1975 and then again in 2002. I could use the increase in the market based on this sale to estimate the value of the subject property and write up a narrative report.

But -- is this a valid approach to appraising? Coulld this considered to be a form of Sales Comparison Analysis? Or would I be out of compliance with USPAP for not utilizing one of the 3 approaches to value?

Wow - 2002? As in 24 years ago?

I do not see how you can opine value without adequately comparable sales.

If the subject lot is 15 acres, imo sales of lots in the 10-20 acre range are appropriate -I would not use a 1/2 acre lot. I would travel further out in distance and/or look for rural area sales of 10-20 acre lots (for example ) that sold with a low-value house, where most of the value was in the land. I would decline the assignment if I could not find enough to base a credible value on.

 

[TerryRohrer]

First, make sure your fee is adequate. The problem with your proposed solution is that prices may have increased through the 70s, then dropped with much higher interest rates in the 80s, began climbing slowly in the 90s and faster in the 00s before dropping after 2008 and then increasing again. You have nothing to suggest to a value anywhere along that rollercoaster except at the end points. I would find whatever MLS covers that area on the off chance they might have something, or some old sold books. Some, even if they don't keep them visible in their active systems, have the sales back to when they began. Or the oldest brokerages in the area. Or, go old school and go to the courthouse to identify transactions that occurred around that time. Verification will be a struggle, but should turn something up.

 

[KeyWhiz]

First, make sure your fee is adequate. The problem with your proposed solution is that prices may have increased through the 70s, then dropped with much higher interest rates in the 80s, began climbing slowly in the 90s and faster in the 00s before dropping after 2008 and then increasing again. You have nothing to suggest to a value anywhere along that rollercoaster except at the end points. I would find whatever MLS covers that area on the off chance they might have something, or some old sold books. Some, even if they don't keep them visible in their active systems, have the sales back to when they began. Or the oldest brokerages in the area. Or, go old school and go to the courthouse to identify transactions that occurred around that time. Verification will be a struggle, but should turn something up.

I've done all the necessary research, I believe. The MLS doesn't go back that far but I was able to access all the county assessor records of sales from the relevant periods. There is nothing to use that is comparable in the area.

Let me explain my proposed solution again, as I don't think the market fluctuations you mention necessarily apply:

My subject sold once in 1975. I need to estimate its value in 2002. I have another property that sold in 1975 and then again in 2002. My solution is to apply the percentage increase of this property between those two sales and apply it to the subject property. This obviously isn't a great solution but may be all I, or anyone, can come up with that would even resemble support for an opinion of value.

My question is one of USPAP compliance. Does doing something like this take me outside of the rules of using one of the three approaches to valuation?

 

[Terrel L. Shields]

You go further in time or further away and I would never use 20-year-old sales. Just go to a similar market. And arm waving is no way to value it. Find sales between 5 and 30 acres. Then get even smaller and larger sales, plot the value vs size and use that as a way to adjust for size. You should get a really straight line between half and double your subject size and a trendline (if you are doing it on Excel) while going from say 1 acre to 100 acres might be more of a log or power law curve. So, if you connect the dots and have no sales that are exactly 15 acres you should be able to figure out where the value falls on the line.

But I would find sales even if you have to go out of the county. And I would try to use sales of 3 years or less in age.

 

[George Hatch]

The pricing trends for land don't necessarily parallel SFR values, particularly when we're talking about larger parcels. You've got one paired sale.
If you aren't already doing it, you might look for other sales booked since then and look into their respective sales histories to find their previous sales. That happens, especially with land parcels.

 

[KeyWhiz]

You go further in time or further away and I would never use 20-year-old sales. Just go to a similar market. And arm waving is no way to value it. Find sales between 5 and 30 acres. Then get even smaller and larger sales, plot the value vs size and use that as a way to adjust for size. You should get a really straight line between half and double your subject size and a trendline (if you are doing it on Excel) while going from say 1 acre to 100 acres might be more of a log or power law curve. So, if you connect the dots and have no sales that are exactly 15 acres you should be able to figure out where the value falls on the line.

But I would find sales even if you have to go out of the county. And I would try to use sales of 3 years or less in age.

If I don't use 20 year old sales, then how do I support a value from 20 years ago? There also IS no 'similar market'. This is a small community (couple of hundred residents) along a lakeside in the middle of the desert with the nearest grocery store or gas station 10 miles away.

My other idea is to use sales of similarly sized sites from 2002 from another area and adjust for market difference based on a paired sales analysis of sales of 1/2 acre sites from the two markets.

 

[George Hatch]

That could work.

 

[Terrel L. Shields]

If I don't use 20 year old sales, then how do I support a value from 20 years ago

Sorry, I missed that. Yes, use sales from three years before the DoA. 5 years at the most. can you access those sales via MLS or county records? You should find sales.

 

[KeyWhiz]

Sorry, I missed that. Yes, use sales from three years before the DoA. 5 years at the most. can you access those sales via MLS or county records? You should find sales.

The local MLS recently changed software and apparently doesn't have anything in their records prior to 2019. Thankfully the county website is a bit better. (Shocking considering how rural this county is)

But yes, I've scoured the records for usable sales. There are none. Sales of vacant sites? Yes. Sales of 15 acre parcels upsloping to a mountain with lake views? No. Actually, there aren't even any actual 15 acre or larger parcels in existence in this community, let alone any that sold around that time. It's a unique piece of land.

Which is why I'm here asking if other methods might be usable or valid.