Land sale comparables with different Zoning

[spieldberg]

If you are appraising a vacant site that is zoned Commercial.. can you think of any logical reasons to use Residential zoned land sales as comparables in your sales comparison approach?

 

[CANative]

Maybe in rural areas along the highway in small towns? Otherwise, I'd have to say no. Or at least a conditional "no." It depends on HBU. A lot of commercial zoning will allow residential uses.

 

[Terrel L. Shields]

In my area, you might not have a single vacant land sale zoned commercial in the area or, the vacant land is located on a major highway while the subject is well off the main arterial roads. I have often used unzoned sales as comparables and occasionally use residential zoned where there is opportunity for the zoning to be changed. I don't use residential lots in subdivisions as comps.

 

[GregoryK]

As CANative says, it is a matter of having a similar highest and best use as the property being appraised. In some areas, obtaining a change in zoning can be achieved with little cost or effort. In those cases, it would seem reasonable as long as that is explained adequately. In others, zoning is very stringent, and even minor concessions can be costly and time consuming. In those cases I would not. Perhaps using sales from other similar-sized communities may be a better choice.

 

[spieldberg]

Thank you everyone for your helpful insight. Cheers!

 

[Vernon Martin]

Residential land comps for commercial site

If you are appraising a vacant site that is zoned Commercial.. can you think of any logical reasons to use Residential zoned land sales as comparables in your sales comparison approach?

I have sometimes had to do this in gentrifying urban neighborhoods with a shortage of commercial land comps and a subject highest best use being multi-family residential. The unit of comparison would then be the price per allowable dwelling unit adjusted for the higher construction costs for higher density development (above two stories).

The typical gentrification pattern is that new housing appealing to higher income residents gets built on infill sites within an older neighborhood while the commercial street remains blighted. There is a certain critical mass of new, higher income residents to be reached before new retail establishments become viable on the commercial street. In the mean time, there is a lack of commercial land sales in the neighborhood, and the only thing being built on commercial streets is condos.