Acreage Adjustments

[Michigan CG]

Folks don't pay $50,000/acre to farm. It is simply not financially feasible.

 

[Stone]

One acre at $50,000 does not equal five acres at $250,000. At least not normally.

The problem (among many) with looking at one acre sites and extrapolating the per acre value for acreage beyond is frequently a matter of residential development rights. If a one acre tract has one development right and a five acre tract also has one development right, the contributory value of the additional four acres is highly unlikely to be anywhere close to the initial acreage necessary to put a house on it (assuming, of course, there isn't anything way out of the ordinary and that residential uses are the driving force of similarly sized properties).

Frankly, it sounds to me like the appraiser was pretty lucky and has reasonably similar sized sales. I wouldn't blink at using those sized tracts. Of course it would be nice to have one the exact same size or a little larger to go with them, but it reads like they were pretty decent from that standpoint.

 

[Meandering]

Folks don't pay $50,000/acre to farm. It is simply not financially feasible.

that's true.

But it could be that if you have the only water source in the desert, it might be different, and AG may not be the highest and best use.

Lord knows we have water park resorts popping up all over the place up here. Water is a valuable resource not everyone has access to.



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[J Grant]

Our property is 3.98 acres. The comps ranged from 2 to 3.75 acres.

For all intensive purposes, 3.75 acres is equivalent to 3.98 acres, so your top end of land has been bracketed with a similar comp.

Whatever vacant land is "going for" per acre is not the same as contributory value of surplus land on multi acreage sites.

Submit your alternate comps for a reconsideration of value is about all you can do. If a RE agent can dig up relevant area recent home sales on similar acreage lots /similar size/age appeal homes to yours that sold higher, that would be information that you could submit to the lender.

 

[Scott R Marshall]

Not sure what part of New Mexico you are in. Having said that, most areas I am appraising in, an appraiser would be hard preseed to show any kind of substantial market reaction to a difference between 3.75 and 3.98 acres. Maybe on the 2 acre sites there should be adjustments.

And again, not sure what market you are in, but in all the markets I appraise in, there is ultimately the law of diminishing returns. Where that line in the sand is will vary but I'd be shocked if a 0.25 acre site is selling for the same price per acre a a 4 acre site in your market. Assuming of course there are 0.25 acre sites. And I'd be shocked if a 4 acre site was selling for the same price per acre as a 100 acre site, assuming of course there are 100acre sites in your area.

And while 1 can farm 4 acres, that's not much of a farm.

 

[Lobo Fan]

I had a similar discussion with a homeowner in Edgewood. They had a manufactured home on 15 acres in Santa Fe county. They saw some 1 acre parcels going for $40,000 so they thought their land should be worth $600,000. The problem was that their zoning was 12.5 acres minimum, and such parcels were selling for $50-75K. So they had a $75,000 lot with a $100,000 triple wide on it. A far cry from $600K.

May your land be subdivided into smaller parcels? Then you should go get it surveyed and broken into smaller chunks. Then it might be valued as 3 one acre parcels instead of 1 four acre parcel.

The appraiser considered much of your acreage to be surplus land, which means that you were not using it. It could be that the slopes were too severe or the rocks too big to be used for anything other than a separation between you and your neighbors.

 

[Fritz in NY]

Mr. Hatches "economy of scale" says it all.

 

[abad14]

Thanks again for the responses. I understand what you are saying about the land in edgwood and other places around New Mexico. I think Los lunas is different than most other places. The biggest problem I guess is that the last appraisal adjusted for the land by calculating the worth of the land seperately instead of calling it excess land. I'll be contacting a real estate agent to see if there has been any vacant land purchases of 2 acres or more and hope that there has been.

 

[Terrel L. Shields]

Folks don't pay $50,000/acre to farm. It is simply not financially feasible.

Beat me to it...

This is what land does...The larger the tract, the lower the unit value - Recognizing that resort areas and places like Taos may have very high unit prices does not change that metric all things being equal that curve will fit almost anywhere.

The issue is described above that zoning and other restricts may make large acreages infeasible to develop. Certainly at $45,000 an acre, a section of land would be $29,000,000...i don't think that is reasonable.

 

[Scott R Marshall]

I understand what you are saying about the land in edgwood and other places around New Mexico. I think Los lunas is different than most other places. The biggest problem I guess is that the last appraisal adjusted for the land by calculating the worth of the land seperately instead of calling it excess land. I'll be contacting a real estate agent to see if there has been any vacant land purchases of 2 acres or more and hope that there has been.

Los Lunas is no different. I've done plenty of work there. The other thing you have to be very careful of is the land only dynamic being very different from the land with improvements on it dynamic.

What I mean by that is 5 acres of nothing but land may sell for $40 - $50K per acre but throw a 2500 square foot home on that land and the whole dynamic changes. What I mean by that is the site with improvements is not calculated by saying what is the land worth + what are the improvements worth. In many case, the overall value is dimished once improvements are placed on the site, meaning the value of the site + the value of the improvements is less than the actual market value for the site and improvements.

This concept was one of the initial "shocks" of realization once I began appraising, as the general concensus among the general public, including myself at the time, is that there should be no difference in value for a piece of vacant land or a piece of land with improvements, land costs this much and it must correlate that land with improvements will increase by whatever amount the improvements cost. The market does not follow suit in most instances, especially with these mid-sized sites, 3 to 10 acres.