Site Vs. Location

[Mike Boyd]

I do not believe there is a single answer to this question. Circumstances vary from market area to market area. I rarely adjust for lot size but I might adjust for site utility.....size is just one component of utility. For example: two waterfront lots may have the same total size but one might have significantly more water frontage. Additionally, the one with less frontage may have a sandy beach while the other has rocky shoals. Those adjustments, or lack thereof, would be under SITE. However, if one of the lots were adjacent to a mobile home park and the other was among homes similar to the one under comparision, then you would have a location adjustment.

It is interesting and helpful to look at new tracts of homes and see if there is a price difference between model matches based on site size. In my market area there is no value difference if both lots are standard size. By standard, I mean what would normally be considered a full size lot. However, if the project is in a PUD of deatached homes on tiny sites, there would be considerable difference in value for even as little as 500 square feet. I once did the bulk of all the appraisals in a tract where many of the lots were along a gentle slope. Going up the slope, adjacent lots were no more than 2 feet difference in elevation. However, the homes became increasingly more expensive (for model matches) with each step in the elevation. There was not a view amenity in the classical sense. However, the higher UP the slope the more one couled look DOWN ON his neighbors. While I adjusted for VIEW, I explained that the market accepted the higher prices as SNOB APPEAL.

 

[Fred]

Jim,
Obviously, you can report it either way: as a lump sum or split into two, with rational explanatin (or explicit proof. )

Theoretically, it’s hard for me to believe that duplicate houses built on a $25,000 acre and a $500,000 acre will have a $475,000 difference in price or value. How can location only affect part of the property?

Austin

Can you adjust an orange to taste like an apple?

Maybe. If you can adjust cost into value, why not? Water into wine can’t be far behind. I saw David Copperfield turn th e Sttatue of Liberty into vacant space. But that just involved switching cameras.

 

[Big ole Boy]

I usually determine the land values for my subject and my comps and make adjustments for both location and site size to reflect the value differences as follows:

In the adjustment column for location I put the words "see below" and make a combined adjustment in the site column. THis way you can make the distinction about location and site, but make only one overall adjustment.

 

[Bill Baughn]

A couple of comments here...

For those of you who believe the mentor is ALWAYS right (wife or not) need to get a new mentor and start thinking for yourself a little more.

Regarding the comment that buyers will always pay more for a larger lot, that isn't always correct. I had an appraisal where I was able to show that having the larger lot was inferior to having a smaller lot in this one neighborhood. I understand that this is contrary to most common beliefs but we are suppose to report facts not our beliefs or so I thought.

Another comment was regarding builders and their lot premiums. Personally to me here lately it has been my experience that builders are using lot premiums as a way to jack up their sales prices so that they can use a lower advertizing price to swoon potential buyers from their competors. For the most part lot premiums are BS.

Now to the question at hand and I am sure it has been handled in one of the other post but here goes once again. Location has to do with how the lot sits in relation to the other comparables. Whether it is a corner, interior, flag, or cul-de-sac lot, is it on a traffic street or does it back to apartments? View is a view and there is a separate line for that so no more on that subject. For site, most appraisers will put the lot size typically in square feet as compared to acres on most lots under 1 acre in size although different choices may be made in different parts of the country. It seems to me most lenders would rather see 3,000sf rather than 0.07 acres (which is not totally accruate but rounded to the nearest hundred. To be accurate you might put 0.068871 but that would only confuse the reader even more). From what I see adjustments for size are just for that size, and has nothing to do with location.

This comes from a non-conforming self-thinker...

Bill Baughn

 

[Mike Garrett RAA]

Bill...

I was the one who said.....a buyer "probably" would pay more for a larger lot. Make yourself a buyer for a minute. If you had two identical houses and one was on a 5,000SF lot and the other on a 10,000SF lot, would you pay a little more to have the larger lot? In my market they usually do. Almost without exception, builders will charge more for the house on the larger lot. I do concur that "lot premiums" are generally "additional builder profit" and that is ok as long as the market recognizes that and is willing to pay it.

