Lot Size Adjustment

[RobRundquist]

Hello,
In regards to this, I'm new to appraisal- A commercial trainee with 1,500 hours thus far.
I had to have an appraisal done on my home, as I thought it unwise to appraise my own home : )
The appraiser used a 3/2 comp. of 1,400 sf, to appraise my 2,100 sf 5/3 using age of the homes as the main reason for comp. selection (or so it looks). Ignoring the fact that to find a home with the amenities of ours, built in pool and spa, cul-de-sac location blah blah blah... you'd need to buy a newer home.(15-30 years newer)
which I would then assume you'd make depreciation adjustments on...

Anywho, my question is for you res. people out there is ...
How is it justified to use a land value of $25.00 per square foot in the cost approach, and $1.00 per square foot in the sale comparison approach??? I asked three appraisers with a combined 65 years of experience between them and they couldn't explain.

The reason I posted this here, is that the appraiser came in 20-30k light as a result of the $1 /sf adjustment. Forget the fact that they said in follow up emails that my built in spa was personal property, and deducted from a comp with the same $4,000- I guess it is considered portable if all you need to move it is a back hoe??? : )

Confused- Rob

 

[Bill Rose]

Rob,

There are no standards for values to use for adjustments. Most appraisers use the number their mentor gave them and will use it for life.

The basic reason for the difference is that the land is valued at current market values, which are well documented.

The value for lot size depends on the market reaction to additional or less lot size.

In other words, if you buy a 5,000 s.f. lot you typically buy by the square foot.

When a buyer has a choice between two properties where one has 5,000 sf, and the other has 4,800 sf, how much difference does it make to the buyer? Not much, if any.

I believe lot size should be valued on a graduated scale for residential appraisals. Does 200 sf make any difference to the buyer? No. Does 2,000 sf make a difference? You bet.

 

[Tim Hicks (Texas)]

Rob,

It is impossible to answer that question without geographic competence. For example, in some areas, a one acre lot outside a town is worth no more than a 7,200 SF lot in town with curbs and gutters. Why? Because that is what the market dictates.

There is no way for any of us to really address the issues on your appraisal with any kind of real knowledge without actually knowing the property, the area, the comps available and market trends for that area. Your best bet is to ask a seasoned appraiser from your area to do a field review to get the correct answers you need.

 

[wyecoyote]

Cost does not equal value. That is the easiest answer. The cost approach is for if new. However, the sales comparison approach is for what the market is telling you.

For example: I spent recently $700 on a dog run. 18' X 14' 4 inch conc slab, wood fencing, covered half of it with a metal roof. Will I get a direct dolllar for dollar price. Nope. Will be lucky if there is any market value added for this amenity.

 

[Tim Hicks (Texas)]

Please disregard Bill's response with the unsupported phrase, "Most appraisers use the number their mentor gave them and will use it for life."


Unless Bill personally knows most appraisers, he has no idea what most appraisers do. :rainfro:


Is this why I keep reading "watch out for the duck!"

 

[RobRundquist]

The property is this...
8,000 sf. Two story, 5BR 3 Bth. built in gunite pool with built in spa. in suburban area, built in 1960's, in an area where property values have gone up 15-20% since 1/04 so far.
Comps were 4/2 1,740 sf, two story, 7,000 sf lot. 4/2 1,500sf one story, 6,500 sf lot, and 1,450 sf one story, 6,000 sf lot.
According to developers- some of the people we do commercial work for- as new development goes, they have substantial lot premiums for larger Cul-De-sac lots, ours was 1,000-2,000 sf larger than the comps. selected, non of which wer cul-de-sacs. I know ours is not a new property, but it would seem to me you'd adjust more than a buck a foot for these differences.

Anyway, I'm looking at this as a learning experience : )

 

[liznindy]

Rob,

I would recommend you 'pick the brain' of a Residential appraiser in your area. Residential appraising differs from Commercial (I only do residential) in some respects.....

Price per SF is not given the same emphasis as in commerical appraising. The market (buyers) of residential properties are not typically thinking 'ok, how much is this home or amenity going to cost me in price per SF?'


As Tim Hicks pointed out two sites which differ significantly in size may be valued equally. Gotta look to the market.

Now if the comparables utilized are, in your opinion, not the best available, I would recommend you get a review or another appraisal.

 

[Tim Hicks (Texas)]

Rob, here is some food for thought. Some people do not like cul-de-sac lots because it makes for a small front yard, limited frontage, less drive-up appeal and sometimes a larger back yard, but with more utility easements. Sometimes cul-de-sac lots are better because these are not issues. If you have a larger cul-de-sac lot, but barely room for your driveway, then there may not be a premium. Every situation, location and area can be different.

 

[Jungle Boy]

Originally posted by Bill Rose@Oct 13 2004, 10:29 AM
The value for lot size depends on the market reaction to additional or less lot size.


I believe lot size should be valued on a graduated scale for residential appraisals. Does 200 sf make any difference to the buyer? No. Does 2,000 sf make a difference? You bet.

Bill

your 1st statement is right on.

your 2nd statement is a contradiction of the 1st statement. I don't have to explain.

If the subject lot is 11,000 sf, and one of the comps has a 13,000 sf lot, would you give an adjustment ?

The answer is : maybe, maybe not.

So, please don't tell a newbie that 2,000 sf would definately make a difference.

 

[Walter Kirk]

As others have said, square footage differences in residential properties may not be as important as those in commercial properties. As to the lot size adjustment; Is the land useable or excess?, Does the larger lot have more frontage or depth? Does the zoning allow any additional use for this extra land or do you just get to mow it and pay taxes on it?

What bothers me is the list of comparables vs the subject. Are there other 8,000 square foot 5 bedroom houses in the neighborhood or is the subject an overimprovment? In too many cases appraisers use the most recent sales rather than the most appropriate sales as comparables to satisfy lenders.