Best Method To Determine Location Adjustment?

[Michigander]

I know you know what you are doing and i wouldn't question anybody that developed the adjustment with grouped sales. Personally, I think I would rather do paired sales than grouped sales. With paired sales, if everything else is equal (including market conditions), the difference would be site value. I am just surprised that a lot of people are dismissing difference in site value because everything else equal, that's what the location difference is. Sales comparison approach and the cost approach should tell a similar story and I don't know how we can dismiss difference in site values when cost approach is site value + contributory value of improvements.

Joe, in this case, the difference in site value based on land sales, is about 40K, but the difference in sales prices due to different communities, is about 100K. This is why site to site doesn't necessarily work (it can work, but doesn't always). I guess the same could be said about grouped data or paired sales. In this instance, the paired sales would tell you just over 100K. I find it fascinating. I don't know everything by any stretch, and there may be some amenities that are not discussed in the listings. Builders are tricky sometimes getting the right information from. Anyway, just sharing

 

[Michigander]

duplicate

 

[Joe Flacco]

Joe, in this case, the difference in site value based on land sales, is about 40K, but the difference in sales prices due to different communities, is about 100K. This is why site to site doesn't necessarily work (it can work, but doesn't always). I guess the same could be said about grouped data or paired sales. In this instance, the paired sales would tell you just over 100K. I find it fascinating. I don't know everything by any stretch, and there may be some amenities that are not discussed in the listings. Builders are tricky sometimes getting the right information from. Anyway, just sharing

Thanks for sharing. So if you were asked to appraise the same improvement in both locations how would you address the $60k gap in the two locations in the cost approach?

 

[George Hatch]

What makes you think the cost approach would come in exactly the same as the Sales Comparison? Mine almost never do.

 

[Joe Flacco]

What makes you think the cost approach would come in exactly the same as the Sales Comparison? Mine almost never do.

I'm just saying. You are not curious? I know you said you don't care why. I like to know why.

 

[Terrel L. Shields]

Joe, in this case, the difference in site value based on land sales, is about 40K, but the difference in sales prices due to different communities, is about 100K. This is why site to site doesn't necessarily work

Then someone is failing to capitalize upon the arbitrage available. Lack of investor/builders?

 

[Terrel L. Shields]

What makes you think the cost approach would come in exactly the same as the Sales Comparison?

They should be close - within the range of adjusted sales values or someone has miscalculated depreciation ôr the HBU behind it.

 

[J Grant]

interesting posts ! Though one can isolate it out and attribute a $ difference in location to land value in one vs another, the adjustment is still made for location, not site, correct? Because even if a vacant site is worth more in location A than location B, the buyer is purchasing the package of a house and lot together, and pays more for the package to be in location A rather than location B.

Even if cost approach and sales comparison approach conclude at same/equivalent number, they are different approaches to value. So what market returns for a property in one location vs another may not reflect the same breakdown as the CA...in fact there is no price breakdown in the SCA, because the buyer is paying one purchase price for the whole package ( package of house, lot and pool, for example ) .

If for analysis purpose we make line adjustments for differences among properties in the SCA , it is for contributory value rather than cost ...since we are no longer doing the cost approach. Sometimes what the market pays is the same as cost, ( or less or more)

 

[Michigan CG]

In my community you can buy a 1/4 acre lot for $30,000 any day of the week.

In a community 20 miles SW of me you can do the same.

But:

A $200,000 house up here is worth $240,000 down in the other community.

Then move that same $200,000 house in my community about an hour away to Michigander's area and the house is $300,000 or more.

 

[Joe Flacco]

In my community you can buy a 1/4 acre lot for $30,000 any day of the week.

In a community 20 miles SW of me you can do the same.

But:

A $200,000 house up here is worth $240,000 down in the other community.

Then move that same $200,000 house in my community about an hour away to Michigander's area and the house is $300,000 or more.

I don't know what to say. I am not understanding the economics of what you are describing is going on in your market.

I'm not talking about 20 miles away or a hour away. I am talking about site values being $600k in one neighborhood and then five miles further out in the next neighborhood site values being $400k. Or $1 million in one neighborhood and five miles further out in the next neighborhood site values being $600k. The difference in the new construction sale price is basically the difference in site value. That's how it works in my market anyways.