Residential Land with Commercial Highest & Best Use

[The Warrior Monk]

And, I still am convinced that the "As is" zoning is a factor in determining if the current use is the HBU... it may be an interim use until it converts to something else and that is easily added to your analysis. BUT it is NOT commercial yet.

My point is simply that the potential for rezoning exists and may affect value. A residential-zoned property with the potential for rezoning may not have the same value as a residential-zoned property without the potential for rezoning. How the valuation of the particular property is performed depends on a whole host of factors.

 

[Lookingat50]

This assignment is the perfect example of someone getting in over their head. There are so many things that some appraisers are not exposed to and they have no clue about the possibilities and how to properly appraise the property.

There are so many that say "it is just a land appraisal"....many do not know what they are signing up for when taking these assignments.

The smartest appraisers are the ones who know when to turn down an assignment.

I agree with your advice of turning down assignments when warranted... And this forum is a wonderful way to help steer those decisions, gain further competence, & identify what we don't know.

I respectfully disagree with your comment about being a perfect example of someone over their head... that statement is a perfect example of a blanket accusation. You do not know what you do not know.

 

[Pittsburgh Pete]

I agree with your advice of turning down assignments when warranted... And this forum is a wonderful way to help steer those decisions, gain further competence, & identify what we don't know.

I respectfully disagree with your comment about being a perfect example of someone over their head... that statement is a perfect example of a blanket accusation. You do not know what you do not know.

Extraordinary cyber-assumptions are very common here. Pointed that out to you early on in this thread. Good luck with your assignment.

 

[Michigan CG]

I agree with your advice of turning down assignments when warranted... And this forum is a wonderful way to help steer those decisions, gain further competence, & identify what we don't know.

I respectfully disagree with your comment about being a perfect example of someone over their head... that statement is a perfect example of a blanket accusation. You do not know what you do not know.

I am (was) not trying to be condescending. First of all.....

I have been asked to appraise a lot that is currently zoned residential but with a highest & best use as a commercial lot. It is currently listed as a commercial lot and several similar lots in the immediate area have been rezoned from residential to commercial zoning......

If the Highest and Best Use is commercial then you are above your license level.

If the Highest and Best use is commercial then you need a very detailed Highest and Best Use discussion, which will most likely be multiple narrative pages.

I have seen very few multiple page H & B analyses from residential appraisers. But you could be one of the ones who is capable of this.

Secondly, we do not just use a hypothetical (condition) that a property can be rezoned to commercial. You must talk to the zoning folks, building department people, research what the other property owners did to get a different zoning and what the criteria is for getting the rezoning.

Most likely there are different set backs, parking area rules, L/B ratio requirements, building height requirements (limits), specific allowable uses (no naked lady bars, or maybe naked lady bars are permitted) and many other unknowns.

All of this analysis is part of this type of assignment. In this type of assignment I do not know of any folks that I have worked with who have done this on any type of form. This is a narrative report with very specific H & B analysis and not simply just a land appraisal.

......I am convinced my comps should reflect similar HBU as my subject with a hypothetical assumption it could be rezoned from residential to commercial - which is what has been done with my comps......

You are convinced because.....? Are the land sizes similar, frontage.....there are a lot of unanswered questions.

Is H & B for single tenant improvements, multi-tenant improvements, could the Highest and Best Use be for sale to one of the adjoining properties for expansion?

......The hypothetial assumption may pose a risk for the bank, but not me. It allows me to predict it's "market value" based on it's "highest & best use".

Once again it would be a Hypothetical Condition or a Extraordinary Assumption and actually as you are presenting it I would use the latter.

The Extraordinary Assumption would be that the property can be rezoned, A Hypothetical Condition assumes that the zoning does not yet exist but is used for the analysis. Without the Extraordinary Assumption that the property can be rezoned I think the analysis would be dead in the water.

But maybe this is splitting hairs.

......The hypothetial assumption may pose a risk for the bank, but not me. It allows me to predict it's "market value" based on it's "highest & best use".

This statement really is something that should be of concern to your client. You are supposed to give the bank an opinion of value....if they own it tomorrow what can they get for it? You are an agent of the bank.

But good luck on the assignment.

 

[Lee Lansford]

My point is simply that the potential for rezoning exists and may affect value. A residential-zoned property with the potential for rezoning may not have the same value as a residential-zoned property without the potential for rezoning. How the valuation of the particular property is performed depends on a whole host of factors.

Dead-on target.

 

[Pittsburgh Pete]

My point is simply that the potential for rezoning exists and may affect value. A residential-zoned property with the potential for rezoning may not have the same value as a residential-zoned property with the potential for rezoning. How the valuation of the particular property is performed depends on a whole host of factors.

Say what? "Dead on target" you say??? Proofread, lad!

 

[The Warrior Monk]

Say what? "Dead on target" you say??? Proofread, lad!

Fixed.






Don't tell TC...

 

[Roger Murdock]

I have been asked to appraise a lot that is currently zoned residential but with a highest & best use as a commercial lot. It is currently listed as a commercial lot and several similar lots in the immediate area have been rezoned from residential to commercial zoning.

Therefore, I plan on appraising this lot against other similar commercially zoned lots but with a hypothetical assumption that it can be rezoned to a commercial zoning.

Sound right?

If there is reasonable evidence supporting the likelihood of this lot getting a zoning change, and in your opinion this would dictate the value dynamics of the property, then it must be appraised in this light.

However, this is not so much a case for a hypothetical condition, but rather for an extraordinary assumption. You are appraising that which actually exists, based on the extraordinary assumption that the zoning can be changed. I would go so far as to say that if you have very strong evidence that the zoning change is highly likely, you could even go without an extraordinary assumption per se, and just disclose it as a reasonable assumption.

 

[Lee Lansford]

...

...I plan on appraising this lot against other similar commercially zoned lots but with a hypothetical assumption that it can be rezoned to a commercial zoning.

Sound right?

Extraordinary Assumption OR Hypothetical Condition?

 

[David Mescon]

Although you didn't specify the intended use of the appraisal or any other specifics of the assignment in youyr original post, I'm basing my response on your subsequent indication that the land is being appraised for lending purposes. I have extensive experience appraising similar properties. Your best comps, of course, would be those which had similar use potential when listed and sold, and were subsequently re-zoned as commercial. In the absence of any such comps, your next best bet would be sold properties which have similar potential but which have not yet been rezoned.

The commercial potential of the subject property adds an element to the assignment which would exceed the scope of your licensure. You should partner up with a certified general appraiser for this due to the commercial element. Working with a certified general appraiser who has experience with such properties will also take care of any possible issues relating to lack of competency.

If you don't stretch your wings you will never learn to fly. Good luck on this and have fun!