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Site Value Adjustments

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Damon Young

Sophomore Member
Joined
Jun 15, 2003
Hello All,

We are doing an appraisal near Peyton, Northeast of Colorado Springs.

My research shows two clusters of prices in the area for homes on 5 acres. The first cluster seems to be about 270-280K, the second cluster 300-330K.

To me, the biggest difference in these clusters is the site. The lower priced ones are on open prairie, while the higher priced ones are heavily wooded (in the Black Forest).

Talking with realtors who specialize in the area, I am told that the premium for a wooded lot is 15-30K or more. In fact, the last 5 acre wooded lot just sold here for $110K, while the un-treed lots are going for 60-70K. (the owner ofd the subject property paid $45K for his lot 1.5 years ago when he had his home built).

These lots and homes are all in the same subdivision, but not necessarily that close, due to the size of the lots.

Here is my dilemna, I really feel that the subject property deserves a 30K lot premium. My partner feels that a site shoudl not be adjusted more than 10K, or "we are just asking for the underwriters to send it back." There is no pressure on us to bring in a value, but I want the appraisal to accurately reflect its worth.

Any opinions out there?

Thanks,
Damon
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
What subdivision? A lot premium of 30K is probably not warranted or supportable for open prairie land in Peyton. Black Forest is another matter. Those timbered lots do bring premium prices these days. Be careful of beetle kill and mistle toe infestations.
 

Damon Young

Sophomore Member
Joined
Jun 15, 2003
Hey Mike,

The Peyton Pines subdivision. That subdiv contains both the prairie lots and the wooded lots. I am looking to establish the site adjustment between a treed and untreed site.

Damon
 

liznindy

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Indiana
If you have market evidence to support a $30K adjustment, then the $30K adjustment should be made. To use $10K just because the underwriter is more likely to accept the report is not a good reason to make an inferior adjustment. (IMHO) Adjustments should be market based.

Of course you should explain the reasoning behind your adjustments (as you have here in this forum).
 

Blue1

Elite Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
California
Just did one in a new subdivision.......1/2 acre lots selling for 90K......1/4 acre lots selling for 50K......Hence a 40K adjustment on lot size alone.......Just sent it in.....we'll see......
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
Facts are facts. If the site adjustments are out of guidelines, but supported by factual data, so be it. However, be ready, that pesky underwriter will want a sale with equal site value or greater site value to "bracket" because it is on their checklist.
 

Walter Kirk

Senior Member
Joined
Jun 24, 2003
Professional Status
Licensed Appraiser
State
New Jersey
It sounds like you have a good basis for your site adjustment. An underwriter may object but if you properly explain your logic all but the dumbest underwriters will understand. Oh, by the way, the dumbest underwriters are about 80 % of all underwriters.
 

Verne Hebert

Senior Member
Joined
Feb 25, 2002
Professional Status
Certified General Appraiser
State
Montana
Tell the underwriter to quaf a bigger shot of MAALOX. If your data supports it, include it into the report and "apply the adjustment". They you parter to buy 12 year old single malt and clear the cobwebs from his brow-beaten mind. You are an appraiser.
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Damon,

Smack your partner for me. :rolleyes:

I run into this dilemma all the time, and I can still hear my mentor telling me not to make those big site or view adjustments.

I learned on my own that this wasn't necessarily true if you have at least one (preferably two) comps with features similar to the subject to justify the difference. Just bracket and explain, and try not to exceed a 10% line adjustment. The chances that the underwriter would have a problem with it are decreased if the LTV is low, so all the more reason to run with your market data.

Someday that homeowner will need another appraisal or know a neighbor who needs one. Take your chances, make appropriate adjustments with good explanations, and someday down the road you may discover that you are considered the appraiser who should be called for an honest and expert appraisal in that area. Beats the heck out of being the 'clueless' appraiser that 'didn't understand the market'.
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Damon, ......You mention "clusters of prices". Is your subject "in the pines" or "on the prairie" ? Can you select enough sales for homes in the same setting as your subject and avoid any lot adjustments altogether ? If this guy bought the lot a mere for 1.5 years ago for $45K, and it is thought that it might deserve a "premium" attribute of $30K.....then that must be one heck of an attribute. I find the nature of stated lot "premiums" to be most impacting upon that first person to buy that vacant lot, and it's all part of the sales technique effectively carried out by the seller, broker or agent. One really sees this closer to and in the city with the Pikes-Peak view vs. No-Pikes-Peak view scenario. "If you don't buy this vacant lot WITH the good view now.....someone else surely will in the next few days, and you'll lose out on the last good lot in this subdivision". Kind of puts the pressure on them to decide fast, and belly-up with the "premium" payment above-and-beyond the sq.ftg. of the land alone.

All too often this higher ground perspective also involves a rapid drop in slope of the potential back "yard" and the guy has some major engineered terracing project to tackle after he moves in, and all those costs, to end up with the view but no flat rear yard to set up the summer croquet game. Once built, that premium they paid is readily absorbed into the entire property more and more over the next few years as that property matures. I just did a report in town, and noticed a for-sale property very similar to subject. Yes, it had good rear yard deck view of Pikes, and was even stated in the text of the listing that "Owner paid large premium for this good view." Sure as shootin'.....and the offering price was a definite $30K higher than the sales I was going out to get pictures of nearby. Clearly they think the view will score them $30K "value". Might be interesting to track that listing and see how it ends.
 
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