Need help with site adjustments.

[doowkcol]

The subject is on a site that is larger than all the comparables in the neighborhood. What is the best way to make adjustments? To clarify, this is new construction. the subject and a comparable is the same builder. Subject site is 11,000sf Comp site is about 8,000sf. Same exact home.

 

[ramrcdk]

A bit more information may be helpful in...helping you. Do you have sales contract & all option pages for the comp w/ same floorplan & builder? Any lot premium charges?
Are there other new construction "not comparable to your subject" but where one could check-see -extract any difference for having a larger lot? and resulting comments for lack of bracketing?

If it helps, I had similar where comp lots were larger BUT : no lot premium was charged because the lot slope limited: use, utility, & appeal. I just explained it, no problem.
I have also had lot premium charges as the builder's way of...charging more. No reason for the premium charge or any difference in the report grid.
It's very questionable when builder's option prices aren't consistent. Point: with 1 inside sale, I typically request more than I need to check on "fair pricing".

 

[Michigan CG]

Any lot premium charges?

Around here lot premium charges are garbage and unsupported.

Subject site is 11,000sf Comp site is about 8,000sf.

I have this situation come up when I do subdivision sales. We have multiple subdivisions and some of them are completely builder controlled with one of the builders "charging" $50,000 for the 1/4-1/3 acre lots. Nothing supports that "lot charge" when compared to subdivisions that have land sales.

Here land values are pretty low and there are subdivisions where one can buy a parcel and build their own home, some with HOA restrictions on what you can build. The lot prices here are basically running $25,000-$35,000 and not the $50,000 that two subdivisions are "charging". The fallacy of the two subdivisions is that they have to compete on the overall price of the home with the other subdivisions so they might be telling their buyers that they are charging less than their competitors for the house but they make it up with the inflated lot charge.

Personally I make NO adjustment for land areas with a difference like you stated and I leave it to the reconciliation of value and address it qualitatively which is a tool most appraisers ignore.

Early last year a pretty smart loan officer called me and he had a land appraisal in a subdivision where the appraiser made goofy adjustments that had absolutely no support given that size is not a factor that can be differentiated here while location can be somewhat differentiated. The unadjusted spread was smaller than the adjusted spread which is just foolish and contrary to appraisal 101.

If you have no way to support an adjustment don't make it and address in reconciliation.

 

[Meandering]

What is the minimum lot size required by the zoning ordinance, and how much larger is your site, compared to the minimum requirement?

.

 

[Restrain]

Consider the builder premium, if any, compare against any sales of lots that you can find. If you can’t prove it, comment and move on.

 

[Carnivore]

I have to admit that I never seem to be able to understand what a Lot Premium actually is? I see the charge, I look at the site...I look around and I see other lots within the new s/d...and then I thats where it begins to make no sense.... Why was someone willing to pay more for THAT lot, but not willing to pay more for one of the other lots or should i say the builder does not charge the premium on other lots!

ftr, I hardly ever complete a new build sale within a new development.

 

[Mark K]

…..
Personally I make NO adjustment for land areas with a difference like you stated and I leave it to the reconciliation of value and address it qualitatively which is a tool most appraisers ignore.
…...
If you have no way to support an adjustment don't make it and address in reconciliation.

I do the same if all other lot amenities are equal (view, woods, pond, corner, etc.) unless the sites are high value and an adjustment can be proven.

 

[J Grant]

The subject is on a site that is larger than all the comparables in the neighborhood. What is the best way to make adjustments? To clarify, this is new construction. the subject and a comparable is the same builder. Subject site is 11,000sf Comp site is about 8,000sf. Same exact home.

There is not a huge amount of difference between 8000 sf and 11000sf. It can give a larger yard or more privacy. Typically (not always ) but typically I find in new construction the reason for a larger lot than others is a pie shape lot and it sometimes backs something not so great a main road or the like. So a lot depends on the lot what it backs up to etc. Did the builder charge a lot premium for it? A lot premium for a 3000 sf difference may or may not be recognized in open market outside of builder new sales - are similar recently built homes on that increment larger lot size selling for more or the same as other homes? If you can't find a reason to adjust for it make none and reconcile at higher end. If you find paired sales that show a premium for larger and get feedback from RE agents yes buyers consistently pay more than adjust. Either way you have to have support and reasoning for the adjustment or lack of one.

I usually do not adjust for this kind of site difference but do not want to give rote advice not to do so in your case.

 

[glenn walker]

Normally the homes in a subdivision that are located on the larger lots are corners-or at ends of culdesaks , so the buyer is often just paying extra for what he/she perceives to be a better overall location. As far as the builder charging premiums for the extra 2,000-3,000 Sq.Sf. on a new sale they can often get it. Whats interesting is if you end up going back into that same development 2 or 3 years later those so called premium lots often bring no additional premium. Much of this has to do with new buyers excitement and a good new home sales person often gets a $% in commissions on any and all premiums and builder upgrades he/she can sell.

SO WHAT'S that extra 3,000 Sq.Ft -Worth I would consider the overall site and location together as a package. Buyers emotions and motivations are more about what they see visually and not by the amount of Sq.Ft. Also many of the builders so called premium sized lots are the pie shaped-triangular-shaped or irregular shaped lots so a rectangular or square shaped 8,000 Sq.Ft lot is more usable than a 11,000 Sq.Ft. triangular shaped lot. I WOULD ALSO LOOK AT THE PLAT MAPS AND DRIVE BY THE HOMES ON THE PREMIUM SIZED LOTS to see what the differences in locations are ? If the premium sized lots appear to be better locations the I would consider making a combined lot and location adjustment in the location or lot grid and then explain that you combined the two adjustments into one to represent or include the location-view and lot size. Finally unless you can determine from outside sales that buyers are paying extra for the variance I would consider making no lot size adjustments.

 

[CANative]

I remember the last time I made this type of adjustment. I just don't remember which decade it was in.