Lender wants site value for townhome?

[NC Values]

My client wants all appraisals to include an estimated site value.
Is this a legimitate question for attached townhome in a PUD with clubhouse, pool, tennis courts?

IF so, how do I estimate site value?

 

[David Beasley]

Yes, if the townhome is attached to the land and that land conveys with it when sold (not a "condo" style townhome, which is rare in my part of NC). Lots of townhomes here have a small bit of land that goes with them - usually the footprint of the entire home and a little extra in front of and behind it. The lot should be shown on a plat, which is easy enough to find.

As for estimating the value, do it the way you would in a regular subdivision. If all else fails, look at the tax card. If it is truly a townhome that has land with it, there will be a lot value there. Not saying that is the actual value, but it should get you on the right path. Maybe poll your MLS and tax system for lot sales - someone had to buy the land before they could build the townhouses.

And be careful with clients that want "site value" but do not request a full cost approach. They're fishing for a value for insurance purposes and my bet is that you're doing the appraisal for lending purposes (intended use). This is why the VA does not want site values in their reports when it can be avoided - they know the data is being mined and used for purposes beyond the intended use of their appraisals. When you must give a site value on a VA appraisal, you have to develop the cost approach AND provide land sale comps in support of your stated lot value.

 

[Mike Boyd]

Keep in mind that the townhome owner owns the land under his home and a little more as David describes. If there are 100 townhomes in the PUD, each homeowner will own 1/100th of the common land and amenities. However, that is a separate ownership issue and will thusly be so described in the legal despription. Only provide a value of the land UNDER his unit as well as the yard area in front and back. The easiest way to do this is by abstraction.

 

[CANative]

Abstraction (extraction) is too much hassle for a non-sense request/demand like this. Just use allocation. Look at a bunch of property records in the area and document a general ratio or percentage of land/improvements used by the assessor's office. You'll need a lot of property records. Once you have the ratio or percentage apply it to the comparables you present in the report, reconcile (to a range is best IMO because then they have to make difficult decisions if they want to use it for insurance) and then report. Show your work!.

 

[timd354]

My client wants all appraisals to include an estimated site value.
Is this a legimitate question for attached townhome in a PUD with clubhouse, pool, tennis courts?

IF so, how do I estimate site value?

Such requests are complete nonsense for a townhouse lot in a PUD where absolutely no market for individual townhouse lots exist. The lender only wants the site value so they can deduct the site value from the appraised value and use that to estimate the amount of hazard insurance coverage that they will require...which is a very stupid way for them to determine insurable value, but nevertheless that is what they are doing.

You can estimate the site value through the extraction and/or allocation methods.

 

[CANative]

They may also want the site value to test REL in relation to the term of the loan, the appraisers conclusions in the sales comparison, HBU conclusion, etc, etc,.

There's a lot of dope in the site value estimate. There's a lot of liability too if the appraiser doesn't do legitimate, documentable job of it. No simple back in methods with the comment "value by extraction" or similar boilerplate.

I always do a cost analysis and land value (on a yellow legal pad) and stick in the job jacket. I seldom report unless forced to and then compensated. Just one more thing for someone to find a crack and exploit it. It's not required for typical mortgage loan appraisals and it's almost never necessary for residential property. And we're working at the lowest fees possible.

 

[Mikey Flair]

If you don't know the answer you hopefully aren't working on your own. Ask someone in the office where you work. If your on your own, good luck to you, sounds like you'll need it!

 

[NC Values]

If you don't know the answer you hopefully aren't working on your own. Ask someone in the office where you work. If your on your own, good luck to you, sounds like you'll need it!

So what is your answer to such an obvious question? Yes I know a townhome includes a small parcel, but how to derive value when there is no market for vacant lots in townhouse PUDs. If you use allocation method, what is your basis for determining allocation percentages?

 

[PropertyEconomics]

So what is your answer to such an obvious question? Yes I know a townhome includes a small parcel, but how to derive value when there is no market for vacant lots in townhouse PUDs. If you use allocation method, what is your basis for determining allocation percentages?

Courtney .. you must use the data you have available to you. You can measure other properties that have sold, ie single family residential sites against median values within a neighborhood which will give you one indication. This indication alone, however, will not be sufficient to provide an allocation percentage as it is a different property type than you have.
You can go back in time and measure lot sales within the development you are currently appraising in and measure against the median value of homes within the development in order to arrive at a percentage.
You can go back in time and look at other similar PUD developments and measure historical land sales against median value of homes as of the date of the land sale which will give you a percentage indication as well.

After doing all of this analysis and research, and it will take time and not be easy, you can apply your percentage of land to value against current median values in your neighborhood and arrive an an opinion of land value.

Is it perfect? No. It would need to be well explained and developed, however, it is a means of providing an opinion of value for the land underlying your subject.

Lots and lots of work and data analysis.

Good luck.

 

[Carnivore]

Call them back and ask why they need the lot value. If its for insurance purposes give them this:

http://accucoverage.com/

Sell it to them for $25.00 bucks.

Seriously, communication with the client is essential. Then telling you to do something is over the top as opposed to both of you discussing there needs and how you can fill that need.