View Adjustment Guidance and Opinion Help Please

[JeffSH]

Prove me what a "view" is... If I have 2 lots and one has a "view" then that "view" is incorporated in the LAND VALUE, not some ephemeral intangible observation from the porch. It's like a lakeview vs a lakeside. A lot with access to the water has a different value from one that doesn't. And if that lakeside lot sits on a high cliff it may have a better view, but water access may be a problem.So the buyer has a choice. And a bluff lot may sell no better than the "lakeview" lot higher up the hill if access to the water is denied. It is the utility of the lot that counts, not its magical "view."

Secondly, that 'view' can be compromised with construction between the subject and the view... The cabin my parents used to own was a low unobtrusive house and the lake view of the houses across the street was unobstructed. The current owner of that cabin built a 3 story house on this lakeside lot and blocked much of the view of at least 3 houses. In fact, as the largest of the 25 or so houses on that hillside, it stands out like a sore thumb to every house there being directly next to the boat ramp. The vacant lot would be worth 10x what my parents got for it 30+ years ago. So how can you attribute it as some separate feature from the land? It's value isn't the "view" (which is superior up the hill from it) rather its lakeside access.

I understand your logic and I agree that view is a characteristic of the land, but adjusting view on a separate line makes the most sense 99% of the time. I only forgo view adjustments when my comps have drastically different site values. In those cases, adjusting by the difference in total contributory value makes the most sense. Splitting up lot value and view only makes sense when the lots are similar.

 

[J Grant]

When a builder sells new, they charge a base lot fee and then a pemium for larger lots or lots with a view

So if the RUBY model costs 300k and a builder charge is 100k for base lot , and for the same size lake view lot they charge a buyer 50k additional, a buyer paid 50 k more for the view. One can argue the view accrues to the land, but that is applicable in the cost approach, not the sales comparison approach. The SCA develops an adjustment based on the market reaction to X feature based on the total property and its price, not a segmented price nor a cost break down price.

Buyer A paid 400k for RUBY model with a residential view, buyer B paid 450k for a RUBY model of same upgrades with a lake view.

On the resale/ open market we might see per data and comps a lake view return a contributory value of 50k, or 10k, or 80k - or zero. That is up to the market to decide. But if the market is showing a premium paid for a lake view, not making an adjustment the market indicates would be misleading.

 

[Terrel L. Shields]

adjusting view on a separate line makes the most sense 99% of the time.

One can argue the view accures to the land, but that is applicable in the cost approach, not the sales comparison approach.

Value is often cost related. And are you saying that the land value is not a component of the sales approach? So you never adjust for site value?

If I know the premium lots sold for 50% more the non-view lots, I can adjust my land value adjustment accordingly. If I judge a comp lot to be worth $80,000 and my subject only $50,000, I do make an adjustment. Is it size? Is it location? Is it view? Well, it is still a tangible value of the land, not an intangible "view". I can make a judgment a lot better when I have a idea what the developer thought. I know a few years ago a fellow developed a small subdivision of about 15 lots. The bigger lots didn't bring more because they tended to be A- next to the railroad or B- fell off in back into a steep hollow. But the cheapest 3 lots were located next to the power company ROW where a 365kva line was located. And it took years to actually sell all the lots. Who wanted to be located next to a powerline overlooking the railroad across the street from the cemetery?

 

[redfish]

Maybe you can handle the adjustment for the 2nd story window view of the canyon qualitatively through reconciliation of the OMV at the upper end of the adjusted sale price range of the comparables.

 

[J Grant]

Maybe you can handle the adjustment for the 2nd story window view of the canyon qualitatively through reconciliation of the OMV at the upper end of the adjusted sale price range of the comparables.

I have done that at times, when I lack the sales to bracket it with or compare it with wrt a line adjustment.

 

[Long Walk]

I personally think the agent should lose their license over something like that. Further, I believe all real estate agents should start being held accountable for misrepresenting listings and exaggerating or even sometime straight out lying. I call them all the time and listen to how they admit to having exaggerated, after the property sold, it's annoying and a waste of our time. How are we supposed to do our jobs with false or exaggerated information? Why do appraiser have to be held to insanely high standards and agents can get away with murder? What a mess.

I've wondered about this too. It happens in commercial, but isn't as obvious. My best theory these days is that we are asked to model behavior of the typical buyer in the market to develop an opinion that is frequently a point value. Accuracy and intellectual rigor in our world as appraisers is required.

Brokers are in a different world, even though its the same real estate. They aren't modelling the typical buyer behavior. They are trying to find it, capture it, and bring it to the closing table. Their accuracy and rigor show up in the negotiation process which concludes after the last argument after the closing. The exaggeration creates the interest which creates the offer and so on.

