Valuation of Improvements Only

[Ricky LaFleur]

Actually, you did not value the improvements only. Your formula valued the contributory value of the improvements to the land.

Please elaborate on how the contribution value of the improvements to a property differ from valuing the improvements alone? Is this one of those market value vs price things you always talk about?

This seems like another AF "Hypothetical" thread started by someone who either has no clue what he/she is doing or just enjoys watching appraisers participate in a never ending " circle jerk" for some sadistic or weird real estate fetish LMAO

My fetish is watching your blood boil when someone posts a legitimate appraisal question on an appraisal forum. You can go back to the political section to "change some minds" with your persuasive posts, if you like.

 

[glenn walker]

Please elaborate on how the contribution value of the improvements to a property differ from valuing the improvements alone? Is this one of those market value vs price things you always talk about?


My fetish is watching your blood boil when someone posts a legitimate appraisal question on an appraisal forum. You can go back to the political section to "change some minds" with your persuasive posts, if you like.

It helps when people post legitimate appraisal; questions not multipe choice test quizzes.
you already know the answers to the questions before you even asked it.

There was no politics involved but if you want to bring them in we can talk about how moving a House
from one City to another or one County to another , where different local codes and zoning may make your "hypothetical " an- entirely different story with a different outcome. The OP has about 99 different scenarios
that could be applied and now you just need to tell us which one is applicable LOL

 

[Terrel L. Shields]

This seems like another AF "Hypothetical" thread started by someone who either has no clue what he/she is doing or just enjoys watching appraisers participate in a never ending " circle jerk" for some sadistic or weird real estate fetish LMAO

No, it is legitimate question. But you are not valuing the improvements in a vacuum nor moving a house. There are many scenarios where you may need to know the contributory values to various buildings. I have seen divorce appraisals where the husband had property prior to marriage but built other buildings after. Then the split excluding prior improvements but he had to split the new house with her. Jake asked a very nuanced question in the OP. But the classic approach to valuation of rural lands do suggest you approach the problem by treating land differently from improvements but USPAP recognizes it is the connection of land to improvement must take in the impacts of obsolescence on the part separated out. This is NOT summation. And it is market value. You don't value a partial estate without consideration of the remainder of the property.

 

[glenn walker]

No, it is legitimate question. But you are not valuing the improvements in a vacuum nor moving a house. There are many scenarios where you may need to know the contributory values to various buildings. I have seen divorce appraisals where the husband had property prior to marriage but built other buildings after. Then the split excluding prior improvements but he had to split the new house with her. Jake asked a very nuanced question in the OP. But the classic approach to valuation of rural lands do suggest you approach the problem by treating land differently from improvements but USPAP recognizes it is the connection of land to improvement must take in the impacts of obsolescence on the part separated out. This is NOT summation. And it is market value. You don't value a partial estate without consideration of the remainder of the property.

Seems like a easy assignment 100 acre land appraisal, with some person who want to move the house.

 

[Meandering]

https://www.appraisalinstitute.org/assets/1/7/Valuing_Fractional_Interests_2_0_%20_Handouts.pdf

Valuing Fractional Interests in Real Estate 2.0

Appraisal institute class handout

 

[Ricky LaFleur]

It is a weird request. I would ask the Client about why they wanted the improvements only value.

I agree, it is atypical. I've been asked about this by a few different clients for various reasons. One case was simply that the client was certain of the land value already... or at least what they wanted to list the land for... and only wanted a value for the improvements to help them determine what to list the overall property for. At any rate, I wanted to hear how others would handle tackling the appraisal problem for my own understanding.

But the classic approach to valuation of rural lands do suggest you approach the problem by treating land differently from improvements but USPAP recognizes it is the connection of land to improvement must take in the impacts of obsolescence on the part separated out. This is NOT summation. And it is market value. You don't value a partial estate without consideration of the remainder of the property.

In any case value the land as vacant and available for it's HBU and the contributory value of improvements. All functional obsolescence belongs to the improvements but external obsolescence may be divided with the land or not. Depends and that is why they hire you.

You can appraise a partial estate as per USPAP. But you still have to evaluate the impact the remainder of the whole property has on value. An old house on one acre may suffer no obsolescence outside physical wear and tear but on 100 acres? The contributory value may be less. On a 10,000 acre ranch, improvements may be entirely invisible even when substantial in nature. The contributory value is different and you must address those. Older barns often have no value except in use whereas newer functional shops and barns do have market value. But an example is 120 acres split off 5 acres with a fairly nice MH. But on the 5 acres was a 6,000 SF hay barn, useful to the larger farm, but over-built for 5 acres. It's contributory value is diminished and would be different if asked to only value the improvements on 120 acres vs 5 acres. It boils down to HBU. HBU of 5 acres differs from 100 acres.

