Front footage vs acreage

[c w d]

Hey all, I'm looking for information pertaining to waterfront properties. The subject is 100' x 1170'. I'm not sure how to handle the front footage and the acreage with other comparables in the area ranging from 100ff to 200ff and lesser total acreage. While I can derive adjustments for the front footage what about the remaining land? What would be the best approach for deriving adjustments to give consideration for both ff and acreage?

 

[ttaM kooC]

Ok, I'll be the first to say it: What does your mentor say, and does he/she have competence in this area?

 

[Lone Star]

Don't know about your area, but in some lake areas where I work in East Texas, the methods of adjustments are based on the motivations of the typical buyer. Are they buying the lot because of the frontage or the size? How is the frontage measured - side to side on the lot, or following the shoreline? Once the lot is big enough to build on, we tend to find diminishing returns for extra frontage beyond a certain point. They want a view and access to the water. Your view doesn't get better with 120' foot of frontage vs. 110'. If the lot is big enough to partition into 2 sections each buildable with frontage, then that's a different story.

View is also critical. With lake shorelines, the lot 4 down from the subject could be the same size and shape, but with a lesser view because of the shoreline. |Hypothetically, could the remaining land be partitioned off and sold? Is there a demand for such a thing? I know you're not appraising it that way, but if other lots aren't shaped the same way, maybe there's a reason, and all of that extra land might not be worth much. A water front lot in the area I'm thinking of might be worth $70k to $100k. A water view lot - located directly behind might be worth $4k - $6k. An interior lot right behind the water view lot might be worth $2k.

I tend to use a ranking analysis first. No adjustments, just pros and cons for each sale compared to the subject, and align the subject in the ranking accordingly. This then gives me the range that the subject falls in, and I can derive adjustments from there. Sometimes, no adjustments are necessary, again based on the buyers motivations.

 

[JSmith43]

A bit more information, please Is the subject excessively deep compared to typical parcels with comparable water front? Can it be subdivided? Are there any land sales (or tear downs sold) on equivalent water?

If there is sufficient sales data available, why couldn't you develop a front foot factor and a lot size factor?

Basically, you have to observe how much the market pays for excess land (if any). Additionally, if the land could be subdivided such that the land with water front plus the extra lot is more valuable than the existing parcel, you need to know.....and to tell us It's a HBU thing.

Edit: Good comments, lone star.

 

[Fred]

Hey all, I'm looking for information pertaining to waterfront properties. The subject is 100' x 1170'. I'm not sure how to handle the front footage and the acreage with other comparables in the area ranging from 100ff to 200ff and lesser total acreage. While I can derive adjustments for the front footage what about the remaining land? What would be the best approach for deriving adjustments to give consideration for both ff and acreage?

I'd ask why are you assuming that ff are price correlate? As far as I know the process of determing whether price varies with ff, would be the same process that tells you how much price varies with ff.

 

[c w d]

This is for a refi, no sale. There is a correlation pertaining to ff. Larger ff with smaller overall lot size typically sell for more than smaller ff with larger overall lot size. Two of my comparables are similar ff to the subject yet smaller overall lot size. One of my comparables has significantly larger ff yet an overall lot size less than one acre. The price for this comparable is more than the others. My reason for posting here is to get a better idea of how to approach the problem. I could do it purely from a ff basis however, considering the size of the subject parcel the additional acreage, I would think, has value in addition to the ff. Complicating the matter is a lack of sales in this area that are riverfront properties. To further complicate the matter is 10+ miles north of the subject sales tend to be smaller lots with similar ff and further south sales are non-existent. I could not find any sales similar in lot size and ff. While, ff could be the motivating factor in any waterfront purchase I want to be sure. So, I'm looking for a means to evaluate the two variables without "double dipping" the adjustments. But, then maybe it comes down to the fact that I don't have similar sales to compare to the dissimilar, this is an exercise in futility and I should just settle on ff since this is the only variable that is consistent among my comparables.

 

[Fred]

The only way I know is to put them on a spread sheet and test the correlation among size, ff, price, psf and pff. You can list them by size, by ff, etc and try this by "eye." Alternatively, it takes Excel about nanosecond to a Pearson test and create the summary table.

It's possible that ff is a factor. It is also possible that you have so few sales, one outlier can throw the whole thing off. I have worked a lot with waterfront properties and I don't see ff as a good predictor, nor does it make sense to me that a 200 x 250 lot would have an inherently different value than a 250 x 200 foot lot.

 

[Lone Star]

Initially, forget about making adjustments. Look at all of the factors: location, shape, topography, water depth, view, zoning, drainage, utilities, flood area, erosion controls, etc. Really get to know your sales, whatever they are. A lot of time it helps to go look at the sales before doing anything else. Even review off water sales. Look at every bit of available information you can.

Then, you should be able to look at each sale, and again, without $ adjusments, be able to state the impacts on value - if any - of all of the above criteria. "Sale A is in a better location than B because of view. Sale C has a shape better suited to building a house on than sale A". I'll put this on a spreadsheet, or sometimes just a plain pad and paper. Most of the time, it's one or two of the factors that explain the bulk of the variance. And as Steve said, with limited data, sometimes one of the sales just doesn't fit. Then the $ adjustments are easier to determine, because - you've already done the "appraising" part. Now you're just quantifying it.

Unless you positively know that the primary motivating factor for buyers is front foot, then I would caution about hanging your hat solely on that. More often than not, it's the whole package that they are buying, with ff being one of the many factors. I've seen many a pie shaped lot with twice the frontage as a standard lot, sell for the same as a standard rectangular lot with less frontage. Even seen a larger pie shaped sell for less (buildable area outside of floodzone too small for most buyers).

 

[Fred]

Initially, forget about making adjustments

It was the orignal question.

FF is a very volatile factor to use as a unit of comparison. Consider the 200" (frontage) x 250" example with the lot selling for $500,000 or $10/sf or $2,500/ff. Say the subject is a very similar 250" (frontage) x 200" lot. If you use ff, the adjustment is 50/200 or 25% which comes to $625,000. If you use sf, then the value wll be equal to the comp price.

Putting that back in terms of ranking, it is hard to see the second lot as offering 25% more in benefits. They seem a lot closer to equal to me.

 

[CANative]

IMO, front footage is a marketing gimmick used by RE agents. 7 years of doing waterfronts from ocean to lakes to rivers to creeks to man-made channels and nothing is there unless there is too little frontage to be useful.