SITE ANALYSIS AND VALUATION

SITE ANALYSIS AND VALUATION

Although the location of the neighborhood and city must be weighed in analysis and valuation of a particular
site, the location of the site itself, in relation to the neighborhood, is a very important factor.

Since sites in a neighborhood are not usually uniform in size, shape and other physical and economic
characteristics, some are superior to others. It is important that the site be analyzed separately and evaluated in
conformity with the principle of highest and best use.

Appraisers value the site when there are no improvements on the property. Appraisers also at times will value a
site separately from improvements that may be on the site. Examples of those times where an appraiser would
value the site separately from improvements include the cost approach, income approach, and property tax
valuation.

Other reasons to separate the land from the value of an entire property, along with important factors
contributing to site value, are discussed on the following pages.

Legal Data of Site Analysis

A. Legal description.

1. An appraiser must determine the legal property description as set forth by a deed or official record.

2. The proper legal description helps to locate the property physically within the neighborhood.

B. Taxes.

1. A comparison is made between the subject and similar properties to ascertain if the property being
appraised has been fairly assessed (assessed value, tax rate and tax total). This comparison of
properties is not as useful since the adoption of Proposition 13. After declining real estate cycles
occur, many property owners engage appraisers to render value opinions that lead to reassessment for
lower property taxes.

2. The extent of the tax burden will have a bearing upon the desirability of the property, particularly when
taxes are out of proportion to income.

C. Zoning and General Plan.

1. Copies of the latest zoning ordinances and general plan should be studied to inform the appraiser as to
the present usages to which the land may be developed. Sometimes the highest and best use of land is
limited by zoning restrictions.

2. Proposed or contemplated changes in the existing ordinances should be determined, since this could
have a bearing upon the valuation of the property. However, zoning by itself does not create value
unless there is a demand for the land so zoned.

D. Restrictions and easements.

1. Public and private restrictions and easements affecting the land must be discovered.

2. The restrictions and the types of easements on the property have a direct bearing upon the use and
value of the site being appraised.

E. Determination of existence of other interests in property.

1. Life estates.

2. Leases.

3. These partial interests divide property values among the parties involved. This does not mean a
mathematical division, but rather a division of the bundle of rights.

Physical Factors Involving the Site

A. The physical features of the site should be compared with typical lots in the neighborhood.

B. Lot values will generally tend to cluster around a “site value,”… the price generally accorded a single,
usable, typically-sized parcel of land in the area. Lots larger or smaller will tend to increase or decrease

when compared to this usual “site value.” A good view will also tend to increase lot value. The effect of
topography (drainage, low spots, rock, etc.) can frequently be measured by the cost to cure the problem to
make the site usable.

C. Shape of a lot.

1. The utility of the lot is the governing factor in irregular or odd-shaped lots.

2. The total area of the lot is not the most important factor. A 50’ x 150’ lot containing 7,500 square feet

is more valuable than a 25’ x 300’ lot (also 7,500 sq. ft.) because of utility.

3. Irregular-shaped lots are frequently valued in terms of total site value expressed in dollars rather than

in terms of unit values of price per square foot or frontage foot.

D. Topography and soil conditions.

1. The topography and the type of soil can have an adverse effect upon the site value if it makes building
costs higher.

E. Corner influence.

1. In today’s market, it has generally been found that corner single-family lots are not valued appreciably
more than inside lots.

2. Corner lots provide better light and more convenient access.

3. On the other hand, corner lots result in more traffic noise and trespassing and, if applicable, greater
special assessments for streets and lighting.

F. Relation of site to surroundings.

1. The site must be studied in its relationship to streets, alleys, transportation, and stores.

2. Does the homesite abut commercial or multi-residential uses?

3. Is it a key lot looking upon other back yards?

4. If a corner lot, does a bus line stop at the corner?

5. Are there high tension power lines over the site?

6. Is the site in an airport flight pattern?

G. Availability of public utilities.

H. Title encumbrances and encroachments.

I. Landscaping and underground utilities.

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 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, shape, topography, soil conditions, utility improvements, and the other
measurable characteristics 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 January 50 x 120 6,000
2 $4,750 June 40 x 130 5,200
3 $5,500 September 50 x 120 6,000
Subject September 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 market transactions;

(3) recompute 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.

2. 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:

Price of sale property ........................................... $83,000

Less depreciated value of improvements:

Cost new .................... $61,000

Less accrued depreciation ... $20.000

Depreciated value ................................................ $41,000

Indicated land value ............................................. $42,000

Divide by lot size ........................................... ÷ 6000 sq.ft.

Indicated lot value/sq.ft.................................... $7.00/sq.ft.

Multiply by subject lot size:

65’ x 100’ = 6,500 sq.ft.......................... x 6,500

Indicated value of lot ........................................... $45,500

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.