Cost Appraoch Insanity!

[Hamlet]

Donna, shame on you....surely you read about the Detroit housing market since you live in Ohio. I can hook you up too, actually know a broker who will sell you all the land you want at $1 (bring your pit bull, body guard and uzi to see your prospective property).

Tim, this would be for a long term investment. How about gentrification? Remember that real estate is cyclical and we are talking about economic obsolescence, not an externality such as a nuclear site next door.

 

[Mztk1]

Tim, this would be for a long term investment. How about gentrification? Remember that real estate is cyclical and we are talking about economic obsolescence, not an externality such as a nuclear site next door.

Anticipating gentrification is speculation. What's the time frame?

Competitive land sales, the sales comparison approach for the site value, will be your best indicator of value.

When you have reliable sales data substantiating a land value of $1 you do not need an external or economic depreciation adjustment. It is already reflected in the comparables. Just like if you have three land sales in front of the nuclear power plant and your house in front of it too, you do not have to make an external depreciation adjustment in the cost approach because the location is already in the sales data of the lots you used for site valuation.

If you have land sales from 8 months at $10,000 and you have evidence land sales have dropped 10% per month but you do not have a more recent closing than 8 months old to prove it (let's say you have 5 active listings at $2,000 and two pendings that are contracted at $2,000) you're land value can be expressed as $10,000 with economic depreciation of $8,000 as extracted from the listings and pendings. That way you are showing that you had to make depreciation adjustments in the sales comparisoin approach for estimating lot value, and you are being consistent with how you express it in the cost approach.

 

[Apraysr]

Thank you, Jim. I do believe this has been exactly that scenario.

And honestly, I have learned a great deal from this thread, a ton, and will seek to absorb and apply it. However, for certain here to say "break out Appraisal 101" for the solution, OMG, give me a BREAK.

Dave...

Quit whining and go back to the cost approach class for continuing ed,
you might learn something.

 

[Kevin Mc]

Me too.

PE, thank you.

Some of these strings seem to go round and round and...well, you get the idea. I get dizzy trying to follow all of the thoughts.

Lee

I just wish someone would fix the spelling of approach in the thread title!

 

[Kevin Mc]

Tim, run.

Donna, shame on you....surely you read about the Detroit housing market since you live in Ohio. I can hook you up too, actually know a broker who will sell you all the land you want at $1 (bring your pit bull, body guard and uzi to see your prospective property).

don't walk and start buying up those lots. There is a neighborhood on the lower east side of Manhattan known as alphabet city where 25 years ago you could have bought burnout tenements for $1. Drug infested, hookers,crime etc...awful place back then. That same tenement renovated and converted to condos would now be worth about $3,000,000. Do some assemblage and the sky is the limit. Detroit can't stay down for ever. someday there will be revitalization.

 

[Terrel L. Shields]

see taxes as 600+ annually. So its under $600, why is the tax so high on worthess property?

Assessor can give the property zero value, but the other taxes are still there

sounds more like HOA dues or Impr. district taxes...so the price isn't exactly "$1"...it will cost a lot more

 

[Mztk1]

sounds more like HOA dues or Impr. district taxes...so the price isn't exactly "$1"...it will cost a lot more

The selling price is $1. Since when do we include taxes, HOA fees and special assessments in our sales price?

Obviously the buyer is willing to take a loss on it now speculating for what it could be in the future.

 

[Mztk1]

don't walk and start buying up those lots. There is a neighborhood on the lower east side of Manhattan known as alphabet city where 25 years ago you could have bought burnout tenements for $1. Drug infested, hookers,crime etc...awful place back then. That same tenement renovated and converted to condos would now be worth about $3,000,000. Do some assemblage and the sky is the limit. Detroit can't stay down for ever. someday there will be revitalization.

It's only been since the 1967 race riots, but in 40 more years, you never know!

 

[Kevin Mc]

It's only been since the 1967 race riots, but in 40 more years, you never know!

LOL...hope springs eternal.

 

[Mztk1]

LOL...hope springs eternal.

To the point, for some, of waxing psychotic.

As a side note, I just came back from talking to my wife and said to her, "Honey, what do you think about taking $10 and buying 3, 4, maybe 5 buildable, vacant lots in Port Charlotte"? I must be going crazy, because she shot me down with this beauty: "We can't afford it right now, honey". :new_all_coholic: