Acreage Value

[Stone]

This thread is a perfect example of the problem with a "rule of thumb" that some people go by in their practice. It is one thing (probably a good thing) to keep in mind different rules of thumb when asking yourself, "does this seem reasonable?" That is a good idea and it is always good to have some triggers that make you re-think the appraisal problem and your solution to it.

However, when these things are put into actual practice, that is nothing but trouble. "It is a residential assignment, therefore the property automatically has a HBU of residential." "Only a commercial report (whatever that is) has to consider commercial uses". "All acreage beyond xx acres is worth very little or nothing".

Those types of things are just beyond silly when treated as factual in a report.

 

[Pittsburgh Pete]

To recap: Mr. Evans is correct--Apprazur is deranged and misguided--Mr. Rex has an anal fixation!!!!!

 

[jlabauve]

The bottom line is that the land is worth what the land is worth at it's HBU. That is where you start in any appraisal assignment. The improvements are contributory to the land. Or perhaps the imps have no value because they do not contribute to the highest and best use of the land. So value the property as though vacant first - whatever it's size, shape, utility, zoning, etc. Then determine the contributory value of the improvements.

In situations like this, I always do a land only appraisal of the subject first. Then I look for improved sales to determine the contributory value of the imps. Is it a lot of work? Yes, but the only way to do the job properly.

To say that excess or surplus land adds no value past a certain point is stupid and a dangerous statement. It is true that different acreage sites sell at different dollars per acre, and sometimes (quite often) this difference is tied to the theory of diminishing returns. Sometimes a 10 acre tract is worth more than a 40 acre tract, depending on location, utility, supply/demand, etc.

I am a residential appraiser in an area of lots of rural properties. But I certainly agree with the guys that are saying that the appraisal theory is the same whether you are appraising a commercial or residential property.

 

[Metamorphic]

I think there's a lot of symantic problems going on. If I'm comparing 2 different parcels, 1 that is 34 acres and another that's 35 acres. For purposes of the appraisal it may be credible to determine that there is "no value" difference. IOW, the difference value because if the difference in area is insignificant in the market compared to other intangibles that would cause a person to pay slightly more or less for one or the other.

You could face the same symantic problem WRT to usability. 10 acres with 6 of it on the side of a cliff might be worth the same as 4-5 flat acres; so "theoretically" the 6 on the side of the hill has "no value" (actually the value for that kind of acreage usually comes in on the "view" line from my experience).

So I think when somebody says "surplus land, no value" they're saying the value added by that acreage for the typical buyer is so small as to be lost in the margin of error of the appraisal process. Of course that vanishingly small per acre price might not be vanishing if you collecting 30 of them together.

 

[The Warrior Monk]

To say that excess or surplus land adds no value past a certain point is stupid and a dangerous statement. It is true that different acreage sites sell at different dollars per acre, and sometimes (quite often) this difference is tied to the theory of diminishing returns. Sometimes a 10 acre tract is worth more than a 40 acre tract, depending on location, utility, supply/demand, etc.

You've brought up some points, and hinted at others...in particular, all other factors being equal.

As an example, let's assume one is comparing a 5-acre lot with a 36-acre lot, and both parcels are similar in every way except size; i.e., similar location, similar zoning, similar topography, similar environmental issues (or lack thereof), etc. It would be very unlikely for the 21-acre difference to have no value.

Now let's assume the 5-acre lot is in a zone with a minimum lot size of one acre, and the 36-acre lot is located in a zone that requires a minimum lot size of 40 acres. The 5-acre lot is potentially subdivisible; up to five 1-acre lots could be created given favorable layout. The 36-acre lot is one building lot, and is nonconforming with regard to size.

In the second case, the 5-acre could very easily be worth the same as, or more than, the 36-acre lot. However, it would be erroneous to conclude that the additional land has no value. This is because parcels of very different utility are being compared to each other.

 

[fifteen]

True comparables must mirror the subject in all HBU aspects. In a residential valuation that's as far as you go. Say someone is looking for 25 acres for their horse farm. But all they can find is 40 acre parcels. Suppose that's a regular occurance and the market recognizes it. Do you think they're buying 25 acres with the extra 15 thrown in or are they paying for the full 40 acres? My experience is they're buying the 25 acres with the 15 thrown in for free as most buyers consider it excess land, and this is borne out in a lot of markets around here. Say someone wants 10 acres as that's all they need, but the area they need it in is zoned 1 unit per 40 acres. Will the 40 acres come down in value to compete with 10 acre sites that were grandfathered in, in the same area, so they can be sold? So talk it up, market data is the only way to verify what you claim.

Did you guys help rex with his problem in post #51 yet? I'm sure he can't breath, help the poor man somebody!!!

 

[The Warrior Monk]

So talk it up, market data is the only way to verify what you claim.

This true...and that goes for the method of valution also. In other words, if the appraiser does the "residential" appraisal and the market doesn't value the property that way, the appraiser had no performed a credible appraisal.

Do you think they're buying 25 acres with the extra 15 thrown in or are they paying for the full 40 acres? My experience is they're buying the 25 acres with the 15 thrown in for free as most buyers consider it excess land, and this is borne out in a lot of markets around here.

FWIW, if this phenomena truly exists, please write an article about it and submit it to the AI journal. There are a great many appraisers that would be interested in this phenomena.

 

[fifteen]

hahahaaa, you're in the hamptons - not much acreage up there right? Find an area with a lot of acreage for sale and do a search. Data will lead you to the same conclusions I arrived at years ago. This is not some new phenom or some new way at looking at acreage. It's been around as long as there's been buyers and sellers. If you only need 10 ac and you can find 10 ac in the area you want, will the 40 acre owner want to compete with the 10's grandfathered in if he wants to sell? His 40 acres is locked in due to 1/40 zoning and he has no choice but to compete with the 10 acres in price if he wants to sell it - hence zero or nearly zero for the excess land.

In this area in rural setting 5 acres is most desireable. For example (not factual just for illustration), 5 acres will sell for $20,000 an acre up to 5 acres. 10 acres sells for $10,500 an acre. 20 acres sells for $5,010 an acre. What does this tell you? It tells me somebodies paying less for what they consider excess land either due to zoning that won't allow larger parcels to be broken up, or in the same sense, the sellers want to move it at a competitive price to the most desireable site size. It's where buyers and sellers meet on price. Happens all the time. I thought you said you were experienced in large acreage valuations Dave? You should know this

FWIW, if this phenomena truly exists, please write an article about it and submit it to the AI journal. There are a great many appraisers that would be interested in this phenomena.

 

[jlabauve]

The only way to do the job correctly is to value the subject site and the comparable sites individually, and then adjust accordingly for site value. Then you look at the contributory value of the improvements, and adjust those accordingly. You never start with the improvements and then determine how much a buyer of those improvements would pay for the land. Which is what Apprazur seems to be saying.

 

[Karl]

Here is a thread that is a perfect example of why The only ones that think Appraisers are important are Appraisers. Can't wait to tell some of the rancher's out here that they have several acres of NO VALUE worthless land. (That extra 20 Acres that produce 10 crops of hay per year, you might as well give it to me). Second thought cancel that idea I want to LIVE!! a FEW more years. As one that has criticized Certified Generals in the past. Now I'm starting to wonder how many "Certified" residential Appraisers know what HBU stands for. YES!!! it's a check box that must be checked!!

Again I still wonder why Certified is such a powerful influencial word in the Appraising industry.


Now that the "Cookie Cutter" Appraisals have gone away, kinda sucks getting those low fees & having to actually WORK on an Appraisal HUH???