Using Recently Razed Dwelling as Comp

[mjkappraisals]

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)?

 

[Ken B]

Such a sale should be an excellent indicator of site value.

 

[Fred]

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?

 

[Carnivore]

Such a sale should be an excellent indicator of site value.

Yes, I agree Ken. I go one step further. The sale is a land sale with a full depreciated improvement. In other words there is a very neat pile of landfill debri on the site that will cost money to remove.

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)?

Here look it up for yourself: http://commerce.appraisalfoundation.org/html/2006 USPAP/toc.htm

Keep looking you will find your answer.

 

[Greg davenport]

Such a sale should be an excellent indicator of site value.

Not all the time.

Had one in a area where sales go from $75,000-350,000 (talk about location within a location:blush. the property sold for $325,000, and on paper (MLS and tax records) looked like a good sale. Nothing noted would lead you to think it was a lot sale, but the new owner also bought all the lots on a full block to build his new Ego Palace.

The home was bought as a teardown, but was not marketed as one.

 

[Ken B]

I agree.

Hence "should be" as opposed to "is".

 

[Carnivore]

Greg,

Ken used the word "should".

Also, a HBU analysis of the site would give some indication of why it was bought.

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.

 

[Terrel L. Shields]

Most such sales tend to be simple site sales (teardowns) or, someone with more money than sense chooses for whatever reason to buy THAT site...in other words its not an arm's length sale. Like Greg's example, they are motivated buyers. The fact is that the property may be appropriately priced but the buyer's motivations make it awfully suspect as a comp even if you have compelling evidence its an accurate market value...I would never use it in a secondary market situation, and I wouldn't weight it in a in-house situation. It's a "4th comp" at best.

 

[DTB]

:Eyecrazy:

Greg,

Ken used the word "should".

Also, a HBU analysis of the site would give some indication of why it was bought.

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.

$1,000 for a remodel??? :Eyecrazy:

 

[Carnivore]

:Eyecrazy:

$1,000 for a remodel??? :Eyecrazy:

Mike, no he wanted to not only renovate and remodel and upgrade but also to expand. The architecture firm gave him the bad news. So he saved himself a million and just built a new house to the period!

I know the guys family, his nephew was an old partner of mine. These people have money to burn(as long as its on them). They are an old North Carolina Mill owner Family.