Land value less cost to demolish = PV?

[CANative]

I've asked this before but now I have to take this to a higher level.

If a property has an old building that is so depreciated that it can no longer function or produce income then I assume the land is ready for a new use. Would the present value of the land be the land value under the new use less the cost of demolishing the building and preparing the site for the new use?

 

[Lee Lansford]

I've asked this before but now I have to take this to a higher level.

If a property has an old building that is so depreciated that it can no longer function or produce income then I assume the land is ready for a new use. Would the present value of the land be the land value under the new use less the cost of demolishing the building and preparing the site for the new use?

The market value of the land as though vacant is arrived at via analysis of market data.



Seriously.

 

[CANative]

This is an industrial property with an 80 year old warehouse. It would be great if I had three comps of industrial properties with 80 year old warehouses.. but I don't.

The opposing entity agrees with my land value (±) and HBU opinion but is not budging on considering the improvements a negative effect. They just say it's worth $1,000 (25,000 square foot concrete building).

 

[Lee Lansford]

The analysis of the market data will indicate what the value of the site is as though vacant.

I don't know how much market data are available to you for your task, but, let's assume that there are at least some parcels which have sold with and without improvements at the time of sale. What do you have by way of data?

 

[Lee Lansford]

Look at it this way:

If a parcel sold for $95k and had improvements that needed to be razed...and the cost of razing and removal was $5k (including costs associatd with holding the property to make it ready for re-development)...this single sale would indicate that the market would pay $100k for a vacant parcel ready for development.

 

[Louis Pompeo]

The analysis of the market data will indicate what the value of the site is as though vacant.

Then, subtract the cost to raze the improvements and restore the land to a ready-to-build condition. The conclusion is your value.

 

[CANative]

The analysis of the market data will indicate what the value of the site is as though vacant.

I don't know how much market data are available to you for your task, but, let's assume that there are at least some parcels which have sold with and without improvements at the time of sale. What do you have by way of data?

I presented 3 good unimproved land sales, a sale of a similarly improved property with a funky building and a sale of a similar property with a building in good condition.

 

[CANative]

Then, subtract the cost to raze the improvements and restore the land to a ready-to-build condition. The conclusion is your value.

Do you ever ponder the difference between actual expenditures made after a sale as opposed to the perception of costs by buyers and sellers prior to the sale?

 

[Lee Lansford]

Was the the assignment to provide an opinion of MV "as vacant"?

If so, the client is aware of the opinion of MV "as vacant". The client should be able to calculate costs associated with preparing the property for re-development...yes?

What's the intended use of the appraisal?

 

[CANative]

No "appraisal." Working as an agent and arguing with the assessor. The assessor's appraiser agreed with me but said the owner purchased it for $xx and to deduct the cost of demolition would result in a reduction of 50% so she isn't going to do it. I told her it didn't matter what one buyer paid, it mattered what the market would have paid. She didn't care.

But that's okay. Even without that we got a $450k reduction for each of two years. Not bad.