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Vendor misrepresented lot size, Purchaser is suing, HELP

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Doug Ellwood

Thread Starter
Freshman Member
Joined
Jan 15, 2002
We have been asked to appraise the rear section of a property which was 70' x 220' on the listing and the agreement. title search at closing showed 70' x 130'. Purchaser is suiing Vendor. I recall a textbook called Appraisal in a Nutshell by "Stewart". Stewart refers to a 4-3-2-1 rule. I think if the value of the land is $80,000 the front 25% is worth 40% of the land value, the second 25% is worth 30% of the total land value, the third 25% is worth 20%, remaining would have a value of 10% of land value. Therefore the rear 25% would have a value of $8,000. In this example the excess land is 70' x 55' for the rear section, and 70' x 35' for the third section should be evaluated using this rule. Does anyone know of this rule or book? Any help would be appreciated ASAP as this is being prepared for court. Thanks
 

sos

Junior Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Florida
Doug- That is an old theory from the 60's & early 70's. Today it is considered excess land and this value if any, is estimated from the market. You might find an old appraiser (like me) who has an old Society or Institute introduction text from that time. It should be there because I remember the rule. Unfortunately I don't know where my old books are. I did a check of Amazon.com, and Stewarts book is listed. It notes it is out of print and limited availability. Hope this helps.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
Check with the International Association of Assessing Officers in Chicago, I think that section is still in their textbook. They are a member of the Appraisal Foundation, so you might be able to find their address through the Foundation. It is used quite frequently for ad valorem purposes but it is not really applicable to fee appraising. You have to research and analyse the subject's market to determine the the applicable discount (if any would be). A 70/30 rule is also sometimes used in ad valorum appraisals, again not very applicable to fee appraisal.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
No, it's not applicable. Here's the exact example. A 50 x 150 lot sold for $6800 per front foot. A 50 x 250 lot sold for $7400 per front foot. Therefore, the rear portion has a differential of $600 per front foot, or a 9% differential for the additional depth. And, yes, these are actual figures for a report I completed yesterday.

Go back to paired sales analysis, especially if there's a chance you'll go to court.

Roger
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Rules of thumbs are incredibly underused in this business. Everyone is married to paired sales which has a real flaw, too. What you need is a few paired sales that support the rule of thumb! Dumb as that may sound, you can then cite the rule of thumb and give an illustration of it working...hinting this is the way the market thinks...and it might not be far from the truth.

The Hoffman Rule (Judge Murray Hoffman (1866) is that the front 1/2 is worth 2/3 of its whole value.

The 4-3-2-1 Depth Rule originally only applied to lots of 100' depth or less. This from Real Estate Principles and Practices 5th ed North and Ring, 1960.

These were actually applied in legal situations but a real literature search would be necessary to cite case law with those rules applied.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
You might consider appraising it to the Uniform Appraisal Standards for Federal Land Acquisitions. Although this is not a federal land taking, this is the standard used for determining value and damages as the result of a taking. The UASFLA standards are based on law and actual court cases. Since your case is going to court, the lawyer may be able to submit your evidence into court much easier. Kinda complex assignment, you may need some more time, help and MO' $$$$'s.
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
Two days ago I declined an order from an attorney to do two appraisals, plus agree to appear in court, on a vacant property "as sold" and "as the Buyer thought he was buying" where the difference was the size of the house that could be built due to an encroachment by the neighbors garage that effected setbacks. The Buyer was dumb enough to buy waterfront property without a location survey. I did some research before accepting the orders and found that there were only 5 vacant land sales on this lake in the past 2 years and only 15 improved sales. My conclusion was that there was insufficient data to draw defendable conclusions in court of any difference in value. At least not to the extent that my conclusions could withstand a good defense cross examination.

You may want to do much the same thing. Pull vacant sale comps with similar frontage in subjects sub and near-by competing subs. With all comps having similar frontage, base your analysis on the area of the site and see if anything turns up. My guess that there might be a little something but remember that in a case like this, your conclusions may have to be justified in a court of law with the questions asked by a sharp defense attorney. The question you have to answer is; will my conclusions hold up to such scrutiny?

The best final answer may be to decline the report. At a minimum, your assignment would seem to be two vacant land appraisals, one "as the buyer thought he was buying" and one "as is". The difference would be your answer. Make sure that you get paid for both of them. I would also not accept the assignment unless the attorney agreed up front and in writing as to your fee for any depositions or testimony (ex: $45/hr portal to portal)


Good luck!
 
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