Where to put external obsolescence in the cost approach section?

[David S]

The subject is located next to a busy local highway. I applied 10% location adjustment in the sales comparison grid. But where I shall put that 10% external obsolescence in the cost approach section? See attached. I saw there is an "External" box. But this is for building's external obsolescence, NOT for site/ land external obsolescence, right?

Any suggestion? Thanks!

 

[Terrel L. Shields]

Land does not suffer depreciation. It is impacted by externalities though. But such external obsol. is applied to the IMPROVEMENTS not the land.

Land is valued "as if vacant and available for its HBU" - so if the externality is for noise, I'd still think the impact is upon the whole and therefore, best addressed against the improvements...not the land. As per its location, the land value vacant is what it is...impacted by traffic or not.

 

[J Grant]

Land does not suffer depreciation. It is impacted by externalities though. But such external obsol. is applied to the IMPROVEMENTS not the land.

Land is valued "as if vacant and available for its HBU" - so if the externality is for noise, I'd still think the impact is upon the whole and therefore, best addressed against the improvements...not the land. As per its location, the land value vacant is what it is...impacted by traffic or not.

I have a different opinoin:

It is true that land does not suffer physical deprecoan. However, the externality does affect the value of the land ( not just the improvement)

A vacant site backing up to a like is worth more from its positive externalities, whereas a vacant site backing up to a garbage dump would be worth less due to its negative externally,

There is no line in the URAR cost approach for ext ob, but it is baked into the value/price of the land - meaning a site with a negative externality would be worth less .

 

[David S]

I have a different opinoin:

It is true that land does not suffer physical deprecoan. However, the externality does affect the value of the land ( not just the improvement)

A vacant site backing up to a like is worth more from its positive externalities, whereas a vacant site backing up to a garbage dump would be worth less due to its negative externally,

There is no line in the URAR cost approach for ext ob, but it is baked into the value/price of the land - meaning a site with a negative externality would be worth less .

In my this case, final value shall be around $1.5 m. So just directly pull down the site value as $850,000 to reflect 10% overall value hit?

 

[David S]

I have a different opinoin:

It is true that land does not suffer physical deprecoan. However, the externality does affect the value of the land ( not just the improvement)

A vacant site backing up to a like is worth more from its positive externalities, whereas a vacant site backing up to a garbage dump would be worth less due to its negative externally,

There is no line in the URAR cost approach for ext ob, but it is baked into the value/price of the land - meaning a site with a negative externality would be worth less .

If so, I have to put 25% in "External" box to get this $150,000 value hit?

 

[David S]

The subject is located next to a busy local highway. I applied 10% location adjustment in the sales comparison grid. But where I shall put that 10% external obsolescence in the cost approach section? See attached. I saw there is an "External" box. But this is for building's external obsolescence, NOT for site/ land external obsolescence, right?

Any suggestion? Thanks!

I try to put something the line above Garage / Carport. But it is only allow positive, not negative, so I can't use it for external obsolescence of the land / site.

 

[J Grant]

In my this case, final value shall be around $1.5 m. So just directly pull down the site value as $850,000 to reflect 10% overall value hit?

My post should have read there is a line for external in the cost approach - so put the 10% hit from the location adjustment you concluded in that line ( IMO)

 

[J Grant]

If so, I have to put 25% in "External" box to get this $150,000 value hit?

Idk where you are getting 25% from; I thought you said your location adjustment was 10%.?

 

[David S]

Idk where you are getting 25% from; I thought you said your location adjustment was 10%.?

Because this line is for improvement external deprecation. Since building only count for 40% total value, I have to apply 25% external deprecation to get overall 10% value hit. 40% x 25% = 10%

 

[Tom4value]

I have a different opinoin:

It is true that land does not suffer physical deprecoan. However, the externality does affect the value of the land ( not just the improvement)

A vacant site backing up to a like is worth more from its positive externalities, whereas a vacant site backing up to a garbage dump would be worth less due to its negative externally,

There is no line in the URAR cost approach for ext ob, but it is baked into the value/price of the land - meaning a site with a negative externality would be worth less .

Perfect! The externally is built into the site value. I say, “site” because I took a course where the proctor said he beat up appraisers who said “land” value in the cost approach. He pointed to the form that said, “site”. This means land that is ready for improvement.

Again, your point is correct.