grouping things into site improvements that really don't meet the definition of that term
But which definition? I only have an older copy in the house and am not going to the office for anything else but The Appraisal of Real Estate 10th ed, is rather vague about it saying in effect, that curbs, gutters, landscaping, grading, fencing, roads etc are "typically considered part of the site value."
To many, any significant improvement such as a barn, shop, etc. can be and perhaps always should be valued using a cost book or local cost in the CA. Most such "improvements"* are valuable enough to warrant a separate consideration. But say on a farm property there may be a house, a modern shop, a machine shed, a hay barn and perhaps an old gambrel roofed barn from 80 years ago. Each can be separately valued via straight line depreciation, or book depreciation, and then the separate issue is functional obsolescence. That "value in use" problem of some items being used for storage or animal husbandry but which the market apparently doesn't reward.
So do we say there is an overall functional obsolescence of over-improvement for too many buildings? Or do we rank the buildings according to their usefulness or age. That is, do we treat the obsolete 80 year old barn as fully depreciated but perhaps the shop as not having anything beyond physical depreciation? Or since it is still used for storing hay and feed, as having some value? Do we apply that functional obsolescence to the overall basket of improvements, or selectively to the older and less useful buildings? It's a choice. And a highly individual choice at that. And to that with multiple buildings of various ages, you get into the "light bulb" problem. Light bulbs will last so long but just because each is marked a 5 year bulb does not mean every bulb in the building will fail in year 5. Some may last 10 or 30 years while others fail within 2 years. So you basically are saying "on average" that 50% of the improvements are above and 50% below the average life of the aggregate of buildings,,,or lightbulbs... in other words, all the buildings regardless age, suffer 50% obsolescence and are at the half-life of their economic lives. That was the observation made in a Farm textbook I had at one point.
It will be nigh impossible to use paired sales to extract a single building from the mix for the lack of places where that is the only improvement. And farms are problematic as the value may vary with the size of the property. A ranch with one older house and a barn on 1,000 acres probably isn't going to bring more than 1,000 acres of bare land. And if a farm gets the land sold off leaving only 5 acres and the improvements, those improvements suddenly become vast over-improvements for the site size.
Since I do only narratives, my forms allow for additional lines and I can readily add extra lines for valuing items separately. But I prefer doing a cost printout for all the buildings of significant value. I would do that on a form, sum the various values and add in the "site improvement" line if I have the second line already filled with something else like a detached garage or pool/pool room.
But there are things I can't do and cannot extract from the market and to do so would be pure speculation upon my part. Water wells. Here you might luck out and get good water at 200' or less, or you may have to go 500'. And no small number of wells (we call them "Roubidoux" wells) are from 1,800 - 2,800' deep. Poultry farmers typically drill those for high flows. But can you extract a universal "value" for a 200' well making 3 gal/minute vs a 200' well with a 5,000 gallon storage and a low flow system dosing from a 1 gal/min well? Vs a 500' - 8 gal/min well with sulphur having to use a chlorination system to take the taste out? Those are wildly different "costs" but similar "utility". I cannot tell a 1,000' gallon septic system with 300' of lateral is "more valuable" than a mound system with dosing pump because it is less maintenance or if the more expensive mound system is more valuable. The market seems to only concern itself with the utility of the item.
* The general public does not understand what "improvements" even are. I just had a conversation with a fellow whose taxes were sent sky high this year... I explained the land and improvements are valued separately. He objected, saying "But I haven't improved anything...." I explained all buildings are improvements to the land and I really don't think he understood clearly yet what I meant.
community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.