Not saying its fair or even right, but that's the theory I'm testing these days.

 

[Long Walk]

I look at it this way, the fact that agents routinely mis state, exaggerate, and hide the negatives about a property gives appraisers a need in the market. If all agents were truthful and their listings showed accurate square footage and other property features, the AVM's would be so reliable we could be more easily done away with.

Agents are allowed, legally, to engage in a certain level of exaggeration and mis repsenetaion ( see the legal case of Puffery - is a case they fought and won ). They claim MLS is a form of advertising a property, and advertising legally allows puffery. The agents are not allowed though to hide a known property defect from a buyer. though

Of course if one follows the logical conclusion, buyers can be mis informed due to agent or owner puffery - thus pay prices that do not always reflect value - creating continued need for our services.

Brokers have risk if they engage in puffing. Irritate the wrong client with that kind of behavior and the result could be a lawsuit. You are spot on about disclosure. Brokers that exaggerate need to know the difference between puffing and lying. Most do, IME. FWIW puffing is usually aimed at the public and appraisers, rather than at other brokers, although they are not immune either.

The legal thinking on puffing is old and established. This is a footnote on puffing from a Hawaii Court of Appeals decision and the authority cited for the puffing standard is Black's Law Dictionary. I couldn't find a decision giving brokers the right to puff, but there are tons of decisions on puffing that involve insurance companies for some reason.

 

[Long Walk]

Since the land is co-owned by the owners association in effect, its attribution would be to the location (viewpoint) of the condo, right?

How does the value of the underlying land in a condo association lead to a view adjustment (or justify the lack of an adjustment) in an individual condo unit? I may not understand your point, so please bear with me.

The right to occupy that particular space would be impacted by what you can do such as watch the sun set (or rise) from you balcony or kitchen nook.

The prices paid to obtain those rights will vary in some way based on market participant behavior according to the view, all else being comparable. Each unit has a view unique to that floor and orientation and all units are sited on the same owned land. The market will differentiate for each unit based on view whether the property is a condo, co-op, or single-family. How would the underlying land characteristics inform as to the view in any particular unit assuming each unit owner has the same property rights?

 

[sputnam]

I personally think the agent should lose their license over something like that. Further, I believe all real estate agents should start being held accountable for misrepresenting listings and exaggerating or even sometime straight out lying. I call them all the time and listen to how they admit to having exaggerated, after the property sold, it's annoying and a waste of our time. How are we supposed to do our jobs with false or exaggerated information? Why do appraiser have to be held to insanely high standards and agents can get away with murder? What a mess.

Once upon a time I had a business law course. Turns out, that when you are selling the sizzle, you are allowed to exaggerate. It's called commercial hyperbole and it is completely legal. Every hotdog stand can advertise that they are the best in the land.

 

[J Grant]

I've wondered about this too. It happens in commercial, but isn't as obvious. My best theory these days is that we are asked to model behavior of the typical buyer in the market to develop an opinion that is frequently a point value. Accuracy and intellectual rigor in our world as appraisers is required.

Brokers are in a different world, even though its the same real estate. They aren't modelling the typical buyer behavior. They are trying to find it, capture it, and bring it to the closing table. Their accuracy and rigor show up in the negotiation process which concludes after the last argument after the closing. The exaggeration creates the interest which creates the offer and so on.

Not saying its fair or even right, but that's the theory I'm testing these days.

My limited dealings with commercial brokers is that they were more professional and fact based .

I used do sell real estate ( for over 5 years ) prior to becoming an appraiser, and on a personal level, I can enjoy interacting with agents. But as far as business, I have a low level of respect for the typical residential RE agent. They do have to follow the law especially regarding fair housing, contracts, escrow funds (if a broker ), and they by law must disclose known defects. Other than that, pretty much anything goes.

As you note, even though we are handling the same product, they are in a different world. Their world is the sales world Their time is spent marketing themselves, getting listings, and snagging buyers. Though they like to call themselves "market experts", most are not , (with a few rare exceptions who I do respect) .

Appraisers should also consider that the average RE agent farms and works in a very small area and type of property ( again, with exceptions ). A RE agent might specialize in luxury beach area condos, or tract homes in her own subdivision. The agent rarely sees, lists, sells, or knows anything about other properties or areas beyond their niche - even though, like anyone else, they can pull data at a click, and then proclaim they know all about the entire region.

The other thing to consider is RE agents are under no obligation to list sell, or negotiate to a benchmark of "market value". They have no interest in MV for its own sake, except that in a financed deal, they hope the property "will appraises out". Their goal is sell the property, make a commission, and whenever possible get the highest price so they can use that as to dangle as bait to get more listings..