Extraction method for site value

[Ron D. in NWA]

I am doing an appraisal for mortgage purposes and I have not been able to find comparable vacant land sales to help indicate a site value. The subject is a 40 yr old frame dwelling located on an area lake. It is 1.43 acres +/- with 200 feet of shoreline which has easy access and all 200 feet is very gently sloping and useable. I have taken my comps and done a cost approach on each one and then determined the site value by subtracting the cost of improvements minus depreciation from the sales price. Two are from the same subdivision and two are not. Is this the correct steps to take or am I missing a step? I was fairly sure I was doing it right but the price per acre seems high, but all 4 of them are within 15% of each other. The indicated site values are from $130000.00 to $150,000.00 per acre. Thanks in advance for your opinions and advice.

 

[PropertyEconomics]

I am doing an appraisal for mortgage purposes and I have not been able to find comparable vacant land sales to help indicate a site value. The subject is a 40 yr old frame dwelling located on an area lake. It is 1.43 acres +/- with 200 feet of shoreline which has easy access and all 200 feet is very gently sloping and useable. I have taken my comps and done a cost approach on each one and then determined the site value by subtracting the cost of improvements minus depreciation from the sales price. Two are from the same subdivision and two are not. Is this the correct steps to take or am I missing a step? I was fairly sure I was doing it right but the price per acre seems high, but all 4 of them are within 15% of each other. The indicated site values are from $130000.00 to $150,000.00 per acre. Thanks in advance for your opinions and advice.

What happens if you put them on a shoreline front foot basis? Just a thought.

And .. does size matter all that much or are they just homesites???

Do you any other areas where there is NEW shorline construction where you can measure land value as a percentage of the total package ... thus being able to apply a % of contributory land value (land to value ratio) to each of your comparables?

I think if you do a few of these methods you will have met your burden of estimating land value ... very difficult in older subdivisions as you well know.

 

[Mike Garrett RAA]

What lake? Arkansas? Thought land was pretty cheap down there. What does the assessor allocate for land? Land values, in my market typically are about 25% of the total value, so we would be looking at a property worth, say, $600,000. Are 1.5 acre sites common for lake frontage?

 

[Ron D. in NWA]

What lake? Arkansas? Thought land was pretty cheap down there. What does the assessor allocate for land? Land values, in my market typically are about 25% of the total value, so we would be looking at a property worth, say, $600,000. Are 1.5 acre sites common for lake frontage?

Mike,
Beaver Lake in northwest Arkansas. As far as land being cheap I guess you might need to tell me what you consider cheap? The assessor has these values all over the place. They show from 30K to over 110K for these same properties I am using as comps. I have some MLS sales that are as high as 250K for 3 acres and they are located farther out than the subject. 1 to 3 acre lots are not uncommon here. All of the comps I have but one is in the 1 to 2 acre range.

 

[DTB]

What is the purpose of this exercise?

 

[Carnivore]

"The Appraisal of Real Estate"
Twelfth Edition, Appraisal Institute

Page 335

extraction
A method of estimating land value in which the depreciated cost of the improvements on the improved property is estimated and deducted from the total sale price to arrive at an estimated sale price for the land; most effective when the improvements contribute little to the total sale price of the property.


allocation
1. The general process of separating value between the component parts of a property.
2. A method of estimating land value in which sales of improved properties are analyzed to establish a typical ratio of land value to total property value and this ratio is applied to the property being appraised or the comparable sale being analyzed.

Pages 339 to 340 explain it fairly well.

 

[Fred]

What is the purpose of this exercise?

That’s what I’d like to know.

Is this the correct steps to take or am I missing a step? [/QUOTE]

It’s a stretch to talk in term of “correct steps” when the “method” involves an appraiser making up a number to replace a market that doesn’t exist.

 

[Mike Garrett RAA]

Thanks Ron...
We drove by Beaver last year after visiting Cherokee Village. Very pretty area. We also saw the new visitor center at Bull Shoals. Part of the desire of area for us was...relatively cheap housing costs. Of course, we didn't look at any of the newer subdivision on the lakes with acreage.

Wife works for Sam's Club so we also looked at Bella Vista. Now that was a lot more expensive and too much like a major metro area for us. Guess we may have missed the chance for living on a lake if a half million dollars is common now. Lake front at Cherokee Village is more like $200,000 but those lots typically less than half an acre.

I am president of our local bass club here. My desire is to retire in an area with good bass fishing. Have fished tournaments on Table Rock three times, Grand Lake three times, and Truman once. Really like that area down there but have to be able to afford it too. We have friends that retired at Cherokee Village and the seem to love it. They bought their place a few years ago for $65,000. Nice 3 Bd, 2 bath with 1 car garage. Not on a lake, of course, by very close to three lakes in the development.

 

[Ron D. in NWA]

It’s a stretch to talk in term of “correct steps” when the “method” involves an appraiser making up a number to replace a market that doesn’t exist.

What number are you talking about an appraiser making up? The sold price is what it is. The cost of improvements minus depreciation ,,, not making that up. And the site value indicated, didn't make that one up either.

 

[PropertyEconomics]

It’s a stretch to talk in term of “correct steps” when the “method” involves an appraiser making up a number to replace a market that doesn’t exist.

What number are you talking about an appraiser making up? The sold price is what it is. The cost of improvements minus depreciation ,,, not making that up. And the site value indicated, didn't make that one up either.

Ahhh ... lest we forget Mr. Santoras abhorance of the cost approach as an indicator of anything ... very intersting post though Steven. I certainly admire your consistency if lotheing the cost method.