Church - Dom? Adjustment

[Michael S]

Since the feds require platted land and unsold developments to discount? I think it was logical to think any time exposure times suggest marketing times will exceed a year, perhaps it needs discounted. Like I said, I am reading an alternative viewpoint sent to me by one of the other forumites.

While it might be logical it's not necessary. Some properties will simply take longer to sell because there is a very limited population of potential buyers. A 200,000 SF food processing plant will likely take a couple of years to sell. The definition of market value includes a reasonable exposure time. You've determined that to be three years. Your sale comps presumably reflected that sort of exposure time and their prices reflected that. If the sellers had wanted to sell those comps more quickly they would have lowered the price. Then you'd have a lower exposure time for your comps and lower sale prices with which to determine your opinion of value.

You could still conclude an estimate of market value with an exposure time of 12 months but it would be less than your market value with an exposure time of 36 months. This is why USPAP changed to require an estimate of exposure time be included with a market value opinion of value. You could provide a misleading report by using the 3-year exposure time sales and concluding a 1-year exposure time, or vice versa.

In the real world perhaps selling it in 1 year at $500,000 is worth more to the seller than in 3 years at $525,000. However, that discount to sell it within a year might be 15-20%, maybe more. Could a reasonable seller really expect to sell in a year, invest that amount for two years, and recoup the difference? Probably not. If they did look at it that way their discount rate would probably be in line with something relatively safe like a corporate bond, so maybe only a few percent. AAA corporate bonds have a yield today of about 3.5%. Throw inflation in there and it's almost a wash.

I think the typical seller would expect to wait a few years and sell it at the "full price", versus trying to discount it enough to sell within a year.

 

[Eli]

I can see a little bitty church out in the middle of nowhere, like on Walton's Mountain and the most applicable and necessary approach to value would be the cost approach assuming that was its highest and best use.

On waltons mountain, it's H and B use was most likely a church.

 

[Laughing Heir]

I agree. The highest and best use of development (or transitional) land is a bit more involved.

Some of the review appraisers in my organization categorize this use as "land held for future development" - I like that one. Transitional is succinct; I like that one, too. I may borrow your phrase from time to time. Where shall I send the royalty check

 

[Gobears81]

Some of the review appraisers in my organization categorize this use as "land held for future development" - I like that one. Transitional is succinct; I like that one, too. I may borrow your phrase from time to time. Where shall I send the royalty check

Can't take too much credit for that term Interesting how terms change in different regions. I remember when I started, I did more residential work, and everyone in my area referred to zero-lot line residences as...that, but when I went south and west, everyone referred to them as duplexes. When I first heard a banker refer to that term, I figured he was mistaken, but multiple appraisers and brokers in those areas did too. I still think of a duplex as consisting of both sides, but who am I to argue ?