Retrospective Appraisals--can Zoning Changes Be Considered?

[IANNOZZI]

Hi all!

Question: In a condemntation matter, when doing a retrospective appraisal (ie., in 2008 with effective date of 2002), and setting forth a highest and best use (both before and after taking) can you insert a highest and best use for 2002 that you know is not possible from 2003 on?

Specifically, I am reviewing a retrospective appraisal with an effective date of 2002. The appriaser indicates that the highest and best use of the Subject Property is a commercial use, assuming that zoning would be granted. Everyone knows that as of 2003 onward no such commercial use has been contemplated and in 2003 such a use was denied by the ZHB in its entirety.

I have found no support--either way--save for statement 3 which speaks to data and cut-off dates for valuation purposes.

Please advise--it seems counter-intuitive that an appraiser would be able to not consider knowledge of zoning when determining a highest and best use--retrospectively.

B

 

[Marcia Langley]

Ian,

Just to make sure I understand you ...

You say the original appraisal was a several-year retroactive appraisal that used a hypothetical condition that the zoning had been changed to commercial? And that at the time that appraisal was done the appraiser already knew that the zoning never got changed?

I find that a very odd hypothertical condition and wonder if I understood you correctly?

 

[leelansford]

Ian,

Just to make sure I understand you ...



I find that a very odd hypothertical condition and wonder if I understood you correctly?

I also am uncertain if I understand.

 

[IANNOZZI]

Interestingly, the appraiser notes that no extraordinary assumptions or hypetical conditions were considered, yet he notes that a commercial use (such as a bank branch or small office) would be readily permitted, despite the fact that the property is zoned R-2 and in 2003 a comemrcial use was denied and the Township has never considered rezoning the property

 

[Marcia Langley]

Ian,

In that case, and unless additional factors come to light, it appears the appraiser made two errors. One for not using an HC and another for stating a zoning change would be easy when the record shows it was not.

Relating this to a current (as opposed to retroactive) appraisal, an appraiser is always on thin ice when they speculate that a zoning change would be easily obtainable. Usually, an appraiser simply cannot know that.

But for a retroactive appraisal, it seems especially inappropriate when it is known that the zoning never changed.

I'm betting the appraiser never knew that the zoning change had been rejected all those years ago. He was very foolish to opine an easy change but even more so if he did so without verifying that data.

 

[Michigan CG]

Wait a second. Did the condemning authority deny the zoning because they wanted the property?

Is it reasonable for that property to be zoned commercial?

If the condemnation were not to happen is it likely that the property would now be commercial?

What did the condemning authority do with the land?

Did they build on it?

What are the surrounding properties?

Have other similar properties had their zoning changed?

Could it be that the reason the zoning change was not granted was because the municipality didn't want to pay the more for the property?

 

[IANNOZZI]

only a portion of the property was condemened--to effectuate a road widening.

The issue here is

1) we have an aprpaisal where it is stated no assumptions/ hyp. conditions are made;

2) we have a retrospective appraisal opinion a highest/best use as commecial, contrary to zoning and past history

3) my point, aren't you prohibited from opining a highest and best use based on a change in zoning when there is no reasonably probability that sucha zoning change would be permitted--particularlly here--were we know it is not permitted

 

[Fred]

only a portion of the property was condemened--to effectuate a road widening.

The issue here is

1) we have an aprpaisal where it is stated no assumptions/ hyp. conditions are made;

2) we have a retrospective appraisal opinion a highest/best use as commecial, contrary to zoning and past history

3) my point, aren't you prohibited from opining a highest and best use based on a change in zoning when there is no reasonably probability that sucha zoning change would be permitted--particularlly here--were we know it is not permitted

As to #1, I don't believe it is possible to do a partial aquisitiion assignment without hypothetical conditions. Generally, these are done by subtracting: value before taking minus value after taking. Well, only one of those properties (before and after) can exist at any one time. The other one has to be hypothetical. That said, there are necessary hypotheticals and assumptions as well as bogus hypotheticals and assumptions.

As to 2 and 3, what you are saying about "reasonable probability" is generally correct. But reasonable probability has to be measured on what a reasonable person would have known and anticipated in 2002, not necessarily what is known in 2008. In January, it was reasonable to anticipate that the Patriots would win the Super Bowl. It is theoretically possible for the 2002 market to have been anticipating rezonings that never materialized.

I would also speculate that since you are using the "reasonable probablility" standard for highest and best use and referring to statement three, this isn't exactly your first stop on the information trail.

 

[larry b]

There is entirely too little info provided to give you advice that would not be missleading. The issues that Tim Evans appropriately alluded to fall under the realm of "project influence" which, typically must be dissregarded in the valuation (including HBU decisions). Provide more info and we'll provide more meaningful answers.

 

[Bobby Byrd]

Always commercial.

Whenever property is being acquired by a government agency, its highest and best use is always whatever the highest land sale an appraiser can find, no matter how far away.

lol