I also like to use square footage for lot size below an acre BECAUSE it allows for easier comparison AND it is how our assessor's office reports the lot size on their property card (website).

Everyone should look to a recognized expert in filling out forms....Henry Harrison's Illustrated guide to the URAR. Check out how he handles the lines in question. There is no "one way" to do anything ... but there certainly is bench mark or reference point and I like Harrison's guides. It also lists Fannie Mae guidelines, FHA handbook 4105 references, and VA supplemental guidelines. Good stuff, thank you Mr Harrison (heard he is now a registered member of the forum). I have recommended his books to my students for years.

 

[CJHNV]

Originally posted by Mike Garrett@ RAA,Nov 13 2005, 08:56 PM
Almost without exception, builders will charge more for the house on the larger lot. I do concur that "lot premiums" are generally "additional builder profit" and that is ok as long as the market recognizes that and is willing to pay it.

It's getting so bad around here that almost all of the lots have a lot "premium" instead of a bit more of a fee for being a "premium" lot...
We've seen lists of "extras" for some of the most typical, interior, generic lots and there will be a $ 5000 +/- charge for "lot premium."

Don't they know... when all of them are *special* then none of them are?!

Cindy

 

[xm39hnu]

Originally posted by Bill Baughn posted...
Location has to do with how the lot sits in relation to the other comparables. Whether it is a corner, interior, flag, or cul-de-sac lot, is it on a traffic street or does it back to apartments?

Bill,
I don't want to seem too nit-picky in response to my request for opinions, but I think while the first sentence is correct, the second muddies the waters. After thinking about this for a while (and getting wire-brushed by my wife--who is NOT always right) I've come to the conclusion that the Location line should handle differences in value solely attributable to location: waterfront, golf course, inner S/D lot, or two blocks from the main drag. Site seems to address the qualities in your second sentence, all of which pertain partially to access except for the bit about the apartments, which should be in the location line.

On vacant land, I use five or six different valuation criteria: Location, access, topography, geometry, appeal, and (if the data shows a unit differential) size. So we agree where the location adjustment goes. It appears that the rest belong on the site line. It also appears that I should add another conditional criterion (view) to my list.

Just so you know, my wife and I review each other's work. This time, she caught me double-dipping. I've caught her in some things just as bad. Edd was being facetious when he told me to learn that "she's always right." Believe me, we both know that either of us can wind up with his/her head in an inappropriate place from time to time.

 

[xm39hnu]

Just another note: It seems that there's no set way to do this ALL the time. Some work will require combining location and site; some will require separating location from other qualities. In some problems, location, site, and view all might have to be combined due to difficulties in separating them.

For these latter ones, relative ranking is vastly superior to trying to break out some of these qualities with really thin data. Steve Santora introduced that to me (Thanks, Steve) and it has worked well on quite a few assignments. The forms don't lend themselves to qualitative analysis very well. But sometimes it's the only viable way to complete an assignment.

 

[Mike Garrett RAA]

Cindy....I have found the same to be true here too. All lots have premiums???? While the builder might think so, the public doesn't and neither do I...in some cases. On numerous occasions I have come in below the contract on new construction and quite often it is because I can't find justification or market support for a "lot premium".

 

[Bill Baughn]

Originally posted by Mike Garrett, RAA@Nov 13 2005, 06:56 PM
I was the one who said.....a buyer "probably" would pay more for a larger lot. Make yourself a buyer for a minute. If you had two identical houses and one was on a 5,000SF lot and the other on a 10,000SF lot, would you pay a little more to have the larger lot?

Mike,

I did and I do put myself in the life of a buyer. I'm now working 40+ hours a week, my wife works just as hard as I do. In doing so I can barely afford the home I am buying let alone want to maintain the yard. The larger the lot, the more work that is involved in the maintenance. The last thing I want to do is more work. Give me the smaller lot and I am a happy camper. If I have to pay more for it I will, it will give me peace of mind in the future.

Yes Mike, I did put myself in the buyers position. I was a homeowner myself and I found that last thing I wanted was more lawn to maintain. I did that as a kid, I don't care to do it as an adult.


Bill Baughn