Valuation of Improvements Only

[Dublin ohio]

Assuming the assignment is as is where is. How does the moving the improvements scenario actually apply. If the assignment is to value the improvements as is where they is. (sorry TC)

 

[Terrel L. Shields]

A lot of you need to go back and read the original post. The scenario is known. The reason for segregating the various components is for

How does the moving the improvements scenario actually apply.

correct. It doesn't. The OP is asking to set the value of the improvements on 100 acres, which may or may not involve a division of the estate among heirs, etc. There are numerous reasons you need to know the contributory value of certain items. I recently appraised an estate where there are 4 heirs. One has cancer 4th stage. one lives on the farm in a separate dwelling, and one lives in the larger house as the caretaker of the deceased and one lives not far away. They needed to know the various values of the several large parcels of land, and the values of the dwellings knowing the occupants will remain in the houses as is, so how do you divide up the lands. And it involved mineral rights. The mineral rights was easy to settle, forming a family partnership and paying out equal shares. Separating the land values, contributory values of several barns and the two dwellings was a mite trickier. After all, in such a case the sum of the various estates cannot exceed the value of the whole. So valuing the whole estate "as is" is critical to valuing the various land tracts and improvements so that an equitable settlement can be had.

 

[TerryRohrer]

I reread the OP as directed and the question posed was "How would you go about valuing the improvements alone on a real property?"

We can all interpret the intent in an effort to make ours the only correct response, but that doesn't make it so. "Valuing the improvements alone" seems fairly specific to me, and doesn't clearly imply that the value of the improvements as if they were part of something else is the unknown in question. The OP also states no HCs or EAs are necessary, yet in those scenarios where the value of the whole minus land value are proposed, assumptions are being made. Specifically, the value of the improvements alone, as a part of the whole, is dependant on the value of the land on which they currently sit.

This is similar to the question, what is the value of an easement. I have been around longer than most and have never seen an easement offered for sale, much less seen one sold. Yet every day, appraiser are opining as to the value of easements. I think most are missing something.

 

[J Grant]

A lot of you need to go back and read the original post. The scenario is known. The reason for segregating the various components is for

correct. It doesn't. The OP is asking to set the value of the improvements on 100 acres, which may or may not involve a division of the estate among heirs, etc. There are numerous reasons you need to know the contributory value of certain items. I recently appraised an estate where there are 4 heirs. One has cancer 4th stage. one lives on the farm in a separate dwelling, and one lives in the larger house as the caretaker of the deceased and one lives not far away. They needed to know the various values of the several large parcels of land, and the values of the dwellings knowing the occupants will remain in the houses as is, so how do you divide up the lands. And it involved mineral rights. The mineral rights was easy to settle, forming a family partnership and paying out equal shares. Separating the land values, contributory values of several barns and the two dwellings was a mite trickier. After all, in such a case the sum of the various estates cannot exceed the value of the whole. So valuing the whole estate "as is" is critical to valuing the various land tracts and improvements so that an equitable settlement can be had.

Actually, the OP did not clearly ask that.
The OP themselves in pst 48 acknowledged that way the question was posed could have been confusing, and post 49 agreed with my take on it ( as it was asked )

If an appraiser wants to know what the contributory value of the improvements are to the whole, they should clearly state that as the appraisal problem. However, to split hairs (but not really), I doubt there could be a "market value " to the contributory value of the improvements. The contributory value of the improvements is most likely derived as a depreciated cost value.

There CAN be a market value of the improvements if they are severed from the whole. That market value is either as the building material as scrap material, salvageable parts or if the improvements if they are able to be safely and reasonably moved to another site.

If the valuation problem is , "What are the improvements worth on a 5-acre site and not the entire 100-acre site, " then it needs an HC. The OP post stated no there was no EA and no HC.

 

[J Grant]

PS, in my personal life or when writing about other subjects such as on a bb, I am not anal about language and use slang, general or even inappropriate terminology on the regular.

But when we are in our appraisal role, we need to be more precise with our terminology, holding ourselves to a higher standard of RE terminology then that carelessly or naively used by the general public, RE agents, lenders, clients, and others..

A client might say , "I want to know the market value of the improvements to the whole .." Well, there is no market value, as defined to the improvement as a contributory value. They have a value . They have a contributory value. That value can be demonstrated in a cost approach or by using an extraction approach.

But there can be no literal sale or transaction of a contributory part of something unless that part is severed off, and then we are back to scrap material or moving a structure off-site.

The problem comes about when appraisers themselves misuse the word "market value .". When the client and the appraiser both misuse the word, the appraisal might pass acceptance with none the wiser. But it still was an incorrect use of what market value means as defined and the appraisal result was construed d as misleading if the application of it were ever scrutinized.

 

[Dublin ohio]

PS, in my personal life or when writing about other subjects such as on a bb, I am not anal about language and use slang, general or even inappropriate terminology on the regular.

But when we are in our appraisal role, we need to be more precise with our terminology, holding ourselves to a higher standard than RE terminology as it is carelessly or naively used by the general public, RE agents, lenders, and clients, and others..

A client might say , "I want to know the market value of the improvements to the whole property of X acres." Well, there is no market value, as defined to the improvement as a contributory value. They have a value they have. They have a contributory value. That value can be demonstrated in a cost approach or by using an extraction approach.

But there can be no literal sale or transaction of a contributory part of something unless that part is severed off, and then we are back to scrap material or moving a structure off-site.

The problem comes about when appraisers themselves misuse the word "market value .". When the client and the appraiser both misuse the word, the appraisal might pass acceptance with none the wiser. But it still was an incorrect use of what market value means as defined and the appraisal result was construed d as misleading if the application of it were ever scrutinized.

Taking the op at face value.

3) Intended use: assist client in making a selling decision

Answering "selling what'?

Would determine if the client is asking for the correct

4) Value: Market value (from Dictionary of RE)

As opposed to what might be considered a "contributory market value".

 

[Terrel L. Shields]

Valuing anything for market is market value. Even when an intangible value like Business Enterprise Value. It is still market value, any value of any portion of a property is still market value as a partial estate. OP clearly said 100 acres. But needs wants only the value of the improvements.

 

[J Grant]

Valuing anything for market is market value. Even when an intangible value like Business Enterprise Value. It is still market value, any value of any portion of a property is still market value as a partial estate. OP clearly said 100 acres. But needs wants only the value of the improvements.

That is not true.

Read the definition of market value. Market value references a SALE of the subject, (the most probable price a subject should bring at a SALE), at certain terms of course

So if something can not be sold, if it is intangible, or only functions as part of a contribution how can it have a market value ?

It has a value, a contributory value to the whole. Nobody is denying that.

Then you mix it up with a different appraisal problem, which is what is the market value of a saleable portion of a property. A saleable portion of the improvements only means them as scrap or a house that can be moved off-site.

If a HC is made that the improvements sit on only one acre, that creates a different subject to be appraised and a different appraisal problem

 

[J Grant]

DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming
the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and
the passing of title from seller to buyer

The above is what market value consists of,. It consists of a sale, real or hypothetical, of X.. How can an idea, a concept, an intangible/contribution, of what is essentially unsaleable have a market value, since "it" can not be sold?

 

[alebrewer]

Terrel is correct. Anything valued at what the market would pay is market value. OTOH - the definition of market value cited above is referring to real property. There are MANY definitions of market value - hence our requirement to cite the definition and source in our reports.