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Presumed Subdivision

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Gary Bartels

Thread Starter
Freshman Member
Joined
Apr 30, 2004
Professional Status
Licensed Appraiser
State
New York
My assignment is to give a market value for estate purposes. Subject is 88 year old classic stone English Manor (appx 4700 s/f) situated on the middle of a 1.297 acre plot located in the most exclusive neighborhood in my town. The issue concerns the land value. The plot can presumably be subdivided, after demolition, to create 2 legal building lots of over 20,000 s/f. A recent sale of an already subdivided nearby plot (17,000 s/f) was for $2.4 million.

If I value the subject "as is" how can I adjust the huge differences in land between subject and comps. There are NO comps with anywhere near this much land. I realize there is a highest and best use issue here but I would like to try and complete the assignment for the decedent's widow.

Let's hear it.

Gary
 

Dennis J. Black ASA IFAS

Senior Member
Joined
Mar 5, 2002
Professional Status
Certified General Appraiser
State
Florida
I think you are confused about "As is".

You did not tell us an approximate value of what is worth "as is improved".

If it is more valuable as 2 vacant lots then the "AS IS" value is that the improvements contribute zero. Those improvements are worthless trash that just happens to be piled in the shape of a house.
 

Gary Bartels

Thread Starter
Freshman Member
Joined
Apr 30, 2004
Professional Status
Licensed Appraiser
State
New York
By "as is" I am referring to my assignment which is to value the current house on the existing lot. I am not being asked to presume the plot will be subdivided.
 

Dennis J. Black ASA IFAS

Senior Member
Joined
Mar 5, 2002
Professional Status
Certified General Appraiser
State
Florida
Again,

"As is" refers to what LEGAL rights does the owner have, it is not confined to the description of the improvements. You have likely been engaged to value the FEE SIMPLE RIGHTS.
 

leelansford

Elite Member
Joined
Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
By "as is" I am referring to my assignment which is to value the current house on the existing lot. I am not being asked to presume the plot will be subdivided.

First, heed Dennis' suggestions.

If you have arrived at the opinion that the value is in the land, what Dennis has stated is correct.

If you are to "value the existing house on the current lot", it would appear that the improvements do not contribute to value (though may represent a short-term interim use awaiting subdivision and new development).

Remember: Land has value and improvements contribute to value.
It appears that your subject property has the value in the land and the improvements do not contribute to value.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
What is going on in the subdivision? are a good number of the older homes being torn down, and newer ones put up, ( with older homes selling basically for land value?) or are buyers purchasing the older homes, restoring/maintaining them but not demolishing them? that would be a guide to what the typical buyer in that area would want. Look at the listings, do they talk about potential for building a new home on site, or are the listings about how lovely the home is, architectural appeal etc?

If trend in subdivision is to tear down older homes and build new, and if the subject home is older, or has inferior appeal, and of the type that is being torn down, then the highest and best use/typical buyer would most likely be to tear it down and build on the large lot, or subdivide lots and sell one off.

But if very few or none of the older homes are being torn down, instead the market values them and typical buyers maintain/modernize them, then most likely highest and best use would be house the way it is, with larger than typical lot adding value for privacy, utility etc.

Because the house is located in the middle of the land, it would I assume it would cost a lot to tear the house down, and then how much could a buyer really get for each lot, and would the typical buyer do that in the area? An appraiser can only appraise to market trends and what typical buyers are doing, not appraise for what the one oddball buyer might do with a house. how to value the additional land, if highest and best use is as is...go outside community, or look at older sales, even a few years old, and see what houses on large lots sell for in comparison to similar homes small lots. .
 

The Warrior Monk

Moderator
Staff member
Moderator
Joined
Mar 30, 2005
Professional Status
Certified General Appraiser
State
New York
Not enough info to answer the question.

Are there restrictions as to what can be done with property (property in a historic district, etc.)?

Subdivisible lots can create interesting scenarios. For example, the owner of the property might be able to work out a deal where a guest house could be built on the property and a restriction placed on the property that it can't be subdivided in the future. You'll have to be familiar with the zone code to answer that one.
 
Joined
Jun 3, 2005
Professional Status
Certified Residential Appraiser
State
Colorado
The other responses are all on the right track -- I agree with Dave, that the local planning and zoning commission is the place to start.

With all of the variables, this sounds like it should be a consulting assignment, rather than an appraisal -- explaining the different value scenarios to the homeowner, depending on what is permitted and what is not.

I just finished a report on a property with 2.4 acres, where the minimum zone lot is 12,000 sf. However, because this parcel had never been subdivided, it would have to be approved by the planning and zoning commission. The homeowners just built a new house and weren't planning to subdivide, but the possibility of splitting off 1 to 3 lots was a significant factor in the report. Because it required city approval for any subdivision, the HBU was the present use, rather than the value after subdivision.

In this case, if the local authorities value the historic preservation of the existing improvements, they might be willing to allow a subdivision that maximizes the utilization of the excess land, along with the preservation of the older home. But these HBU possibilities are beyond the current use, and may or may not be permitted -- which is why a consulting assignment that explores the various options might be the best way to go.
 

Mike Boyd

Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
What is going on in the subdivision? are a good number of the older homes being torn down, and newer ones put up, ( with older homes selling basically for land value?) or are buyers purchasing the older homes, restoring/maintaining them but not demolishing them? that would be a guide to what the typical buyer in that area would want. Look at the listings, do they talk about potential for building a new home on site, or are the listings about how lovely the home is, architectural appeal etc?

If trend in subdivision is to tear down older homes and build new, and if the subject home is older, or has inferior appeal, and of the type that is being torn down, then the highest and best use/typical buyer would most likely be to tear it down and build on the large lot, or subdivide lots and sell one off.

But if very few or none of the older homes are being torn down, instead the market values them and typical buyers maintain/modernize them, then most likely highest and best use would be house the way it is, with larger than typical lot adding value for privacy, utility etc.

Because the house is located in the middle of the land, it would I assume it would cost a lot to tear the house down, and then how much could a buyer really get for each lot, and would the typical buyer do that in the area? An appraiser can only appraise to market trends and what typical buyers are doing, not appraise for what the one oddball buyer might do with a house. how to value the additional land, if highest and best use is as is...go outside community, or look at older sales, even a few years old, and see what houses on large lots sell for in comparison to similar homes small lots. .

I agree with JGrant. Highest and best use is sqawt if there is no market for the change. Also, the cost to subdivide can be significant and must be factored in to a H&BU analysis.
 

aussie ken

Member
Joined
Mar 11, 2005
Professional Status
Retired Appraiser
State
Australia
My assignment is to give a market value for estate purposes. Subject is 88 year old classic stone English Manor (appx 4700 s/f) situated on the middle of a 1.297 acre plot located in the most exclusive neighborhood in my town. The issue concerns the land value. The plot can presumably be subdivided, after demolition, to create 2 legal building lots of over 20,000 s/f. A recent sale of an already subdivided nearby plot (17,000 s/f) was for $2.4 million.

If I value the subject "as is" how can I adjust the huge differences in land between subject and comps. There are NO comps with anywhere near this much land. I realize there is a highest and best use issue here but I would like to try and complete the assignment for the decedent's widow.

Let's hear it.

Gary

Garry.......I wouldnt presume to know all the ins and outs of your locality but universally there are some constant truths to be done with this task.........is the home noted as a historic item?..........will local city zoning allow sub-division?.........would the use of similar but older sales be of help?..........as the report is being prepared for private purposes does this allow you more freedom to develop a valuation approach not so dog-matic as to those necessary for a mortgage report?
 
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