CANative
Elite Member
- Joined
- Jun 18, 2003
- Professional Status
- Retired Appraiser
- State
- California
I have a difficult assignment for many reasons but right now I'm working on the cost approach. Subject is a proposed townhome with detached garage with accessory unit over it. Zero lot line and this is the first of 4 appraisals.
There are no land sales of a tiny lot. What I do have is a self-contained narrative of a project with kind of similar properties (attached townhomes).
The report concludes that the market value of the finished lots (bulk value) based on residual analysis is $940k, or within a percentage of the value opion of $1,030,000 based on the built-up approach. The prospective market value of the fee simple interest of the subject as proposed, as 12 attached single family lots, as if sold in bulk to a single purchaser is determined to be $1,000,000. This equates to a bulk sale value of $833,333 per lot. ($1mm/12)
In the cost approach summary it states cost factors based upon M&S, modified for local cost multipliers and compared to the developers cost estimates. No calcs for physical depreciation, none for functional depreciation, none for external obsolesence.
Next comes analysis of soft costs. Fees not included in M&S include jurisdictional impact and hookup fees which include water, sewer, electrical, parks and traffic mitigation. Theses costs in total were divided by 12 for a single unit.
They added 5% allowance for sales commissions and marketing and 1% allowance for administrative and overhead costs and a 4% allowance for miscellaneous contentingency expenses. Then a 20% (of total cost) allowance for EP was added to each floorplan.
Finally, to provide an individual retail value opinion of each floorplan, the appraisers have added the bulk sale finished lot value opinion of $83,333 per lot to the total replacement costs estimated for each floorplan.
Here's my question:
Should the "bulk sale value" of the lot be used in the cost approach which is reportedly for providing an "individual retail value opinion" for each property?
There are no land sales of a tiny lot. What I do have is a self-contained narrative of a project with kind of similar properties (attached townhomes).
The report concludes that the market value of the finished lots (bulk value) based on residual analysis is $940k, or within a percentage of the value opion of $1,030,000 based on the built-up approach. The prospective market value of the fee simple interest of the subject as proposed, as 12 attached single family lots, as if sold in bulk to a single purchaser is determined to be $1,000,000. This equates to a bulk sale value of $833,333 per lot. ($1mm/12)
In the cost approach summary it states cost factors based upon M&S, modified for local cost multipliers and compared to the developers cost estimates. No calcs for physical depreciation, none for functional depreciation, none for external obsolesence.
Next comes analysis of soft costs. Fees not included in M&S include jurisdictional impact and hookup fees which include water, sewer, electrical, parks and traffic mitigation. Theses costs in total were divided by 12 for a single unit.
They added 5% allowance for sales commissions and marketing and 1% allowance for administrative and overhead costs and a 4% allowance for miscellaneous contentingency expenses. Then a 20% (of total cost) allowance for EP was added to each floorplan.
Finally, to provide an individual retail value opinion of each floorplan, the appraisers have added the bulk sale finished lot value opinion of $83,333 per lot to the total replacement costs estimated for each floorplan.
Here's my question:
Should the "bulk sale value" of the lot be used in the cost approach which is reportedly for providing an "individual retail value opinion" for each property?