It's pretty fun to think through. It makes sense that the property as a whole has an impact on the contribution of the improvements. Thanks for the comments!

 

[J Grant]

Please elaborate on how the contribution value of the improvements to a property differ from valuing the improvements alone? Is this one of those market value vs price things you always talk about?

1) contribuiton value :5000 sf house( for examlple) on 100 acres. The contributory value of the house to the 100 acres would be the replacement /depreciated cost of the 5000 SF house, as it sits on the 100 acre parcel. You valued the land at 2 million, total value of improvement and land is 2,700,000

2) valuing the improvements alone: You value the house as an improvement worth the face value of the 5000 SF house as it does not sit on the 100 acres of land. In which case, the 5000 SF house if is i able be moved offsite might be 300k, or the more likely scenario is it can not be moved off site and it is sold for scrap materials price ( 40 k)
The land, if you area also valuing the land, would be 2,000,000 as vacant land

 

[Ricky LaFleur]

1) contribuiton value :5000 sf house( for examlple) on 100 acres. The contributory value of the house to the 100 acres would be the replacement /depreciated cost of the 5000 SF house, as it sits on the 100 acre parcel. You valued the land at 2 million, total value of improvement and land is 2,700,000

2) valuing the improvements alone: You value the house as an improvement worth the face value of the 5000 SF house as it does not sit on the 100 acres of land. In which case, the 5000 SF house if is i able be moved offsite might be 300k, or the more likely scenario is it can not be moved off site and it is sold for scrap materials price ( 40 k)
The land, if you area also valuing the land, would be 2,000,000 as vacant land

I think you might be trying to make a distinction that I and most of the others weren't making, which I should have clarified for you after your first post. Your second option, which I think you were arguing for in most of this thread, is essentially seeking to find scrap value or almost an investor value for removal of affixed improvements. I did open the floor to discussion as to how the improvements would be considered, whether real or personal, but I gave the details of the example property because I believe it was germane to the valuation of the improvements on a real property. Call it how you wish, contribution value, improvement value to the land only, etc, but all are seeking the same thing. Thanks for the comments!

 

[TerryRohrer]

As much as I hate to admit it, I tend to agree more with JGrant on this thread. It is the same as the mobile home question posed in another thread. For me, it depends on the actual appraisal problem, and I don't find specific terminology to be frivolous or just semantics. If the whole of the task is to determine the contributory value (to the whole) of some improvement(s) situated on a specific tract of land, I agree with the value of the whole minus land value approach. But if a specific tract of land is not in the picture, clearly that can not be a viable option, and it does not reveal the market value of the improvements by themselves. Here, old homes are often offered "to be moved." I am aware of one currently on the market, know of many that were relocated and know of several that were offered and then demolished. I have been partially down the road to acquiring a couple, only to conclude it would only make economic sense to move them to an available (owned) site if I were paid to take them. So, in my view, the "market value" of the improvements alone has little to no relationship with its contributory value as a part of a complete property. The value of the whole minus land value approach ignores the very real and very significant costs involved in getting those improvements to not be a part of a specific, real property. Failing to acknowledge and explain those differences, I think, is typical but inappropriate.

 

[glenn walker]

As much as I hate to admit it, I tend to agree more with JGrant on this thread. It is the same as the mobile home question posed in another thread. For me, it depends on the actual appraisal problem, and I don't find specific terminology to be frivolous or just semantics. If the whole of the task is to determine the contributory value (to the whole) of some improvement(s) situated on a specific tract of land, I agree with the value of the whole minus land value approach. But if a specific tract of land is not in the picture, clearly that can not be a viable option, and it does not reveal the market value of the improvements by themselves. Here, old homes are often offered "to be moved." I am aware of one currently on the market, know of many that were relocated and know of several that were offered and then demolished. I have been partially down the road to acquiring a couple, only to conclude it would only make economic sense to move them to an available (owned) site if I were paid to take them. So, in my view, the "market value" of the improvements alone has little to no relationship with its contributory value as a part of a complete property. The value of the whole minus land value approach ignores the very real and very significant costs involved in getting those improvements to not be a part of a specific, real property. Failing to acknowledge and explain those differences, I think, is typical but inappropriate.

Bingo -Yahtzee We Have a Winner - I'm kinda surprised it took so many people to connect the dots to other threads.