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Excess Land

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runner52

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Mar 15, 2010
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Certified General Appraiser
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Washington
I am valuing a property that has four parcels. Two of the parcels comprise the primary economic site and two comprise excess land. With the excess land, the two parcels actually could be sold off separately but in this case since the buyer is buying all four parcels, can I just value the two parcels together or do I need to value them separately and have two separate values for the two parcels of excess land?

I do understand that with excess land the value for the excess land is always reported separately from the primary economic site. Just not sure if I will have 2 or 3 separate values (1-primary site value, 2-parcel 2 value (Excess land), 3-parcel 3 value (Excess land) OR, 1-primary site value, 2- total excess land area value (in other words, value the two separate parcels as one). Hope I'm clear :)

Thanks for your thoughts and input.
 

hastalavista

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California
It sounds like you know this: Excess land's value is contributory to the whole. So, the primary site and its improvements are valued as-if by itself and the excess land component is valued as-if it is by itself. However, other factors (cost to split, selling costs, entrepreneurial incentive) are also part of the excess land analysis. In general, once one deducts those other factors from the value of the excess land (at what it would sell for if split), one has the contributory value of the excess land as-it-is.

The value of the whole is:
A. The value of the primary parcel as-if-it-were a stand alone
Plus
B. The contributory value of the excess land component.

So there are two different sets of analyses, but they are used to report a single as-is value.
Most reports I see will add the contributory value component of the excess land in the reconciliation to conclude the final as-is value. But, it could be made as an adjustment in each approach as well.

Does that answer the question?
 

runner52

Sophomore Member
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Mar 15, 2010
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Certified General Appraiser
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Washington
Not really. Yes I already understood your comments and I too see that but people tend to get surplus land values mixed up with excess land values. My main question was that the excess land is comprised of two separate parcels which could be feasibly sold separately. So do I need to value each parcel separately or can I just value the two parcels together as one and report one excess land value? Also, the excess land purchase has been privately transacted so there are no added costs. Thanks.

By the way, thank you for your input; appreciated!
 

hastalavista

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Professional Status
Certified General Appraiser
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California
In identifying the excess land, you would have identified if the two parcels H&BU would a single-site (combined) or if the H&BU is two sites. Implied in the 2-site scenario is that they would be more or less similar in site area, but one can come up with a scenario where that may not be the case.

So, your H&BU of the excess land should have already determined what/how the excess land should be divided.

If the excess land has already been sold, is it excess land or is it two separate parcels already (not really excess land)?

Now I'm confused. :)
 
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runner52

Sophomore Member
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Mar 15, 2010
Professional Status
Certified General Appraiser
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Washington
There are four parcels. The buyer is purchasing the four parcels for his landscaping business. The four parcels are within a small industrial park. They all four adjoin each other and have equal access and exposure to fronting roads. I determined that the improved parcel and the adjoining parcel comprised the primary economic improved site. However, the buyer is also buying two other parcels to store equipment, landscaping, etc. He is not developing these two parcels, which I determined to be excess land. These two parcels are two separate and similarly sized and shaped parcels that the buyer will only use to store equipment and landscaping. I need to value these two parcels and I am thinking that they need to be valued separately because effectively, the highest and best use would be to develop them with a light industrial use. The seller does not want to do this; he just wants to get rid of all of the parcels and sell them to the landscaper.

I'm pasting the parcel map below. The four parcels are the 2-027, 2-028 parcels and the two square parcels to the left of the 2-027, which I have identified as the excess land. They are in a light industrial park.
 
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Michigan CG

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.................He is not developing these two parcels, which I determined to be excess land. These two parcels are two separate and similarly sized and shaped parcels that the buyer will only use to store equipment and landscaping...............

While he is not "improving them" the improvements on the other parcels would not be functional without the other two parcels. The building improvements on the two parcels need the vacant two parcels in order to function as intended.

Shown below is a landscaping business in my town with most of the land being vacant (no building improvements). Rock, mulch, etc. is stored on the "vacant" parcels. Without the unimproved parcels used for storage the building improvements would not function to their highest and best use.

Just an alternative opinion.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
There are four parcels. The buyer is purchasing the four parcels for his landscaping business. The four parcels are within a small industrial park. They all four adjoin each other and have equal access and exposure to fronting roads. I determined that the improved parcel and the adjoining parcel comprised the primary economic improved site.
The value of the above is one value; these two parcels work together as a single economic unit.

However, the buyer is also buying two other parcels to store equipment, landscaping, etc. He is not developing these two parcels, which I determined to be excess land. These two parcels are two separate and similarly sized and shaped parcels that the buyer will only use to store equipment and landscaping.
(my bold)

I wouldn't consider this "excess land" if they have already been separated from the primary parcel. They are what they are; two separate sites that happen to be purchased along with the other two sites (what you are referring to as the "primary site" and what I am calling the single-economic unit).

I need to value these two parcels and I am thinking that they need to be valued separately because effectively, the highest and best use would be to develop them with a light industrial use. The seller does not want to do this; he just wants to get rid of all of the parcels and sell them to the landscaper.
Yes, you do have to value them separately but again, if they are already separated and are two individual lots, they are not excess land.

You have a mixed-use bulk property sale.
1 economic unit is the improved lot and the secondary lot.
The other two properties are two individual parcels (not excess; they've already been split and can be sold individually; they are not part of any "whole"; they are linked transactionally to the other parcels because they are being sold in bulk).

If this is for lending purposes and the bank is going to make a loan on the entire purchase, then they should have identified how they want it valued.
If they want it valued in bulk, then the value is going to be the single economic unit (2-parcel, one improved) and the value of the individual sites less a bulk discount. Someone who was going to purchase these together and utilize them to their highest and best use would immediately sell of the other two parcels. They are not going to do that for free; even though the other two parcels have been subdivided and (I'm guessing) are two, legal and individual lots, the bulk-buyer is going to still incur selling costs when s/he sells the lots and would likely require some EI for the hassle of managing the process.
So, the bulk value would be (a) single economic unit + (b) value of the two separate sites - (c) selling costs/holding costs (if any) and EI.
The individual values (if the lender wants them) are the value of the economic unit (2 lots, improved & vacant) and the remaining value of each vacant parcel without any cost deduction.

There are a number of different valuation scenarios the lender may want/require. I think I now understand your issue; it sounds to me like the lender wasn't clear so you are trying to figure out how they might want it. If I'm right, I'd stop right now and communicate with them and ask them exactly how they want it. That will answer your question without an guesswork or risk of being incorrect.

I hope that helps.
 
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