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  • METHODS OF SITE VALUATION

A. Sales or market data comparison.

  • 1. Sales and listings (data) of vacant sites are obtained and compared with the property being valued.
  • 2. The data should be of comparable properties, including the same zoning and in the same or similar neighborhood. Since people make value, the data gathered should be from areas where the purchasing power or income levels are the same as the subject property.
  • 3. The sales prices should be investigated to determine whether the price paid was the result of a true open market transaction reflecting fair market value. Listings may also be considered.
  • 4. Some sources of comparable market data are:
  • a. Title insurance company records.
  • b. Tax assessor's records.
  • c. Recorder's office.
  • d. Multiple listing files.
  • e. Financial news.
  • f. Appraiser's personal files.
  • 5. The verified market transactions should be compared with the subject parcel as to:
  • a. Time.
  • (1) Determine if prices have gone up, down, or remained stable from the time of each sale to the date of value.
  • (2) A percentage factor or a dollar amount may be applied to the comparable sales in order to arrive at an adjusted price due to the time factor.
  • b. Location.
  • (l) Determine if the location of each comparable property is superior, equal or inferior to that of the subject property.
  • (2) A percentage factor or dollar amount may be applied to the data in order to adjust for the difference in location.
  • c. Characteristics of the lots.
  • (1) The size, depth, and topography of the other properties are compared with the property being valued.
  • (2) A percentage factor or dollar amount is determined for these characteristics and applied to the comparable properties to adjust their prices towards the property being appraised.
  • d. The adjusted prices of the comparable properties are then compared and analyzed in order to arrive at an estimate of value for the property under study.

Example. Using only 3 lot sales (the minimum) as a demonstration.

Sale No.

Price

Date

Size (feet)

Square Feet

1

$5,000

October, 1995

50 x 120

6,000

2

$4,750

March, 1996

40 x 130

5,200

3

$5,500

June, 1996

50 x 120

6,000

Subject

 

 

50 x 150

7,500

 

Through investigation, it was found that prices have been increasing approximately 1% a month during the past year. Sale No. 1 is believed to be located in an area inferior to the subject. This lot would sell for about $500 more if located in the subject's block. Sale No. 2 is located in an area believed to be about $250 better than the subject. Sale No. 3 is also in a superior location, by the same $250 adjustment. The shape and topography of Sales No. 1 and No. 2 are better than the subject by an amount estimated to be $500 and $100 respectively. Sale No. 3's topography and utility appear about the same as the subject.

Adjustments.

 

Sale

No.

Time

Location

Characteristics

Adjusted $

Adj.

$/sq. ft.

1

+$500

+$500

-$500

$5,500

$.92

2

+$240

-$250

-$100

$4,640

$.89

3

+$110

-$250

0

$5,360

$.89

The average adjusted price per square foot of the comparable sales is $.90. Therefore, the subject property has an indicated value as follows:

7,500 square feet x $.90 per square foot = $6,750

In actual practice, the use of more sales data is advisable in order to arrive at a well-supported adjusted price per square foot.

  • e. If all pertinent factors are considered, the adjusted prices will probably be in a fairly close range. If there is still a wide discrepancy, the appraiser will:
  • (l) re-analyze work to find undisclosed pertinent factors;
  • (2) reexamine data as being true examples of fair market transactions;
  • (3) re-compute adjustments to insure accuracy; and
  • (4) finally, discard the data or explain the apparent contradictions.

B. Abstraction.

  • 1. The abstraction method is used to obtain land value where there are no vacant land sales.
  • a. Sales of houses in the same neighborhood on lots with similar characteristics are obtained.
  • b. An estimate of the cost new of the improvements is made.
  • c. An amount is deducted from cost new for depreciation.
  • d. The depreciated cost of the improvements is deducted from the selling price of the property.
  • e. The difference represents an approximation of land value.

Example: Appraised lot size is 65 X 100 = 6,500 sq. ft. Sale property is 6,000 sq. ft. lot with a single family residence and sold for $83,000. The sale building has an estimated cost new of $61,000 and an accrued depreciation estimated at $20,000. Land value by abstraction:

Analysis Figures
Price of sale property

Less depreciated value of improvements:
Cost new
Less accrued depreciation

Depreciated value

Indicated land value
Divide by lot size
Indicated lot value/sq. ft.

Multiply by subject lot size:
65 x 100 = 6,500 sq. ft.
=


=
=

=

=
=
=


=
$ 83,000


61,000
20.000

41,000

42,000
/ 6000 sq. ft.
$ 7.00/sq. ft.


x 6,500
Indicated Value of the Lot = $ 45,500

C. Plot Plan. For better appraisal reporting, a plot plan can be prepared, with lot dimensions and improvements drawn to scale. It should show walks, driveways and other lot improvements and roof plans of the various structures on the site. The plot, together with pictures of the site, neighboring street and lot improvements are vital for an effective site analysis.

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