Site Vs. Location

[Richard Carlsen]

The grid is the place where you make calls about each significant element of a property.

Market sees more sq footage as more valuable, you do a sq foot adj.

3 bedroom utility more valuable than 2 bedroom utility, you do a utility adj for bedrooms.

Fireplaces as desirable feature, you do an adj for fireplace desirability..

Basements as desirable due to increased utility, you do an adj for basement desirability and utility.

Property A with a site that has 100 feet lake front on lake with $3000/front ft value as being more desirable than the Property B next door with 75 feet of frontage, you do a $75,000 site value adjustment for the site as vacant.

Each element in the sales grid is judged on its own merit and the markets reaction to it in relationship to the same elements that are equal, greater or lesser.

The sales grid is nothing more than the place where the "as is" contributory value of the significant elements of comparable, relevant properties, known as comps, are compared with the significant elements of the subject. Each element is judged on its own contribution to value and then compared to the subject.

I don't think it is really that hard to understand.

 

[xm72mhd]

Originally posted by Jim Plante@Nov 13 2005, 11:33 AM
Thanks for all the insight and replies. Tracy read them, too, and agrees with you that she's right.

See, you've finally seen the light. This is one of the universal truths, period. It should be in USPAP and the Constitution and every other seminal document ever created. At least we got one thing done today.

EDIT: It may not have been on Moses' tablets, but its definitely chiseled in stone somewhere, 'cause all the girls have read it. Strike that, memorized it. Guys don't ever get to see it, but they are well advised to heed it, nonetheless.

Hey, I used the spell checker again. Let me say this. If Lee Ann recommends it, it has got to be good.

 

[Tom Wilson]

I often run into the following in small towns: Subject is on the highway a half mile from town on one acre. Sale is in town on a 75 X 140 city lot. This is a small town so you have to use the comp.

Both sites are worth $18,000 based on tons of data.

I've been at this over 25 years, but I am not smart enough to make the individual adjustments to make the lots equal.

I say "location, lot size, and view adjustments were combined to reflect the estimated net contributory value of each site as compared to the subject."

Never had a call back on this. It also helps with net and gross percents - I don't have to +$7,500 for location and -$7,500 for size.

 

[incognito]

I am afraid that I have to respectfully take exception to one of Mr. Carlsens' premises, which he states several times in this thread.
Mr. Carlsen states:

The adjustment is made to what the comps and subject's site is worth "as vacant".

Then states:

The sales grid is nothing more than the place where the "as is" contributory value of the significant elements of comparable, relevant properties, known as comps, are compared with the significant elements of the subject. Each element is judged on its own contribution to value and then compared to the subject.

I find these statements to be conflicting. First, I accept that appraisers "styles" in the handling of site, view and location adjustments vary considerably, without necessarily being wrong.

In the COST approach, land IS ALWAYS valued as if vacant and available to be developed to it's highest and best use. No questione here. However, in the sales comparison approach, I do not believe that this is the case. As Mr. Carlson indicates, "Each element is judged on its own contribution to value and then compared to the subject". The key word, applicable to ALL sections of the sales comparison approach, is "contribution", or contributory value.

Evaluating the site and view in the sales comparison approach, as if vacant, excludes the consideration of issues such as functional obsolescence, underdevelopment, overdevelopment, the concepts of excess land and surpluss land, and perhaps even some forms of economic obsolescence.

In my opinion, the site must be evaluated in relationship to the improvements on it, in the sales comparison approach, and adjustments made reflecting the difference in the contributory value of the site feature, as it reflects on the property as a whole, not on the value difference of the two sites, compared as if vacant. (UNLESS, the appraiser address on a line or lines elsewhere on the grid the issues of functional obsolescence (different than what is addressed on the "functional utility" line), and the other above mentioned issues. However, making so many adjustments would tend to make gross adjustments quite high.

I searched all of my text's trying to find some mention of adjusting site in the sales comparison analysis, as if vacant. I will be the first to stand corrected if someone could provide some reference advocationg this method.

Thanks....

 

[Don Miller]

In my opinion, the site must be evaluated in relationship to the improvements on it, in the sales comparison approach, and adjustments made reflecting the difference in the contributory value of the site feature, as it reflects on the property as a whole, ...

This technique would appear to result in differing contributory values for two identical sites next door to each other, but having different improvements.

Not sure if I understand.

 

[hastalavista]

Originally posted by Don Miller@Nov 13 2005, 01:47 PM


This technique would appear to result in differing contributory values for two identical sites next door to each other, but having different improvements.

Not sure if I understand.

I don't see a conflict if I understand the argument correctly.

Bill, would this be an example:

A site allows for a permissible use of either a SFR or a duplex. The site "as improved" is SFR. The value improved with the SFR is higher than unimproved OR as improved with a duplex.
The particular site is located on a busy street. The market indicates that busy streets create an adverse appeal for SFR's, and such SFR properties sell at a discount to non-traffic streets. A location adjustment for traffic is warranted for the SFR comparison.
However, as a rental duplex, the market indicates no rental difference and consequently no value discount for income properties. A location adjustment for a busy street would not be market supported.

