Site Value in Cost Approach

[hastalavista]

With the information given, it seems to me that the subject property has a highest and best use as a subdivision. If that is the case, it shouldn't be compared directly to properties with no subdivisible potential and than a value concluded. There are more steps to the process.

Agreed!
And, depending on how many lots can be "spun" from the existing lot, HBU may not be "as improved".

 

[CANative]

"Excess Land" has one flavor (Land that is not needed to support the use of existing or probable future improvements)

"Surplus Land" is a form (or sub-category) of excess land and can come in many flavors.

"Surplus Land" does not have much meaning without acknowledging that it is excess land first and then determining what can or can't be done with it.

IMO

 

[Webbed Feet]

You would be able to divide with the improvements as they are.

Mr. Lindner,

This makes no sense after your first post, and at least one following post, unless you are saying that having land that can be parceled into an additional building site without disturbing the existing improvements has absolutely zero value in your market. Which is not what your land sales are telling you.

You better find sales of properties, with similar large able to be parceled sites, and see if they are being parceled since the time of sale. Because now I question your analysis of the highest and best use of your subject. How have you determined that with the current improvements on the site, located where they are, that the site can be feasibly parceled? The owner has a survey and proposed site partition filed with the jurisdictional authority?

I am now reversing and joining the other most recent posts. It is sounding like a highest and best use analysis problem. Not a CA problem.

Barry Dayton

P.S. By the way, you are now starting to make this sound like it is a complex appraisal assignment. I ask this just so it is considered only. What is the transaction value and how are you licensed? You don't want to end up out of scope of your practice.

 

[Webbed Feet]

Mr. Kinney,

Thank you! I'll ask for that one for xmas. Looking at the two definitions I would think "Surplus" land might be hard to prove with it tossed in that it cannot be sold separately. In most cases one neighbor can certainly sell a few feet to an adjacent neighbor and do a lot line adjustment unless it is destroying a zoning required lot line set back. So given the definition I would say one would have to use the term very carefully for it to qualify under that definition.

But I'll take it! .. You are a scholar and a gentleman!

Barry Dayton

 

[The Warrior Monk]

P.S. By the way, you are now starting to make this sound like it is a complex appraisal assignment. I ask this just so it is considered only. What is the transaction value and how are you licensed? You don't want to end up out of scope of your practice.

It's not just the complex aspect of it that may be a problem. Many states specifically state that a subdivision analysis falls under the scope of practice of a general certified appraiser.

 

[Steve Owen]

Mr. Kinney,

Thank you! I'll ask for that one for xmas. Looking at the two definitions I would think "Surplus" land might be hard to prove with it tossed in that it cannot be sold separately. In most cases one neighbor can certainly sell a few feet to an adjacent neighbor and do a lot line adjustment unless it is destroying a zoning required lot line set back. So given the definition I would say one would have to use the term very carefully for it to qualify under that definition.

But I'll take it! .. You are a scholar and a gentleman!

Barry Dayton

Barry, I think the implication is that it cannot be sold as a separate tract. That would at least imply market sale, rather than a non-arms-length situation such as adjustment of lot lines. (Just guessing.)

 

[The Bob]

Is the site value in the cost approach "as vacant"?

The reason I ask is that the subject's lot size is excessive for the market area. By the sales comparison approach, the larger site does not add value in this market area. It appears the subject has excess land.

However, if "as vacant", the large lot could possibly be divided into two residential lots. Therefore, the value estimate in the cost approach would be higher than the value estimate used in the sales comparison approach. Let me explain, the value estimate used in the sales comparison approach for the subject was said to be equal to the value of the comparables which were on smaller lots. No positive adjustment for the larger site. Now, when doing the cost approach and locating lot sales, the site value for such a large lot is estimated to be more. "As vacant", the site has more value than "as is".

Am I correct in valuing the site differently for the two different approaches?

Is this an appraisal you are doing or is this a review? You make some contradictory statements. First, you say

By the sales comparison approach, the larger site does not add value in this market area

Then you go on to say

Now, when doing the cost approach and locating lot sales, the site value for such a large lot is estimated to be more.

I think you may be jumping around because you really didn't do a Highest & Use Analysis. There is a reason H&B use is the first analysis of the subject on the form. You do this first so you can select the proper comparables.

 

[Donny Lindner]

After doing more research, I was able to talk to the city planner. He says there is a easement at the rear of the property which would prevent any further development. Thus, not allowing for any subdivision of the site and any other development. Now, I know I have a large residential lot with an improvement.

From what I understand from some of the postings, this would be excess surplus land?????

 

[CANative]

Surplus land.

If you determine that highest and best use for a residential lot in this market is a quarter acre and you have a three quarter acre lot, the extra half acre is excess . Since it cannot be further subdivided as a separately salable lot, it doesn't have it's own HBU and would (could*) be considered surplus land. Value it based on comparison to other properties with similar amounts of surplus land.


*This is a matter where knowledge of the market is important. If zoning was just right and a neighbor wanted/needed a larger yard or more land to make a non-conforming lot conform and thus be buildable, the owner of the surplus land could sell that neighbor a chunk of it via lot or boundary line adjustment.

 

[Couch Potato]

Backwards IMHO

"Excess Land" has one flavor (Land that is not needed to support the use of existing or probable future improvements)

"Surplus Land" is a form (or sub-category) of excess land and can come in many flavors.

"Surplus Land" does not have much meaning without acknowledging that it is excess land first and then determining what can or can't be done with it.

IMO

I believe this is backwards (although common if not prevailing) thinking. It makes more sense to think of Excess Land as a sub-category of Surplus Land. If one looks at the definition of Surplus Land, Excess Land has all of the described characteristics; but Surplus Land lacks characteristics needed to fit the definition of Excess Land. Therefore logically, all land not required to support the improvements would be Surplus Land and Excess Land would be a sub-category of Surplus Land that also has the characteristic of being able to be legally separated from the parcel.

I believe teaching it the other way around is the major source of confusion on the subject. It is totally illogical.