Appraisers and Land Value Adjustment Help

[Terrel L. Shields]

It's possible it is viewed as Contributory Value and not on price.

That is not classical appraisal technique. Land is valued "as if vacant and available for its highest and best use", in fact, that was in USPAP until they decided it didn't apply to insurance value. Therefore, land is adjusted dollar for dollar according to its value as if vacant. "Contributory Value" implies you are ignoring obsolescence. Handy but not textbook.

The markets for vacant residential sites and improved residential sites are distinct from one another.

Again, I beg to differ. Obsolescence need calculated based upon use not matching land HBU... Site improvements are treated separately to arrive at a total site value but the LAND value is what it is according to its HBU.

It's unlikely that land prices are directly related to the size of the site. For example, if a 0.5 acre site is worth $50,000, a 0.75 acre site may not be worth $75,000. It isn't linear.

you can calculate that easily by plotting size v unit price.

Yes, I understand the problem with actual vacant land sales, but I believe you can go to any textbook and find that land is normally valued as if vacant and available for its highest and best use...which is why all my reports have a cost approach as the best way to value the site...then the site improvements (well, septic, driveway, etc.) is a separate item to estimate the total site value.

 

[ZZGAMAZZ]

I have not made an adjustment for residential site size in at least 10 years for surplus land. Around here, its simply a larger yard. Of course I have seen many reports where appraisers have placed adjustments on the site line in my area, but I seriously doubt there was any real research behind it and, in my view, its not necessary. Especially not where buyers are still so desperate they do not care about the size of the lot they just want a house and will pay anything. The best way to deal with it here is qualitatively. I have also seen where adjustments were given for larger yards, but it appears the report did not take into account that the additional site was aggressively sloped, wooded, etc (no utility). Especially not where buyers are still so desperate they do not care about the size of the lot they just want a house and will pay anything. The best way to deal with it here is qualitatively. Sometimes I also think its easy to over-think residential valuations.

I'm curious--based upon this post as well as my recent SCA continuing ed course: Should the appraiser ever distinguish between quantitative and qualitative adjustments in the SCA, by literally describing which is which?

 

[ZZGAMAZZ]

I'm curious--based upon this post as well as my recent SCA continuing ed course: Should the appraiser ever distinguish between quantitative and qualitative adjustments in the SCA, by literally describing which is which?

BTW I'm terrified of being asked to testify the rationale for my lot adjustments.

 

[George Hatch]

Sensitivity analysis (which is how the appraisalware programs' "GLA Adjustment tool" have been working) is hard to beat. You're using your direct comparables to demonstrate which factors are the most effective *with this dataset* in prompting for convergence. Obviously better if you're using more comparables so long as they're actually comparable. But the point is that the comparisons are internal to those comparables, even if the sales in your report are a subset of the sales you consider comparable.

If your dataset doesn't respond to those adjustments then it is what it is. If the response is greater than or less than the price/sf of vacant land in the area then THAT is what it is.

 

[Zephyr999]

That is not classical appraisal technique. Land is valued "as if vacant and available for its highest and best use", in fact, that was in USPAP until they decided it didn't apply to insurance value. Therefore, land is adjusted dollar for dollar according to its value as if vacant. "Contributory Value" implies you are ignoring obsolescence. Handy but not textbook.

Again, I beg to differ. Obsolescence need calculated based upon use not matching land HBU... Site improvements are treated separately to arrive at a total site value but the LAND value is what it is according to its HBU.


you can calculate that easily by plotting size v unit price.

Yes, I understand the problem with actual vacant land sales, but I believe you can go to any textbook and find that land is normally valued as if vacant and available for its highest and best use...which is why all my reports have a cost approach as the best way to value the site...then the site improvements (well, septic, driveway, etc.) is a separate item to estimate the total site value.

Land doesn't depreciate so no, obsolescence isn't being ignored.

Finding truly vacant land in an urban area is complicated as redevelopment sites have vertical improvements that upward influence the unit value...or $/SF.

Thus, the CV of land as-if vacant could be less than the price being paid for a finished site.

 

[Terrel L. Shields]

BTW I'm terrified of being asked to testify the rationale for my lot adjustments.

One of the most common violations found in appraisals before the board are abusing the land value and making nonsensical adjustments.

 

[Terrel L. Shields]

CV of land as-if vacant could be less than the price being paid for a finished site.

Site = Land + site improvements.

 

[Zephyr999]

Site = Land + site improvements.

Thanks...thus CV of site to get to vacant land is
Site - site improvements = land

 

[Terrel L. Shields]

 

[CaliforniaSD]

Back when I used to do reviews, I used to see the $1/sq.ft. land adjustment all the time. It didn't matter whether it was a 0.25 acre lot worth $50,000, or a 0.25 acre lot worth $1,000,000.

It was pure laziness. Most of the time, land sales were readily available, and a ballpark adjustment for the contributory value could be determined with a casual review of data. But many simply referenced "The List" when making adjustments.

Yeah that is lazy. I at least run regression, I have a solid method that works but never $1 lol. I see old timers that have been applying $1 for over 25 years lol. I guess the value of land has not changed in 25 years