Sensitivity Analysis For GLA

[George Hatch]

Yes. It crossed my mind. They are a little bit similar looking but I don't have california MLS I am just looking at zillow. But seriously you have to be ****ing with me that your opinion of site value for 3001 N Verdugo Road is $250k.

The site sale is the sale; I can't help that. Do you think the difference in grading/site costs approaches $400k? If so, then why is the one sale for a level lot with no plans but some preliminary site improvements top out at $430k? Bear in mind that was the all-time high sale for a land-only transaction in this size range that didn't include approved plans.

You don't even want to know what some of the lower priced land sales sold for in the areas that have really serious topo issues. Sites that really are 45* up from the street.

 

[Joe Flacco]

Okay George. I will take your word for it.

 

[George Hatch]

Joe, go back to post #69 for another example in that same town, albeit not quite as extreme. I would agree that these situations are the exception and not the rule, even in this region; but I can find comparable examples in a number of areas in L.A, Orange and San Diego counties; and I'm sure the trend continues right up the coast as well as some of the resort areas.

The point was and is that we're not measuring the actual costs in isolation to everything else; we're measuring the market's reaction to these attributes within the context of their local market conditions.

 

[Joe Flacco]

No. You are ****ing with me. If you are actually appraising 3001 N Verdugo Road and you were required to complete the cost approach, your sales comparison approach value is not going to be $700k with your cost approach value being $350k-$450k. You are ****ing with me.

 

[George Hatch]

It won't be that if I do it the way you do it by using land-value-by-I-backed-into-it. The value conclusion might get to $700k if I use the actual site sales data to support my site value and if I use the same approach to calculating accrued depreciation that M&S has used for their depreciation tables. (I don't actually know the answer to that because I haven't completed that analysis - I was just looking at site values).

The problem you would face in this situation is that NONE of the available site sales data come anywhere near to supporting your opinion that the site must be worth $600k or more. We come to the disconnect between what we think "should be" vs "what is".

I showed you another example in So Central LA where the site values vs sale prices of the old homes don't support your approach to depreciation or calculating the contributory value of the beater construction. I can show you examples of the same theme, albeit to varying degrees, in quite a few areas in this region. I am not discussing this issue in bad faith or cherry picking one example in isolation or out of context.

You never did respond to my question of how the $188k site sale becomes a $600+k land value for the 60 year old home across the street. Or how the $430k *shovel ready* site value on the north end of town becomes a $600+k land value for each of the homes in its neighborhood.

You didn't respond because you don't have an answer. Because that isn't what's happening.


FYI, I taught the 8-hr comprehensive M&S course for the Residential Cost Guide to appraisers for 15 years, and probably 50% of the SFRs I've appraised or reviewed in the last 20 years have involved either construction or major remodel, not including the years I spent working on staff at a construction lender where we had a full-time cost estimator working on staff to analyze contractor cost breakdowns. I'm not some idiot who values SFR lots on the price/sf basis or who has never seen a contractor's cost breakdown for a spec home.

 

[Joe Flacco]

I don't do it by "land-value-by-I-backed-into-it". I use actually comparable site sales. You are smoking crack if you think a developer will pay the same for that 45 degree lot as a flat level lot. Whatever they build on that lot is not going to have windows to the rear. You have somebodys driveway right at the edge of your lot at the top of the hill. It will not have outdoor space to the rear. You have to walk up a level to get to the main level.

Site characteristics are the main driver of difference in values for those type of properties.

 

[Joe Flacco]

That $430k "shovel ready" is a different area of Glendale. 4025 Willalee Avenue which is either poor condition or tear down is more similar location than your property on 3342 Stevens.

 

[Joe Flacco]

What you are observing is a major adjustment for that lot being a POS.

 

[George Hatch]

Here's a pro-tip for you to consider: Sometimes the results of two approaches to value reach very different conclusions. That's what "reconciliation" is for.

I actually see these situations more commonly among the older non-residential properties.

What are you going to do in a cost approach analysis when the site with the 100-yr old 4-plex is significantly overimproved relative to its HBU as if vacant; because the city of Long Beach downzoned those parcels 70 years after they were built out? I've had assignments midtown areas of the city of San Diego where the city went through and downzoned from medium density multi-family to SFRs, so that the 12-unit apt complex was a gross overimprovement for the site as if vacant, but yet still competes with other such projects where the improvements do conform to the current development criteria. If the price/unit value indicator is an aggregate of the contributory value of the site + improvements, and the site value as if vacant is 1/4th that of a multi-family zoned parcel of otherwise similar location and attributes then what are we allocating to the improvements and how are we classifying it.

They're obviously not part of the hard costs.

 

[George Hatch]

That $430k "shovel ready" is a different area of Glendale. 4025 Willalee Avenue which is either poor condition or tear down is more similar location than your property on 3342 Stevens.

As I said, you've got your facts twisted. Willalee wasn't a tear down, which you can tell is the case because IRL they didn't tear it down - they remodeled the existing 1951yb structure, and then the idiot broker called it "brand new construction". Look at the pics - that's a raised foundation, bro. Nobody has built houses on raised foundations on a level lot in this region since the early 1960s.

Google Maps has pics of this site. Compare to the MLS listing pics that are online.