Lot Value

[DaveS.]

Is there any formula for determining lot value using comps with developed properties in the same area? I am trying to structure a deal where a home is situated on a double lot. The owner says it is subdividable, I would have to check it out for sure before making the offer. The house value is in the 250K-260 range on the one property.

Thanks.

DaveS.

[Burke]

If your county provides tax information online, you can look up the tax appraised value of the property or comp properties. Usually, the tax appraised value will break it down between land component vs. building component. Even if the FMV is not the same as the appraised value, you can take the ratio of the land to total value from the tax records and apply that same ratio to the price of the home. An example may yield clearer understanding.

Tax records indicate that the subject property is tax appraised for $100K. Of that $100K, the land component is appraised at $10K and the building at $90 therefore a 10/90 split.

So...if the FMV of your house is $300K, multiply that by 10% which results in a land value of $30K and a building value of $270K.

Does that make sense? If not, I can try again.

Hope that helps....a little.

Burke

[Debbie]

Burke's response is almost accurate. Reason I say almost accurate is based on the location (state/county/city).

Good response, Burke

[Burke]

Burke's response is almost accurate. Reason I say almost accurate is based on the location (state/county/city).

Good response, Burke

Thanks but I would be interested in how things are done in other places where my example may not apply. I know the ratios might be different but I am curious what other methodology is being used? For instance, those ratios are not even close to what you will see here in Hawaii. Here the land would be about 60-70% and the building the remainder.

Burke

[Debbie]

I can only speak for Springfield---more specifically my fully paid for lot and a home about to be built....(FYI, in three weeks!!!)

In 2004, we paid $35K on a double cul-de-sac at a far west end of Springfield. The street behind my lot (also a double cul-de-sac street) were all sold for $43K - $46K per lot.

Now, on my street almost all of the houses are between $200K - $239K. Our house will be $235K (not including the lot worth).

The street behind my lot, most houses are almost completed and we've learned that they are worth between $235k - $275K, excluding the lot worth.

Sometimes the FMV can differ just one block away.

[Burke]

I can only speak for Springfield---more specifically my fully paid for lot and a home about to be built....(FYI, in three weeks!!!)

In 2004, we paid $35K on a double cul-de-sac at a far west end of Springfield. The street behind my lot (also a double cul-de-sac street) were all sold for $43K - $46K per lot.

Now, on my street almost all of the houses are between $200K - $239K. Our house will be $235K (not including the lot worth).

The street behind my lot, most houses are almost completed and we've learned that they are worth between $235k - $275K, excluding the lot worth.

Sometimes the FMV can differ just one block away.

I must not be following you. My methodology of estimating the lot value doesn't depend on the FMV. In fact, the FMV is irrelevant. As long as the ratios as indicated on the tax appraisals are fairly consistent (within a few percentage points maybe), then it will work with any FMV. If the ratio (not the value) differs significantly from one place to another within a few blocks, then there is probably a reason - lot size, location, corner lot, etc....

With all that said, can you use your example to explain a different methodology in use in your locale?

[Debbie]

With all that said, can you use your example to explain a different methodology in use in your locale?

:rolleyes: Um, no I can't....Now, I'm often told that I'm a smart cookie/very bright lady/savvy lady but I'm not one to be an intellectual.

Sorry.....I really do not know how to explain it another way....

[SlumLordMike]

Improvements on lots have to be considered as well as all the other aspects. Water, electric, and an outhouse are worth a few dollars.

[mike_mn]

Is there any formula for determining lot value using comps with developed properties in the same area? I am trying to structure a deal where a home is situated on a double lot. The owner says it is subdividable, I would have to check it out for sure before making the offer. The house value is in the 250K-260 range on the one property.

Thanks.

DaveS.

Dave, from my perspecitve and from this example, your goal should be to get the second lot essentially free. Meaning, in a neighborhood where most of the houses are single lots and all the sudden you find a home with a double lot on it, the value from my opinion should not be all that much greater than that of the single lot. If the guys knows it is subdividable, then heck, he should subdivide it and make money, otherwise, he should be selling it not based on the idea you will subdivide and it is worth more, but that you are buying his house. It is dependant on a lot of factors and certain areas, a double lot will be waaaay more expensive and others it won't make a big difference in price.

The only caution I will give is that you need to be very careful with setbacks on all sides of the structure(s) on the land if you plan to keep the existing homw and build another or sell the lot. The second lot needs to be clear for all setbacks to qualify for a simple subdivision. Make a trip to the city and talk to the city planner, they won't bite and they will be very helpful in this before you pull the trigger. A simple subdivision is not free, but it should not be overly expensive either...if all things are in order before you pull the triggere.

[jpopkin]

The only formula to determining value is looking at comps. While tax records can give you a rough idea as to percentages, they are just that a rough idea. On newer homes the comps will be easier, and the tax record percentage will be more accuragte. But that is why you have to look even harder for established neighborhoods. Comps can be hard to find and adjustments may need to be made, but I wouldn't trust the tax value percentage as your sole source.