Using Recently Razed Dwelling as Comp

[Kevin Mc]

THat is typical in my market.

You do have a good point. I recall an idvidual who paid 2 mil for a 4,000 sft house. He discovered that the cost to modernize, renovate and upgrade the house would cost about 4 mil. So he knocked it down and spent around 3 mil for a new construction 8,000 GLA with a 3,000 finished basement. Actual lot value was about 1 mil. based on nearby lot sales.

Land value ratios in many areas in the NY market can exceed 70% easily. Often it is as cheap to just raze a home rather than it is to expand it. I had one a few weeks ago. Typical ranches in the area sell in the $750K range. One of my comps sold for $775K. I had appraised the home in August. It is now gone. My subject was selling for $760K. All homes (subject and comps) were identical. There are also many $1 million colonials in the area, all primarily new. All were most likely ranches a few years back. There exists a good chance that my subject may be gone in the near future too.

 

[The Warrior Monk]

I've always wondered about this scenario. According to USPAP, is it acceptable to use a recent sale as a comparable that has been razed since the sale date to make way for a new construction (e.g., 50-year-old Cape razed and replaced with a new, large single family)?

USPAP doesn't get that specific.

How the data is used depends on the circumstances. If I'm appraising a home that is likely to be razed, my best choice of data would be those sales with similar improvements that are slated to be razed.

 

[Lee Lansford]

I've always wondered about this scenario. According to USPAP, is it acceptable to use a recent sale as a comparable that has been razed since the sale date to make way for a new construction (e.g., 50-year-old Cape razed and replaced with a new, large single family)?

Tell us more about the Intended Use of your appraisal.

I can only guess that it for use in mortgage lending and...I'm reading between the lines here...there is a concern on your part that the existing improvements on your Subject's site represent--at best--an interim use. Further...and I'm still taking an educated guess on the details...that your client (a MB by any chance?) doesn't want an appraisal of a property that is vacant land (or, an appraisal with the improvements as an interim use).

What can you tell us?

 

[Terrel L. Shields]

One of my comps sold for $775K. I had appraised the home in August. It is now gone. My subject was selling for $760K.

sounds to me like the land value is 760-775 and the contributory value of the dwelling is zero...

 

[Elliott]

I had a reviewer use a house that was razed as a better
comp than the 3 I choose. I pointed out to the AMC that
the site where the comp was, was now just dirt. They didn't have
any more problems with my appraisal. I think
maybe they should have gotten their review fee back
though.

 

[Carnivore]

I had a reviewer use a house that was razed as a better...

... I think
maybe they should have gotten their review fee back
though.

Why should they ask for there $125.00 review fee back? They got what they paid for!

 

[Don Clark]

USPAP doesn't get that specific, does it? Are you referring to using it as a comp for site value or as a comp for a house that isn't a teardown?

Steven,

Agreed as to USPAP. I have on occassion, used a comp that had been modified after sale. My theory is, it was a sale representative of the market at the time it sold. However, i have never used one that was torn down. On more than one occassion, a tear down, if still existing, would have been my best comp due to proximity to subject, view(Chesapeake Bay), size, and other factors. However, I did not use those sales due to the highest & best use questions. I have used on occassion, sales modified from a one story Ranch to a two story dwelling. They were Ranches at the time of sale. I included a current photo showing the second floor not completed, and an MLS photo showing how it looked at time of listing and sale. But, in my opinion, they are still not the best comps to use.