Same site. Adjustments differ due to the Improvement located on site.

 

[incognito]

Don,

I think it is important to say that the improvements on the site don't necessarily have to reflect in different site contributory value. Just that it could..., and considering the sites, as if vacant, could result in errors.

An example:

Two 10 year old properties, A and B, are identical in all respects, except one. They are both located on .5 acre parcels, where .25 acre parcels are the most common. Demand exceeds supply for vacant buildable sites. Many in the market area are subdividing larger .5 acre sites into smaller .25 acre sites. .25 acre site values were $5000 10 years ago, and adjacent sites were easily available for $10,000 (.5 acre). Today, vacant sites are rare, and .25 acre sites sell for $75,000. (This is actually a very common scenario in several large market areas in area).

Both sites are IDENTICAL, and have the same value, as if vacant. Property A has the imporvements situated such that the parcel can not be subdivided (in the middle of the site). Property B has improvements situated on the site such that it legally and readilly can be subdivided (improvements located on one side of the site).

Long scenario, but I wanted to clearly lay it out. The presumption that the site adjustments should be made based on the sites, as if vacant, simply does not reflect the market, and recognize that the contributory value of the additional .25 acres on property A is MUCH different than the contributory value of the additional .25 acres on property B.

I can think of many other scenarios, but feel one is adequate to illustrate my point.

 

[Don Miller]

Still don't understand. Maybe I just have the wrong idea about location and view adjustments.

If the busy street does not affect the value of the site (since there is no loss at its H&BU which is duplex), it seems to me that the traffic penalty would attach to the improvements and be adjusted under "Functional."

If the traffic affects site value, I could see the location adjustment - maybe even a functional adjustment on top of that.

 

[Austin]

Jim:
I am not sure I am following your sale data accurately. You say the sales are comparable, the size ranges from 3.3 to 16-acres, there is excess land in some sales, and there are location differences.
How do you distinguish size influence from location influence? If you have excess land you have to value that too but it could indicate a different H & BU. You have a number of complex issues in that assignment. When you start mixing highest and best uses with size and location, excess land-that sounds like a serious problem of H & BU and comparability.
I don’t know the market and so cannot be more specific but based on what I understand about this problem I would back off and re-examine comparability of the sales. Look at the range of values and using your judgment and place the subject in the pecking order based on the same highest and best use assumption, then deal with the other issues. You can’t adjust for different highest and best uses or lack of comparability. That is what I meant by adjusting oranges to taste like apples. Why bother?

 

[xm39hnu]

Austin,
They tell you in school these days that you can't compare two properties which don't have the same H&BU. The reason for it is pretty easy to understand: Different uses, different buyers--and different market.

But two properties with the same H&BU can be compared. They may be very dissimilar and require outrageous adjustments, but they're still comparable. Can you compare a stick-built house to a MH? Sure! If both are real property, you can do it. Not very good practice, and it would produce a pretty ugly report, but you can do it if that's all you've got. You can do it because both properties attract single family owner occupants, and thus appeal to the same group of buyers.

The land problem you bring up--possible differences in HBU due to size--isn't much of a problem in this slow market. The range of feasible uses are pretty much as I've outlined in my previous post. And the HBU of vacant land is "leave vacant" in most rural areas. Now, you can build on spec, but you're gonna be waiting for it to sell for quite a while. Normal market times are 6-12 months near town. Out of town, it can be up to 24 months, depending on where it's located and how well it's marketed. In an area with a more active market like you work in, differences in HBU like you describe would definitely have to be considered carefully. And if HBU is different, you can't compare them.

You asked how to distingush size influence from location influence. The rural 16 acre site is valued like this: Typical rural site size is around five acres. The reason for this is that the state says you must have a perk test if the site size is less than 5 acres. Therefore, if you want to partition rural land, you do it in five-acre chunks, and that size is the most common. Two and three acre sites are also common, even though they require a perk test. These sites sell for $2,500 - $8,000 per acre, depending on location. Vacant land in larger chunks sells for between $250 and $2,000 per acre, depending on location, geometry, topography, access, and condition. The low end is logged-off, trashed-out, eroded land. The high end is located with frontage on a major highway with public electricity and water available. Excess land can be shown to be somewhere in the lower 2/3 of this range, again depending on the factors listed.

So a rural house site is arount 2 - 5 acres. I called the subject at 5 acres for the improvement site, and 11 acres excess land. It's excess because it can have its own HBU; access could be provided easily. But it's as-vacant HBU is "leave vacant." What would you say the HBU of a vacant lot in the desireable SD is? Same thing. There are only about 24 lots in the subdivision. Over half of them are sold. All but about six are undeveloped. Most of the sales are more than a year old. One spec house in this market has been built for over a year--no takers! So the lots are attractive to buyers who intend to custom build their homes. My conclusion of HBU for land in that SD "as vacant" is to leave it vacant due to the sluggish market.

So, you see, the HBU of both the subject and the comp in the desirable SD is the same: Leave vacant. Consequently, they're comparable.