Acreage Adjustments

[JasonHaskell]

Does anyone else have a problem with making site size adjustments in neat tidy $5,000 / acre or $10,000 per acre chunks? This is always something that has bothered me. There are so many variables that I think using a mechanical per acre adjustment does a disservice, at least in my area. I always try to come up with an estimated value for the subject site and each comparable site and then make dollar for dollar adjustments. Very rarely do I ever see a situation where true value differences between sites can be boiled down into a rote per acre adjustment across the board for all comps.

 

[Stone]

Does anyone else have a problem with making site size adjustments in neat tidy $5,000 / acre or $10,000 per acre chunks? This is always something that has bothered me. There are so many variables that I think using a mechanical per acre adjustment does a disservice, at least in my area. I always try to come up with an estimated value for the subject site and each comparable site and then make dollar for dollar adjustments. Very rarely do I ever see a situation where true value differences between sites can be boiled down into a rote per acre adjustment across the board for all comps.

Not really. For most adjustments I like to keep them round because I don't like to imply precision I don't feel is really there. I get what you are saying and don't have a problem with it, I just don't like to do it that way. There are, of course, exceptions and if I feel I have enough data to make more precise adjustments fine.

 

[DMZwerg]

Does anyone else have a problem with making site size adjustments in neat tidy $5,000 / acre or $10,000 per acre chunks? This is always something that has bothered me. There are so many variables that I think using a mechanical per acre adjustment does a disservice, at least in my area. I always try to come up with an estimated value for the subject site and each comparable site and then make dollar for dollar adjustments. Very rarely do I ever see a situation where true value differences between sites can be boiled down into a rote per acre adjustment across the board for all comps.

It depends.
When dealing with properties of virtually the same site size then the mechanical adjustments can work fine. When there are few if any sales of vacant lots then, again, the mechanical adjustments ca work as a general indication. When dealing with wider variances in site size then I generally find using mechanical adjustments can actually be misleading.

Remember, adjustments are meant to account for the preferences of a typical buyer, so even if vacant lots are selling for $40k for a half acre lot that does not mean that a typical buyer will pay $20k less for a house on a 1/4 acre lot and $20k more for one on a 3/4 acre lot (difference may actually be under $5k, aka only between $10k/ac to $20k/ac). In the same area you may well still see a $40k or greater difference between 1/2ac and 1ac as the typical buyer changes from one sub-market to another.

In one area I saw 10ac parcels with house selling for as much if not more than 20ac parcels with similar house, due to a change in typical buyers (semi-rural pure residential to hobby farm/rural), yet both were basically equidistant from town.

 

[Delta85]

In my area a site of 3.75 acres is about equal to a site of 3.98 acres and I would not seek an adjustment unless there were some major differences in view or something like that.

If the comps ranged from 2 to 3.75 acres it sounds like they are similar comparables and I doubt large $40,000-50,000 adjustments are necessary. But I do not know that area and the variables of the land, topography, view, etc.

By all means if you have solid sales that support the value you feel is correct submit them to your lender for a reconsideration of value.

To me it sounds more like a homeowner trying to figure out a way to push the value up.

 

[Bill Streep]

OK, I'm thinking I'm missing something. Something critical.

WHERE did the $10,000 per acre adjustment come from? There HAS to be some substantiation of this number - a discussion of some kind. Just saying "site adjustments were made at $10,000 per acre" doesn't mean jack. Somewhere on that appraisal should be a justification of this adjustment - generally by analyzing sales of acreage lots.

If there's nothing there, ask for a reconsideration, with the appraiser to provide the data from which he/she came up with the site adjustments.

 

[abad14]

Ok. So I got the new appraisal back and I still have some issues. A lot of the thing that we send that were incorrect were not fixed. (Type of roofing, appliances, etc.) Explanation of why the comps that we sent were not used was included and I am fine with that. But the $10,000 per acre was not addressed. Comps were sent of different size lots that had sold varying in size from 2 - 3 acres, averaging to about $44,000/acre.

I guess my question is am I out of luck? Time to move on?

 

[Delta85]

OK, I'm thinking I'm missing something. Something critical.

WHERE did the $10,000 per acre adjustment come from? There HAS to be some substantiation of this number - a discussion of some kind. Just saying "site adjustments were made at $10,000 per acre" doesn't mean jack. Somewhere on that appraisal should be a justification of this adjustment - generally by analyzing sales of acreage lots.

If there's nothing there, ask for a reconsideration, with the appraiser to provide the data from which he/she came up with the site adjustments.

It always helps, if a reconsideration is going to be asked, that the person asking has laready done THEIR homework as well and has data to back up any opinions on site adjustments.

These nit picky homeowner complaints about this or that boils down to one thing.....the final opinion of value. If it is where they need it to be they could care less if the appraiser pulled the site adjustment out of a magicians hat.

So if they are going to ask for a reconsideration it would help if they had some idea what direction adjustments and values should be going with supportive data.

 

[JasonHaskell]

It depends.
When dealing with properties of virtually the same site size then the mechanical adjustments can work fine. When there are few if any sales of vacant lots then, again, the mechanical adjustments ca work as a general indication. When dealing with wider variances in site size then I generally find using mechanical adjustments can actually be misleading.

Remember, adjustments are meant to account for the preferences of a typical buyer, so even if vacant lots are selling for $40k for a half acre lot that does not mean that a typical buyer will pay $20k less for a house on a 1/4 acre lot and $20k more for one on a 3/4 acre lot (difference may actually be under $5k, aka only between $10k/ac to $20k/ac). In the same area you may well still see a $40k or greater difference between 1/2ac and 1ac as the typical buyer changes from one sub-market to another.

In one area I saw 10ac parcels with house selling for as much if not more than 20ac parcels with similar house, due to a change in typical buyers (semi-rural pure residential to hobby farm/rural), yet both were basically equidistant from town.

It's this kind of adjusting that I have a problem with. I reviewed an appraisal the other day that had $1.00 per square foot adjustments for site. 6,000 sf site vs. a 6,800 sf site...adjusted $800. This is where "mechanical" adjustments are stupid. Who thinks an 800 sf difference in site value is really going to add $800. In what world would buyers even recognize this difference. That is why I ALWAYS look at overall estimated site values. We have developments here where site sales between 5,000 and 8,000 sf sell for similar prices all else being equal. It's the appraisers who make these mechanical adjustments for minor differences in site size that I take issue with. Just because the site sizes are different doesn't mean you HAVE to make an adjustment and if you do it better be based on something more than just $1.00 per square foot.