External Obsolescence - 2-4 Surrounded By Apartments

[George Hatch]

You're still referring to lot size. Unless there's a specific clause in the zoning that prohibits development of any kind on a substandard sized lot (which I highly doubt) all a substandard sized lot = nonconforming means is if you had a 15,000 sf lot in that location they wouldn't let you split it into (2) 7500sf lots. It doesn't mean that the site can't be redeveloped into an R3 density.

At any rate, if your existing use is already 3 units then it's highly unlikely the property is worth more as land anyway.

The explanation you're looking for in your report could go something like this:

The subject's existing use as 3-unit residential is among those uses that are legally permissible, albeit on a legal non-conforming basis due to the substandard site size. These improvements are also deemed to meet the other criteria for highest/best use in that they are (obviously) physically possible, financially feasible (they add to the value of the property as a whole) and can be considered a reasonable expression of the concept of highest and best use.

 

[jackimoya]

You're still referring to lot size. Unless there's a specific clause in the zoning that prohibits development of any kind on a substandard sized lot (which I highly doubt) all a substandard sized lot = nonconforming means is if you had a 15,000 sf lot in that location they wouldn't let you split it into (2) 7500sf lots. It doesn't mean that the site can't be redeveloped into an R3 density.

At any rate, if your existing use is already 3 units then it's highly unlikely the property is worth more as land anyway.

The explanation you're looking for in your report could go something like this:

Thank you, but how did we get side-tracked to Highest and Best Use? This is not what my originally post was asking.

 

[George Hatch]

Well, HBU analysis is an issue in your assignment whether you recognized it as such or not. Had your subject been an SFR unit but you concluded it was still the HBU for the site as improved you might still be facing a very limited remaining economic life, depending on the long term land use trends in your neighborhood. Try opining a remaining economic life (if current trends continue) of only 15-20 years in a report and see if it makes any difference what your value conclusion is.



As for your original question, it wouldn't matter what our opinions on the effects of value in that situation were because you would still need to develop that opinion *in this situation* on your own and using the market data. That's what rent surveys are for - to *demonstrate* whether there's any effect on value of the location attributes. If the comparable rents in similar properties that don't have the same proximate uses show a difference in tenant appeal then that can be translated to the sales comparison; if they don't show any difference in rents you can use that to support a decision not to make adjustments to the comparable sales.

 

[jackimoya]

Well, HBU analysis is an issue in your assignment whether you recognized it as such or not.

As for your original question, it wouldn't matter what our opinions on the effects of value in that situation were because you would still need to develop that opinion on your own and using the market data. That's what rent surveys are for - to *demonstrate* whether there's any effect on value of the location attributes. If the comparable rents in similar properties that don't have the same proximate uses show a difference in tenant appeal then that can be translated to the sales comparison; if they don't show any difference in rents you can use that to support a decision not to make adjustments to the comparable sales.

Is it only external obsolescence if it affect's value? I've always shown any adverse location as external obsolescence, however, sometimes buyer's aren't recognizing the adverse location, therefore, no adjustments are made.

 

[George Hatch]

We generally treat conclusions as opinions to be developed, not assumptions to be made. We do "what is" not "what should be".

I really don't know why anyone would assume a 3-un property in an apartment neighborhood would even represent a disparate or conflicting use anyway. Unless you had data that showed it, in which case it wouldn't be an assumption, but a supported opinion.

 

[Howard Klahr]

I've always shown any adverse location as external obsolescence,

External obsolesence by definition is a negative adustment. If it doesn't negatively influence value how could it be obsolesence?

 

[glenn walker]

Jackie ** Just check NO and be done LOL and if your the Jackie that was my sisters friend at the Anaheim Shores Condos off Euclid and the 91 Freeway in 2000-2005 period contact me and I will update you on her health status and where she lives.

 

[J Grant]

The neighborhood comprised of low rise apts might even be a positive appeal - some apartment neighborhoods are along bus routes or walking distance to stores, services, playgrounds etc- which might appeal to renters.

Typically motivated buyer for a 2-4 unit property is (usually )an investor- what matters to them are the rents as cash flow/income- are the rental rates and vacancy rate of subject units better, equivalent, or worse than similar properties. Current or recent rents of subject as well as prior sales of subject is a source of support for an opinion. As others noted, rent survey and market research need to be developed to find the answer.

 

[Tim The Enchanter]

I think as Glen suggests your answer is probably no.
But, I don't know where it is or what it looks like. Does the street scene all blend together?
To me, that would inform the call quite a bit.
Typical location might be on a busy street for apartments, maybe then it's not adverse.
Well, apart from the black lung issue.