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highest and best use?

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angdw

Thread Starter
Freshman Member
Joined
Mar 9, 2007
Professional Status
Certified Residential Appraiser
State
North Carolina
Our office has been asked to appraise a property, which is located on 7 acres, older small house and a pond. It is located in an area, which has some new commercial and residential development. No comps are available in the immediate area for this property. In addition, the owner has received an offer from a residential developer if he ever wants to sell.

What's the best way to go about this appraisal? Urgent help needed!
 

PropertyEconomics

Elite Member
Joined
Jun 19, 2007
Professional Status
Certified General Appraiser
State
New Mexico
Ang ... what are the potential uses for the property? ... List them, compare them including their costs of development and their income returns .... you are right ... its merely a highest and best use analysis.
Perhaps more extensive than your fee anticipated but its really all that needs to be done and then appraise the property to its highest and best use.
I would think this will take lots of addenda and explaination.
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
Our office has been asked to appraise a property, which is located on 7 acres, older small house and a pond. It is located in an area, which has some new commercial and residential development. No comps are available in the immediate area for this property. In addition, the owner has received an offer from a residential developer if he ever wants to sell.

What's the best way to go about this appraisal? Urgent help needed!
Start with current zoning and land use. Assuming the land can be split into residential lots, the question is how many. Take it from there.
 

Ted Martin

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
Sounds like your property is in transition from single family to subdivision, which may mean that the current improvements either have no value or a greatly depreciation value. You need to research the markets need for vacant residential lots. You also need to brace yourself for the calls when you check the box that asks if the current use is the H&B. You also might want to find a CG that will work with you on this one. The 1004 may not be the best format for the report.
 

angdw

Thread Starter
Freshman Member
Joined
Mar 9, 2007
Professional Status
Certified Residential Appraiser
State
North Carolina
The property is zoned AG, which would allow for subdividing the property under its current zoning regulations. Given the new residential development on the street, it is my opinion that the highest and best use would be for residential development.

Would you do a vacant land appraisal? The house is is good condition with updates, but the land is worth more than the house.

So, would you do on a vacant land form and discuss highest and best use or would this be a narrative?
 

angdw

Thread Starter
Freshman Member
Joined
Mar 9, 2007
Professional Status
Certified Residential Appraiser
State
North Carolina
Yes, it is an area in transition; however, there are several similar surrounding properties, which have not sold. Others have sold for commercial use on the corners of the main road and residential development has taken place along the subject's road. Would you suggest to the lender that a general appraiser work on this assignment?
 

PropertyEconomics

Elite Member
Joined
Jun 19, 2007
Professional Status
Certified General Appraiser
State
New Mexico
How can you know HOW to appraise it until youve done the analysis? No one here can answer that question for you ... there is no short cut to doing the Highest & Best Use analysis ... if you dont wish to do it .... pass on the assignment. It is perhaps the most important part of the assignment you have.
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Retired Appraiser
State
California
It's weird that AG zoning would allow for subdivision. Typically (in my market and most that I know of) the intent of AG zoning is to reduce the intensity of development and keep large parcels large.

Assuming that your area is different (or that the general plan's forward looking intent is to change land uses) then your market research scenario is a "site in search of a use."

The "land is worth more than the house" is not the question. The question is would the land be worth more without the house? If your initital HB&U research indicates that it is worth more without the house, your assignment as a residential appraiser is probably over.
 

Stone

Elite Member
Joined
Feb 1, 2002
Professional Status
Certified General Appraiser
State
Wisconsin
It's weird that AG zoning would allow for subdivision. Typically (in my market and most that I know of) the intent of AG zoning is to reduce the intensity of development and keep large parcels large.

Assuming that your area is different (or that the general plan's forward looking intent is to change land uses) then your market research scenario is a "site in search of a use."

The "land is worth more than the house" is not the question. The question is would the land be worth more without the house? If your initital HB&U research indicates that it is worth more than the house, your assignment as a residential appraiser is probably over.

Around this state, different counties and townships have different types of Ag zoning. The most common is around 35 acres, but there are plenty of ag zoning types that allow for divisions of 1, 5, 16, acres etc. In those areas, the ag zoning has more to do with allowable uses than sizes for development.

Different states (or in the case of WI - different communities) have different purposes for their zoning. Residential density is only a piece of the puzzle.
 

PropertyEconomics

Elite Member
Joined
Jun 19, 2007
Professional Status
Certified General Appraiser
State
New Mexico
It's weird that AG zoning would allow for subdivision. Typically (in my market and most that I know of) the intent of AG zoning is to reduce the intensity of development and keep large parcels large.

Assuming that your area is different (or that the general plan's forward looking intent is to change land uses) then your market research scenario is a "site in search of a use."

The "land is worth more than the house" is not the question. The question is would the land be worth more without the house? If your initital HB&U research indicates that it is worth more without the house, your assignment as a residential appraiser is probably over.


Greg .. why do you think this? A residential appraiser can still appraise vacant land they just cant do a subdivision analysis. With no subdivision proposed and none immediately likely ... at that point it would be merely an appraisal of a developable parcel of land. (not that I agree with this assessment yet) I dont see why a residential appraiser couldnt appraise the land as is to its highest and best use.
 
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