Is Assemblage value a Market Value?

[Matthew Jehs]

I wanted to ask the opinion of the forum on their thinking on assemblage value. I am working on an appraisal where a developer is intending on purchasing land adjacent to his property to expand his commercial development. I am providing an "As Is" market value on the adjoining land being purchased. My interpretation is that the market value is the value to the general market, not this one specific developer. Though it is worth more once he assembles the piece (the land being bought does not have road frontage), it is reasonable that he would not pay more than anyone else in the market for the same parcel. I understand Standard 1-4 (e) to support this view, the piece being assembled must be valued independantly, even though its value increases substantially upon completion of the assemblage. Is this the consensus view?

 

[Fred]

I think you answered your own question about market value.

My interpretation is that the market value is the value to the general market, not this one specific developer.

Although this is not just a "developer," but the owner of the adjacent parcel.

However, this

it is reasonable that he would not pay more than anyone else in the market for the same parcel.

only makes sense to me if you take the word “not” out.

the land being bought does not have road frontage

Is it “landlocked?”

I understand Standard 1-4 (e) to support this view, the piece being assembled must be valued independantly, even though its value increases substantially upon completion of the assemblage. Is this the consensus view?

Consensus? :icon_smile: The answer to this is rooted in the intended use and user of the appraisal. Do they need to know the market value of non-frontage parcel, the increased the assembled value of the new parcel, etc.?

 

[Christine Marie]

Is this the consensus view?

such a leading question, good luck with that..... anywho, since i am TRYING TO BE first, here goes....

if i had been told correctly, the first step in the appraisal process is to determine the highest and best use as though vacant. Assemblage, as indicated per your post, benefits the purchaser in a way that would not benefit john q. public, especially factoring in your statement regarding no frontage.... in your scenario, it is different in the following way:
"who most benefits from the assemblage?"...... so in essence, i do not agree, am on the other side of the fence..... ​

 

[Matthew Jehs]

Ok, perhaps I need to clarify. The rear site being assembled has access via a flag stem, so it is not landlocked. Yes, the land being purchased has significantly increased value after assemblage to the adjoining developer. However, this value is to only one individual, the adjoining user. Thus, I would contend this is not a "market value" to the prevailing market, only an assemblage value to the buyer. The purpose is the "as is" value for lending purposes.

 

[Fred]

Thus, I would contend this is not a "market value" to the prevailing market, only an assemblage value to the buyer. The purpose is the "as is" value for lending purposes.

I still say that answers your question. It's "market" value is what people pay for similar poor access/frontage/visbility type sites. Value is not transaction price.

 

[CANative]

The "market" for this piece of land is not a buyer who would want this land as a stand alone parcel. The "market" is land owners who buy contiguous parcels for assemblage. Maybe what's needed is a modified definition of market value.

Sounded good for a second or two.

 

[Christine Marie]

am not going to go against steven santora on this entire issue, i will try to tread water here slightly, though... there may be issues that neither of us are familiar with in play in your scenario.... assemblage factor only based upon this statement " I am working on an appraisal where a developer is intending on purchasing land adjacent to his property to expand his commercial development." may imply that certain principles need to be taken into consideration, i.e., contribution, scarcity, are just two that immediately hopped on me... as well as supply, all of which, ultimately affect the motivations of the purchaser, in any market... surely, you can find adequate sales that will ultimately supply your pool of comparable sales and support your conclusion.... it all goes back to highest and best use.... WOULD it be a good location for wally world, or for this guy that has indicated that he's willing to pay cold cash for it, in order to "own it, outright".....

again, this is just my .01 cents worth.... ​

 

[Richard Carlsen]

Seems to me you have two separate assignments that you are asking about:

#1 The "Market Value" of the site "as is" or "as constituted".

#2 The "Plottage Value" of the site as assembled with the developers site.

One definition of value does not necessarily apply to all situations nor is it the only value that can be used in an appraisal.

 

[xm72mhd]

The "market" for this piece of land is not a buyer who would want this land as a stand alone parcel. The "market" is land owners who buy contiguous parcels for assemblage. Maybe what's needed is a modified definition of market value. Sounded good for a second or two.

I think Greg is correct about the market for this type of property. Apparently the land is entitled as commercial, and because the property lacks frontage and visibility it sounds as if it doesn't have obvious commercial potential unless it is joined with another piece. Market value not only includes a typical buyer, but an exposure time as well. Although, I can't go so far as to admit the contract price for this property is its market value, however it may, as Greg says, be a very limited market type of property.

The question doesn't have as much to do with the concept of assemblage as it does answering the question of who is in the market for this property. Has it been listed? What's the DOM? Any offers?

I am understanding you have no market data including properties similar to the subject, so another possible approach is to discover what the premium is for frontage and visibility in your market and calculate the value by extraction.

We had an event here that gave us some data on the value of frontage and access. A major highway project significantly and permanently removed easy access to what was once valuable commercial frontage. It still has good visibility, but it is hard to get to. For sale signs went up, DOM went up, bankruptcies were filed, people went out of business, businesses that needed access went out of business, a once thriving motel became weekly rental, and values definitely and dramatically changed.

 

[ginna currie]

This sounds almost like a bi-lateral monopoly.Who owns the land on the other side of the parcel the developer is trying to purchase? The developer may be willing to pay much more for the land since he is trying to make a complete pie.