Land appraisal

[wattnjhc]

A client wants a plot of land appraised as if it was subdivided into 5 vacant residential lots. Assuming its legally permissable, wouldn't I have to factor in the cost to subdivide, estimate the absorption period, decrease the land tax for each lot as its sold, apply a depreciation rate,.etc? Do I do 5 seperate appraisals, or 1 using the future value of the subdivided lots as of the estimated date of subdivision?

 

[Mr Rex]

In NC it would require a CG license. Check with your state board.

 

[Michigan CG]

...... apply a depreciation rate,.etc? .......

Don't most smaller parcels sell for more (per SF or acre) than larger parcels in your market...and depreciation of land?

 

[Elliott]

Run Bambi Run. Unless your a Zaio ZO and you already have the
value in your file, the report probably should require a narrative
explanation of all those things you mentioned and a few more.
I wouldn't do a subdivision until I'd taken AI's subdivision course.

I know a local appraiser who got nailed by the state board on
doing one of these 'simple' subdivisions.

 

[PropertyEconomics]

A client wants a plot of land appraised as if it was subdivided into 5 vacant residential lots. Assuming its legally permissable, wouldn't I have to factor in the cost to subdivide, estimate the absorption period, decrease the land tax for each lot as its sold, apply a depreciation rate,.etc? Do I do 5 seperate appraisals, or 1 using the future value of the subdivided lots as of the estimated date of subdivision?

This is a subdivision analysis and in my state its not allowable under a Cert Res license. Only one to four family land with a highest and best use of being one to four family can be appraised by a CR here. More than four lots would be subdivision anlaysis and require a CG.
It would typically require two values, "as is" and "as developed" (depending on the scope of work) and you need to know development costs, investor rates of return, retail value of the lots, rates of absorption, taxes for each lot AS DEVELOPED, I dont know what a depreciation rate is but I assume you meant a DISCOUNT rate. The mere confusion of this factor may lead you to conclude that this is above your license level. Have you ever done subdivision anlaysis before? If not Id pass on the assignment for reasons of needing to disclose this as a competency issue to your client.

 

[Darrel Clark]

It depends on what the client wants and who the client is. If they want to know the total value of the five lots as if the subdivision process were completed, you can do that using a hypothetical assumption. If the client is under the supervision of the OCC, OTS, FDIC, FRB or NCUA, then it would be a federally related transaction and an “as-is” value would also be required.

If they want to know the current value of the land assuming the use is for a five lot subdivision, then you need to factor in the subdivision costs, absorption rate, etc. Under my state regulations, it then has to be completed by a certified general appraiser.

 

[Bama Bayou]

I would strongly advise you to work with a CG who is experienced appraising subdivisions. I really don't think anyone should try this on their own the first time, way too many pitfalls. The AI has a course and book on the subject.

 

[Bama Bayou]

I think the AI course can be taken on line.

 

[Michigan CG]

I would strongly advise you to work with a CG who is experienced appraising subdivisions. I really don't think anyone should try this on their own the first time, way too many pitfalls. The AI has a course and book on the subject.

I know they have a good book, and I think they have an on-line class.

 

[wattnjhc]

Thanks, I am going to pass this to a CG, as it is out of my license range.... Depreciation meaning the market in the area is getting killed and that land by the time the lots are sold will probably be worth less than they are now-thanks for everyones quick reply. . .