Appraisers and Land Value Adjustment Help

[Mark K]

...because I really don't understand why some appraisers in San Diego apply such a small adjustment for lot size within the sale comparison approach grid. Thank you all!

Its not just San Diego; Its all over.

Its due to laziness, ignorance, and bad habits.

When you get past the site area necessary to support the improvements, it turns into surplus land. Around here the surplus land is worth 20-25% +/- of the basic homesite value. It doesn't take long to analyze and a competent appraiser should do it now and then to get a feel for a realistic adjustment in the area.

I still see lazy/stupid appraisers adjusting suburban/rural sites at $1,000/acre when homesites are $50K for 1 acre site and $100K+ for 5 ac. site.

 

[The Warrior Monk]

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

I’ve done pair sales over the years, and have been able to establish parameters for which to make an adjustment.

And it is nowhere near $1 per square foot!

 

[ZZGAMAZZ]

View attachment 64638

My initial reaction leads to these questions:

Does this text address the "Lot" line item adjustment in the SCA and/or the relationship of the lot value reported in the CA relative to the lot value reported in the SCA?

 

[Terrel L. Shields]

My initial reaction leads to these questions:

Does this text address the "Lot" line item adjustment in the SCA and/or the relationship of the lot value reported in the CA relative to the lot value reported in the SCA?

You can separate them. much of it is your judgment. In a rural property with site improvements of rural water, a septic, gravel driveway and a yard fence of barbwire...how much would that cost new? Compare to a hillside lot with retaining walls (which "cures" the site defect of too steep) grading, landscaping, curbs, and a septic system. I do a rather complex analysis sometimes. OTOH, in subdivisions, often the curbs and utilities are mandated by the town so the "lot" (land) value is pretty much one number. Other than some landscaping, turf perhaps, and a driveway - not much else. It's when you have large irregular lots that require a lot of engineering where the land value and the site value are wildly different.

I know what a tap is locally for our rural water and I know what a 1000 gallon septic installed costs. Using those as a guide, then a bare land sale can easily be transformed into a site value.

 

[Michigan CG]

I used to do many subdivision development appraisals and the developer just didn't get much more for small differences in site size with that being only difference. Say a subdivision was average 15,000 sqft lots selling for $35,000 and a lot had 18,000 sq ft. They might get $2,000 more for the 18,000 sq ft lot.

Quit being sensible. The adjustment is always $2/SF.

 

[Lee Lansford]

I noticed that a lot of appraisals that I have reviewed in my area (San Diego), the appraisers typically apply a $1-$3 adjustment per a square foot of land. The value of land is not $1 a square foot anywhere in San Diego. I am working on an appraisal over an acre and a reconciliation of the allocation and extraction method indicate the land is $14 per square foot. The land residual method indicates $16 per a square foot. I asked my mentor why appraiser put such low adjustments for land, since it does not depreciate in value. I did a regression analysis and it indicates $4+ per a square foot. I read a article by an appraiser that said land adjustments are typically between $1-$7. I would like to get some input from you guys, because I really don't understand why some appraisers in San Diego apply such a small adjustment for lot size within the sale comparison approach grid. Thank you all!

Why? Because they know not what they do. That's one possibility.

 

[Elliott]

Solomon just released their last survey of adjustments, and here are the results:

"6. Assume you are appraising a house on a low traffic residential street. An identical house just sold on a busy street for
$400,000. What would that house have sold for on a low traffic street?
4.9%
7. Assume you are appraising a house with no adverse location influences. An identical house in the subdivision,
backing to a freeway, just sold for $400,000. What would that house have sold for with no freeway influence?
6.3%
8. Assume you are appraising a house with no adverse location influences. An identical house in the subdivision,
backing to a water tower, just sold for $400,000. What would that house have sold for with no water tower influence?
2.2%
9. Assume you are appraising a house with no adverse location influences. An identical house in the subdivision,
backing to a high voltage transmission line, just sold for $400,000. What would that house have sold for with no power
line influence?
5.0%
10. Assume you are appraising a house with no adverse location influences. An identical house in the subdivision,
backing to rail tracks, just sold for $400,000. What would that house have sold for with no rail track influence?
5.2%"

So about 5% seems to be the limit. So $16 x 5% = $0.80 per square foot, or about $1/SF. An empirical adjustment.

 

[alebrewer]

The land residual method indicates $16 per a square foot.

Wait - you performed a land residual analysis on a residential lot? How did you come up with an NOI attributable to the land?

 

[J Grant]

Solomon just released their last survey of adjustments, and here are the results:

"6. Assume you are appraising a house on a low traffic residential street. An identical house just sold on a busy street for
$400,000. What would that house have sold for on a low traffic street?
4.9%
7. Assume you are appraising a house with no adverse location influences. An identical house in the subdivision,
backing to a freeway, just sold for $400,000. What would that house have sold for with no freeway influence?
6.3%
8. Assume you are appraising a house with no adverse location influences. An identical house in the subdivision,
backing to a water tower, just sold for $400,000. What would that house have sold for with no water tower influence?
2.2%
9. Assume you are appraising a house with no adverse location influences. An identical house in the subdivision,
backing to a high voltage transmission line, just sold for $400,000. What would that house have sold for with no power
line influence?
5.0%
10. Assume you are appraising a house with no adverse location influences. An identical house in the subdivision,
backing to rail tracks, just sold for $400,000. What would that house have sold for with no rail track influence?
5.2%"

So about 5% seems to be the limit. So $16 x 5% = $0.80 per square foot, or about $1/SF. An empirical adjustment.

Maybe I am missing something, but the above data shows no price penalty thus no site/view adjustment between the houses - they each sold for $400,000 regardless of site backing up to X or Y.

Sometimes adverse influences show impact on prices, other times they do not., Sometimes larger sites of surplus land shows a positive adjustment in the market, other times not. Each situation is different which is what makes appraising difficult - if one tries to find the answer in the market and not in a formula.

Vacant land sales do not always return the answer either, because as others have noted, the contributory value of site sizes to a finished package of improvement and site can differ from prices paid for vacant lots, which tend to be based more often on a $ per sf basis. Of course vacant land or site sales are valuable information and should be analyzed if any are available in the relevant market area.

 

[Artemis Fowl]

Wait - you performed a land residual analysis on a residential lot? How did you come up with an NOI attributable to the land?

Can do using cost approach...no NOI needed.