Highest & Best Use Is Vacant Land

[BJ]

I've been hired to do a two unit apartment. I researched that the subject is most valuable as vacant land. What is a good way to write up this report? I'd prefer to use a standard form instead of writing a narrative report. I have at least five good comparables of similar buildings with the same zoning and similar lot sizes that were torn down for new construction. I have a few other comparables that are similar in style/age but have a different zoning and weren't torn down (which sold for less).

 

[Tawfik Ahdab]

You should be able to do it on the Land appraisal form. There enough lines to note improvements in place, which are in any case completely discounted, so that you don't have to adjust for them, only for whether they were still standing or torn down when purchased.

I'm assuming you're not using a land residual technique for the valuation, and that the sales comparison approach is the only needed approach.

 

[Otis Key]

Say What? I think you're confusing the details or something. There must be a subsequent highest & best use as if improved. What you're attempting to imply is that the current use is not the highest & best use. Therefore, based upon all the requirements of establishing that opinion, there must be some other H & B U. You might want to expound a little more.

You also might want to check with your client and advise them and see what they want you to do.

 

[xm39hnu]

Questions to ask yourself:
What's the highest and best use as though vacant?
To leave it vacant? -- why?
To improve it? -- What's the typical improvement? What's the ideal improvement? Why?
Is the HBU as improved: To demolish the existing structure and replace it with the ideal improvement? Why?

 

[Tawfik Ahdab]

In all fairness to BJ, I have assumed that he has already answered Jim's questions to his satisfaction, and now would like to know which form report would be best to use.

 

[Otis Key]

Tawfik

***-U-ME

He didn't state so therefore my post. and Jim's (I ***-U-ME :rofl: :rofl: )

 

[Jerry Bone Jr]

I have at least five good comparables of similar buildings with the same zoning and similar lot sizes that were torn down for new construction.

Sounds to me like the H&BU is not as vacant land.

 

[George Hatch]

We are, once again, getting into the semantics of HBU and how far it must be developed within the context of an appraisal. The question being asked isn't what exact structure (size, quality, condition, color, etc) would maximize the value on this site, but rather who is the typical buyer for this property at this time and, in fairly generic terms, how would they use it.

Obviously, the Highest and Best Use for this site would not be to leave it vacant, but to develop it to whatever the HBU is. By the description being given, the typical buyers for this type of site are buying them as redevelopable sites rather than their current use or as another use. And we know this because those sales with similar development potential are being redeveloped whereas those sales without such potential are remaining in their current use.

I'd do it as land, on the land form , but include a substantial HBU analysis that goes through the criteria, so that the reader can see you didn't pull your conclusion out of thin air. The sales will include not only the most direct comparables (units being redeveloped), but also some other sales of vacant or underdeveloped sites with similar zoning. If your conclusion is correct, all of these data as a whole will demonstrate the trend.

Don't forget that if the trend for redevelopment of properties with similar development potential is going to be the primary issue in your valuation, it should also be the primary theme of your report. Start discussing the trend in the neighborhood analysis and continue developing the theme in the site analysis. That way, your readers won't be surprised when you get to the Sales Comparison and you're valuing it as a site.

 

[BJ]

Yes Tawfik Ahdab, I simply wanted advice as to the best form to use.

To expound further, the highest and best use would be a three unit, three story condo with basement. The market is essentially 100% developed and builders are snatching up properties with my subject's site size and zoning. They are paying more than similar properties with a more restrictive zoning that won't allow this type of new construction. This assignment is for an estate that the heirs will use to decide market value.

As for the suggestion to use the Land Appraisal form, how does that satisfy the reader that the as-is improvements aren't better? Can I simply mention the thought process in the comments section?

BJ

 

[George Hatch]

This is a first. I'm quoting myself!

I'd do it as land, on the land form , but include a substantial HBU analysis that goes through the criteria, so that the reader can see you didn't pull your conclusion out of thin air. The sales will include not only the most direct comparables (units being redeveloped), but also some other sales of vacant or underdeveloped sites with similar zoning. If your conclusion is correct, all of these data as a whole will demonstrate the trend.

Regardless of what report form or format you use, you'll have to adequately develop your opinion of HBU. That's the hardest part about appraising a property based on it's site value - land is all about potential. Define the potential and the remainder of the valuation is relatively easy. Skimping on that analysis will only detract from your results.

I know it's hard (the first few times you do it), but you either need to suck it up and do it right or else refer the assignment on to someone who will.