Can Residential Acreage Sold W/rezone Intent To Industrial/heavy Manufacture Be Used For I/hm Comp?

[PriceItRight]

5 parcels, from 2.6 acres to 5 acres, were purchased in the last year directly across the street from an Industrial/Heavy Manufacturing 4.85 acre parcel. There is a 29,000+ Industrial building on 30 acres +/- right next door to the 4.85 acre parcel. The 5 residential parcels recently purchased are zoned residential single family and were bought by a large corporation at sale prices from $500,000 to $1,100,000 each with the intent to rezone to the Industrial/Heavy Manufacturing zoning nearby (directly across the narrow road). The increased recorded sales prices were well above all other residential parcels in the area. The parcels' value was in combining them and rezoning to meet the corporations needs. They have not been rezoned yet. Can the 4.85 acre parcel directly across the road use those residential sales as comps? Thank you!

 

[George Hatch]

Land development is the most speculative form of real estate there is because land is always about potential. And a lot of potential roadblocks can crop up at the last second to thwart the best laid plans of these developers. Fortunes are made and lost off of land development. That's why they make the big bux.

The only real comparables for a "might be rezoned in the future" would be other parcels with similar status. Aside from that (which there probably won't be any), what you see as of the date of the appraisal is the only alternative that 50 other potential buyers for those parcels would be able to assume will continue.

In an appraisal aimed at market value, it doesn't matter what any one buyer or any one seller will do. What matters is what the entire herd will do once sufficiently informed as to what they're valuing. We seek the central trend, not the statistical outlier (that's actually the broker's role to seek that one special buyer).

A lender or other user of an appraisal might ask the appraiser what the value would be if the zoning change had been hypothetically changed as of that date, but the conscientious appraiser will still add an "As is" value in addition to the "subject to zone change" valuation scenario being proposed. Show the value under both valuation scenarios and let the decision makers decide which makes sense to their decision.

 

[shrubberyvaluation]

5 parcels, from 2.6 acres to 5 acres, were purchased in the last year directly across the street from an Industrial/Heavy Manufacturing 4.85 acre parcel. There is a 29,000+ Industrial building on 30 acres +/- right next door to the 4.85 acre parcel. The 5 residential parcels recently purchased are zoned residential single family and were bought by a large corporation at sale prices from $500,000 to $1,100,000 each with the intent to rezone to the Industrial/Heavy Manufacturing zoning nearby (directly across the narrow road). The increased recorded sales prices were well above all other residential parcels in the area. The parcels' value was in combining them and rezoning to meet the corporations needs. They have not been rezoned yet. Can the 4.85 acre parcel directly across the road use those residential sales as comps? Thank you!

Would a typical buyer see it as an alternative?

 

[CCAAMO]

It would have to be made based on Hypothetical Assumptions which need to be noted all through the report, cover page and everything else.

 

[Elliott]

What do the planning and zoning people say when you lay out your scenario to them? Do they say sure, no problem, or big problem?

 

[CCAAMO]

If it's not eminent and probable then its all Hypothetical.

 

[PriceItRight]

Would a typical buyer see it as an alternative?

Thank you all for your response. Much appreciated!: The parcel value in question is the 4.85 acre Indust./heavy manufacture zoned parcel. It's currently fenced in and being leased to a car & truck repair business and large rig parking. It only appraised at $190,000 using comparables quite far away and I'm attempting to determine if the correct comps were used given all of the neighboring Industrial/Heavy Man. parcels within 500 feet or less of the subject parcel. Although, unfortunately, none of those have recently sold. That's why I brought up the recent sale with intent to rezone. (Two 2.6 acre Residential parcels, directly across the narrow street, sold for $500k and $550K with intent to rezone, so I'm struggling to see how 4.85 acres already zoned I/HM only comped at $190k. Trying to get a better feel for if a new survey should be ordered by picking your more informed brains.

 

[PriceItRight]

What do the planning and zoning people say when you lay out your scenario to them? Do they say sure, no problem, or big problem?

Please see my response above for more explanation. It's supposedly Pepsi Cola Corp. who bought the parcels, (although they're listed as a different corporation) so I don't have privy to zoning responses. But if they were willing to pay $1/2 mil each for the 2.5 acre lots (not yet rezoned), I'm struggling to see $190k for the 4.85 acres. Thank you!

 

[Walter Kirk]

A sale should only be used as a comprable when the buyer and seller are typically motivated. A buyer of residential land would be typically motivated if the buyer intended to use the land for residential purposes. Here the buyer does not intend to use the land for residential purposes therefore the use of the sale as a comparable for residential land sales is inappropriate.

 

[PriceItRight]

A sale should only be used as a comprable when the buyer and seller are typically motivated. A buyer of residential land would be typically motivated if the buyer intended to use the land for residential purposes. Here the buyer does not intend to use the land for residential purposes therefore the use of the sale as a comparable for residential land sales is inappropriate.

Thank you, Walter. I think I misphrased my question. I agree with you 100% that the sales shouldn't be used as comps for residential acreage. I'm wondering why, given the buyers intent, the appraiser Did Not use the residential sales to appraise the 4.85 acre Industrial/Heavy Manufacturing lot directly across the street, given that the buyers intent on the residential acreage purchases is to try to rezone them to I/HM. The residential sales sold for $500k & $550k each for the 2.5 acre parcels and $1.1 million for the 5 acre parcel (although that had a large home on it, that's now been torn down). Yet the 4.85 acre parcel (the appraisal subject) directly across the street, zoned and used as I/HM, appraised at $190,000. It makes no sense to me, I think a new appraisal would have merit. But I wanted Appraiser's advise as to whether or not you all would use those residential parcels as comps, given the purchase was made with the intent to rezone to I/HM.