Presumed Subdivision

[J Grant]

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.

Your land won't be worth that much (Above) that land the house was demolished etc. your land is only worth the extra contributory value. you might want to include that sale of vacant land in an addendum, state that if theoretically, if an owner decided to demolish the house and sell off the lots, the above comp suggests the lots would be worth close to 2.4 million, however, you are appriaing the subject as is, therefore, the contributory value of the lot is only 1.6 million ( or whatever you think it is) in other words, if the subject as it exists on the land it has appraises for 2 million ( guessing) would it be highest and best use to demolish it, which might cost 200 k, and sell if for 2.4 million, which after realtor fees the owner is left with little profit? what the house is worth now with land, vs cost of tearing it down and potential profit would tell you what hghest and best use is, plus market trends, are most homes in area on large lots torn down, or are they left standing and sold with the land for extra privacy and building guest houses, tennis courts and the like

 

[Dennis J. Black ASA IFAS]

AS IS does not relate to the improvements. It relates to the rights the property owner holds and this owner apparently owns the right to have two lots with each being very valauble. This is Highest and Best Analysis.

As far as the historic aspect each of you read that into the equatation.


As far as being a consulting assignment go read USPAP and you will learn that this is not a consulting assignment. It is an appraisal. It just is not one which can be performed by a form filling, lender guideline following NITWIT.

 

[Gary Bartels]

I think this hits the nail on the head. The house is not landmarked and zoning provisions would indeed permit the subdivision. So yes it is a H & BU analysis. As you might guess, the client and her attorney are not interested in that analysis in order to settle the estate taxes.

 

[Lee Lansford]

I think this hits the nail on the head. The house is not landmarked and zoning provisions would indeed permit the subdivision. So yes it is a H & BU analysis. As you might guess, the client and her attorney are not interested in that analysis in order to settle the estate taxes.

Yeah, they may not be "interested", but it is the responsibility of the appraiser to develop and communicate a credible appraisal.

 

[Gary Bartels]

I am all too aware of this fact.

 

[Michigan CG]

I think this hits the nail on the head. The house is not landmarked and zoning provisions would indeed permit the subdivision. So yes it is a H & BU analysis. As you might guess, the client and her attorney are not interested in that analysis in order to settle the estate taxes.

Yeah, they may not be "interested", but it is the responsibility of the appraiser to develop and communicate a credible appraisal.

How much do you like your license? I would sure hate for a misleading report to be turned into a taxing authority only to have them get it reviewed and find it misleading.

Let's create an extreme example of your situation: There is a SFR located on 1.2 acres across the street from the world trade center. Is the highest and best use for a SFR? No, but your client wants you to value it that way. Are you going to heed to your client's request. If you do, send your license into the state, you won't need it any longer.

 

[Gary Bartels]

Thanks everyone for confirming my conclusions. H & BU questions always have a degree if subjectivity, and I for one hate to see classic older homes demolished to make way for more MacMansions but que sera, sera.....

 

[Farm Gal]

OK - I am going to act as devils advocate here... The cleint has a need - to determine 'as-is' value as of a past date under SPECIFIED physical conditions.

Now the decedant obviously had not intended as of the DOD to demolish the house, or the dozed woulda already rumbled through... While the speculative market as of the DOD may have included a need to demo and sell vacant buildable lots, what would the absorbtion time have been for the dual lot sales, costs to demo, carry costs of demo and eventual ROI... as opposed to appraising the HOUSE on the 'oversized/ subdividable' lot with ?? contributory (speculative) value for the overimprovement in land size?

C'Mon folks at some point you may have to address the H&B value issue directly but until you think or prove it out all the way, is it really that cut n' dried?

There are a heck of a lot of old rambling ranch houses on oversized lots in Atherton & Woodside CA, within striking distance of big bucks that exist, will most likely continue to exist and sell and resell without teardowns despite what SOME of the neighbors were doing putting in thier megamansions... ergo ther is/was a historical market...

IF there are no other sales in the area, and all the sales on oversized going back many years are teardowns - you have a clearcut value /H&BU deal - otherwise even if the house has minimal contributory value I just do not see where you cannot solve the problem!

Among other things (like the clients need to settle the estate) - the house probably would sell as speculation to the guy who wants to bring in the dozer AS-IS not with the stipulation that the seller knock it down prior to closing!!! So can you figure in EP and risk?

Sometimes we are our own worst enemies...
So address the dang lot and then valeu the dang house!

 

[The Warrior Monk]

OK - I am going to act as devils advocate here... The cleint has a need - to determine 'as-is' value as of a past date under SPECIFIED physical conditions.

In this case, the conditions are not specified by the client...they are spelled out by the IRS.

There are instances where the IRS allows Value in Use, but it is under very specific circumstances, and this case isn't it.

C'Mon folks at some point you may have to address the H&B value issue directly but until you think or prove it out all the way, is it really that cut n' dried?

In many cases it is. For example, right around the corner from and in the village where I work, any home under $1,000,000 is either torn down (the normal situation) or gutted and greatly expanded within a short period after purchase. In other markets it is never done. In other areas it is questionable. That's why the HBU is necessary...the same situation in different market areas produces different results.