"as-is" Value Of Site Improvements

[yes4me]

In the cost approach, what is that for?
What does it usually cover?

 

[gregb]

Typically this would include those site improvements that make a site suitable for its intended use or development, including grading, landscaping, paving and utility hookups.

 

[hastalavista]

For typical residential appraising assignments....
The building improvements (house, garage, etc.) are typically depreciated.
"as-is" value of the site improvements are the contributory value of things like driveways, sidewalks, hardscape/landscape, etc. Some appraisers put the value of a pull in the "above the depreciation line" and then depreciate it. I prefer to put the contributory value of the pool in the as-is value of the site improvements.

Another way to look at it is the as-is value of the site improvements is the depreciated value of the cost of those improvements.

In the cost approach, the site is valued as-if vacant and ready for development (platted, entitled, etc.). So, it isn't "raw land". In most of the areas I appraise in, utility hook-ups are at the site and the site is rough-graded (if grading is needed); there may still be some site prep work for the specific site that is necessary.

Out of curiosity (and there is no wrong answer here) what did you think or what were you told "as is value of the site improvements" reflect?

 

[JTip]

Out of curiosity (and there is no wrong answer here) what did you think or what were you told "as is value of the site improvements" reflect?

hahaha

 

[hastalavista]

View attachment 26610

hahaha

That was good.

But, really, I am curious. I teach a 4-hour CE residential cost approach class. There are a lot of "urban legends" as well as just misconceptions about what the cost approach is and what it consists of. That's why I ask!

 

[CANative]

Since there is no right or wrong answer I say it is a space in a Fannie form for capturing other costs not captured elsewhere.

 

[Terrel L. Shields]

Can's answer is pretty generic and should well be. In rural property, I would normally not itemize the septic and well since those costs in this area can vary widely. A 200' well is a far cry from a 500' well, but you go 500' when you don't get enough water at 200'...but the market normally isn't going to add anything for the deeper well regardless. In agri property, fencing, gates, cattle guards seem invisible as are ponds. Often get people wanting you to set a value to a pond. I would challenge anyone here to extract a value for a pond...not gonna happen. Likewise, on rural water or a well, I cannot extract a contributory value.

So driveway, septic, well, landscaping, fencing...all pretty invisible. Often I can get a contractors charge for constructing a home from the builder, or I can get the bid from a poultry farm. There are items they do not include such as dirt work, well drilling, electrical service and water service to the building. Those costs are "site improvements."

When I reverse engineer a sale, extracting the contribution of the building, often you can see the contribution of the total improved site and it is above the raw land costs, That too can be attributed to the site improvements. And there seems to be some relationship between the amount of site improvements and the nature and size of the project. A lot of difference from improving a site for a house and improving a site for 6 - 66' x 600' poultry barns with a separate 80,000 gallon storage barn with variable pressure controlled pumps, 3 generator sheds with 200 kva generators running off diesel, self-exercising engines, and a stacking shed (for chicken litter). I have seen $50,000 in gravel and driveways to poultry barns alone.

 

[hastalavista]

I wouldn't argue with Greg's response either.

The location can make a big difference on what constitutes a site, ready for development and what the contributory value of site improvements are.
Utility hook-up at the street is the expectation in most of my markets. Not so in the rural area. Likewise, everyone expects a concrete driveway, concrete walkways, front and rear yard, and a boundary fence on a typical suburban home; again, not quite the same in a more rural setting.

A regular question I get is how to value the as-is site improvements. Terrel, you've posted numerous times that you defy someone to extract that from the market. I wouldn't take that challenge. I think what is reasonable is this: if a concrete driveway is the expectation, and no one replaces the driveway (usually) until it is needed, then the as-is value of the driveway is close to the cost. If you have one, you don't need one, and if you don't have one, you are going to get one. Likewise, yard and hardscape. I argue that is a reasonable approach.

 

[CANative]

Aren't the "as is" value of the site improvements included in the opinion of site value at the top of the Fannie cost approach table? You do the site value first (if you go by the form layout) and you use 5 land comps, some raw land, some with power at the street or power all the way in, some with this, some without, some with an old house on it, etc., etc. At the end of the process you have a site value.

It would be double dipping to enter something in that last line unless it was something odd or did not get captured for some reason.

 

[Gobears81]

Aren't the "as is" value of the site improvements included in the opinion of site value at the top of the Fannie cost approach table? You do the site value first (if you go by the form layout) and you use 5 land comps, some raw land, some with power at the street or power all the way in, some with this, some without, some with an old house on it, etc., etc. At the end of the process you have a site value.

It would be double dipping to enter something in that last line unless it was something odd or did not get captured for some reason.

I wouldn't include it in there. For a house, site improvements include water/ sewer hookups, and some of your land comps may vary in how much additional expenditure is needed for these items. But, the garage, driveway, porch, fence, deck, all warrant separate consideration and certainly wouldn't be part of the land value. If the land comp has an old house, then they will probably deduct for demolition, but then add for items that have contributory value.