"as-is" Value Of Site Improvements

[CANative]

I don't think I've used that line in the Fannie Cost Approach section since I was a newbie and didn't understand that the reason my CA was coming in lower than the SA was indicating was due to excess EI in the market during the run up.

Like the Prego! tag line: "It's in there."

Which is a disturbing tag line if you think about it too hard.

 

[hastalavista]

From Appraising Residential Properties, 4th ed. (p. 268)

Once cost and depreciation figures for the main improvements are calculated, site improvements must be examined. The value of garages and accessory buildings as well as paving, landscaping, fences and walls, patios, swimming pools, and other site improvements are estimated either by the amount they contribute to the property or by the depreciated cost of these items. If the land value estimate is based on raw land, the appraiser must also estimate expenses for clearing and grading the site, installing utilities, and preparing the site for development.

One could put all site improvements above the depreciation line if one wanted to, but I wouldn't as I don't think they depreciate at the same rate as the house (except for the garage). As I said, I think driveways and fences depreciate based on useful like; as long as they are useful, they work and don't need to be replaced. As soon as they become useless, they are fully depreciated and it is time to replace.
Kinda like a quantum leap: there is no in-between (halfway depreciated). It is either "usable" or "replaceable".

 

[CANative]

When you do a cost approach not on a FannieForm® how do you handle "as is value of site improvements?"

 

[CANative]

In the cost approach, the appraiser estimates the market value of a property by: (1) estimating the
cost of either reproducing the existing improvements with duplicate improvements or replacing
the existing improvements with improvements of equivalent utility as of the appraisal date; (2)
reducing that estimated cost by the amount of depreciation, or loss in value; and (3) adding the
estimated value of the land or site to the depreciated cost of the improvements. The cost
approach thus requires a separate estimate of land or site value. The cost approach is primarily
based on the principle of substitution.

The Fannie CA requires a site value opinion, not a land value opinion.

Edit: The last Fannie style CA I did (Denis... that one in San Jose for proposed construction) had $25,000 in the "as is value of site improvements." lol

 

[Gobears81]

When you do a cost approach not on a FannieForm® how do you handle "as is value of site improvements?"

On commercial appraisals I include it below the depreciation line, but show the depreciation in the costs. So if concrete has a 30-year life and a cost of $5/ SF, I'll give somewhere in the neighborhood of $2.50 per square for a 15-year old parking lot.

 

[Sid Holderly]

It depends on your market and the purpose of the report. On new construction the value is cost or near it, on a 15 year old sale it may be the buyers perception of the value of the amenities.
A driveway/parking area to hold up heavy equipment is much different than one for a home (see Terril). A $7,000 retaining wall, 2 years old, may only have a $700 "as is" site improvement impact.
Most buyers do not have an idea of what many amenities cost.

 

[Michael S]

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.

A site would be your typical building site in a new subdivision. Street, curb and gutter are in place, utilities are at the property line, the site is rough graded. This is different from raw land where none of that is in place. If you have a previously improved site than presumably utilities are not at the street, they've been extended all the way to the building pad, fine grading has been completed, a driveway and landscaping may be in place, etc. Typically that would be more valuable than a vacant site as there are now site improvements in place.

 

[CANative]

On a commercial property you might have three or four thousand feet of concrete flatwork versus 300 or 400 feet on a residential property.

Comments on the cost approach for a little pink Fannie Mae house:

"No land sales. Site value by extracabation." Oh and I put the concrete sidewalk in the "as is value of site improvement" line because it depreciates at a different rate than the house.

 

[CANative]

A site would be your typical building site in a new subdivision. Street, curb and gutter are in place, utilities are at the property line, the site is rough graded. This is different from raw land where none of that is in place. If you have a previously improved site than presumably utilities are not at the street, they've been extended all the way to the building pad, fine grading has been completed, a driveway and landscaping may be in place, etc. Typically that would be more valuable than a vacant site as there are now site improvements in place.

Isn't that accounted for in your opinion of site value?

 

[Gobears81]

Isn't that accounted for in your opinion of site value?

No. In Michael's example, if you buy a subdivision lot for $50,000, then it doesn't include the water extension from the property line to the house- that would be included in the construction costs. If you include residential building costs of say $80/ SF, then that is just for the house itself. Not the garage, driveway, etc. Like he said, if you see a land sale with driveways and landscaping, then you will have to adjust that down to account for the driveway value, etc.