Appraising Vacant Waterfront Lots

[Thomas N. Morgan]

APPRAISING VACANT RESIDENTIAL WATERFRONT LOTS

I just completed an appraisal of a vacant waterfront lot. The assignment came through Source One Services. The fee offered was $135.00, as I recall. I did the job for $300.00. By the time I was finished with it, it felt like a $500 - $600 job.

As far as I know, the best way to value such properties is still by the front foot of waterfront. Sounds simple enough, doesn’t it? Well, it isn’t

My comments: 1. Buyers of waterfront lots have excess funds. If the lot appeals to them, the price is of little importance. 2. The relationship between in prices paid and the physical characteristics of those lots was not consistent.

I would appreciate any comments or suggestions about appraising waterfront lots.

 

[Richard Carlsen]

Waterfront, in my service area, is like doing two appraisals for the price of one. Hence, my upcharge for these appraisals.

In a plat, you may be working with $15,000 to $30,000 lots with site value representing 10 to 20% of the total value. On some waterfront, I've had site values represent $90% of the value.

Vacant site, such as on Walloon Lake where front foot values range for $8000 to $11000 per front foot and there are very few sales annually, you really earn your money figuring out the site values, especially when you have to use the allocation method to extract the site value of improved sales.

$135 is only enough to get me to drive out and look at the site, shoot a dozen photos and return to the office.

You are absolutely right about the high end market. They are some of the cheapest folks you can run into (or at least the people who cater to them are looking to impress the heck out of their rich clients). I had a call the other day from a lender who wanted me to do a $1.5MM house again on Lake Michigan. But he didn't want the borrower to have to pay the full fee for another appraisal when the last one I did was only 15 months old. I told him, my liability is the same on the new one as on the old one and the only thing that is being saved is that I don't have to remeasure the house. I still have not seen the order.

 

[Tawfik Ahdab]

I do those all the time.

The first thing to note is that in my market, there is no discernible, calculable value on a lineal frontage foot basis. However, when frontage foot matters, so too does lot depth, typically, with a higher value associated with greater depth.

It is important to appraise type for type, namely oceanfront with oceanfront, lakefront with lakefront, creekfront with creekfront, and riverfront with riverfront.

In my market, a gently sloping site facing south tends to obtain a premium over other configurations. Site size is in itself frequently not very important. In such cases, one is paying by the lot, not by site size, frontage foot, or other units of comparison.

With frontage lots, the view potential is also a factor. In some cases, even with water frontage, the site does not offer a good or unimpeded view of the body of water.

Another factor that sometimes comes into play is the quality of the water frontage. A lot ending on rocks with tide pools is environmentally sensitive and may not be very suitable for recreation. Hopwever, it may offer dramatic vistas of crashing waves and ocean spray during heavy weather. Sandy beach frontage is more usable, but may affect privacy, and may have erosion or flooding potential.

River frontage can vary greatly. A seasonal flow is typically inferior to year-round flow. Deep water frontage may be more attractive for fishing the local species, whereas whitewater frontage may be more appealing in other cases.

The ability to install a dock may be an important factor if recreational use of the water frontage is the driving force. Docks may be very expensive as in the case of deep water frontage, where currents and tides may require deeply-set pilings and a floating staircase and platform or boathouse.

The presence of servient easements may be an important factor if they diminish privacy or utility. The type of water system relied on for domestic consumption may be a factor in marketability and value. For instance, some lake water systems may be of questionable legality unless an easement into the lake is expressly available. When questionable, the lack of a recorded easement for the lake water system may render the property effectively unmarketable as a homesite, and it would best be regarded as a campsite.

There’s a lot to the appraisal of waterfront properties. Practice makes perfect, but you can get help from the book Land Valuation: Adjustment Procedures and Assignments by James Boykin (an excellent and learned instructor, by the way).

 

[CANative]

I treat front footage as an adjustment rather than the predominant factor in value. And there is usually an insufficient number of sales of similar enough properties in similar locations with similar views to make front footage adjustment except where they vary widely, for instance, 150' versus 50' or 100' versus 300'

The type of waterfront is of utmost importance: Ocean, Lake, River, Reservoir, pond, creek, seasonal, etc. Location is king. Waterfront neighborhoods tend to cluster in snobby rich people areas to ratty weekender areas and everything in between. Demand for waterfront is almost always good but it can change from year to year and when it's a hot commodity with diminishing inventory the prices can sky rocket - for a short period of time. LOL

They're difficult and time consuming assignments. The only harder ones are trying to appraise the last lot in a fully developed urban area. Or maybe that 200 acre tract in the middle of nowhere on the top of a ridge without hope of electricity and only seasonal access via a white knuckle road that's sometimes there and sometimes not.

I'm not supposed to ask questions like this but why, why, why would you accept a land appraisal at such a low fee. Land appraisals are ALWAYS harder the houses.

 

[Thomas N. Morgan]

Thanks, Richard, Twfik and Greg. Three very valuable, instructive comments.

 

[wyecoyote]

Waterfront properties are typically more difficult that non water front. Consider with vacant waterfront also look at the depth of the lot. Don't know about your area but around here trying to build within 100 feet of water can be a pain in the a**. With trying to get variancies which may or may not take years. Consider a couple things the differences of the water front even different lakes can have adjustments for location. Even the different sides of the lakes. I have found one lake where the north end is worth less than the west end which is worth more than the east end which is worth less than the south end. So even the sides of the same lake can have different values. Front footage may be an adjustment where one also has to consider properties for High, medium, cliff, low, or bulk head water front.

 

[Willie]

In many area around here, we have either what they call "Deep Water" lots or "Shallow Water" lots. Also, of utmost importance is is it dock permitable by the CORP or TVA.

I had one over a year ago, on Tim's Ford lake. I do very few lake homes. Very very few, because of my location. But I took this one as I love water, and it was a good client. Used 5 year old sales as comps, etc.

By the time I was done, I thought I had done a Demo report, for a now almost dufunct SRA. Proved lot value on my deep water lot, vs shallow water lots, vs Point lots.

The hard ones are the ones you learn from and remember.

Guess you have to love water.

 

[Fred]

I like a lot of the stuff in Tawfik's post.

Price per FF is counter-intuitive. If two sites both have 200 feet on the water, but one is 200 feet deep and the other is 2,000 square feet, are they "equal?"

Here's another one: "cliffhanger" It looks waterfront on the map, but if you dive off the balcony, it will be a one-way trip.