property inspection and analysis: the site basic real estate appraisal: principles & procedures...
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Property Inspection and Analysis: The Site
Basic Real Estate Appraisal: Principles & Procedures – 9th Edition
© 2015 OnCourse Learning
Chapter #6
STUDENT LEARNING OUTCOMES
• List Three Reasons for making Site Inspections• List Four Criteria for Highest & Best Use• List the Three Main Categories of Site
Information•Calculate the Area of a Square,
Rectangle, Triangle, Trapezoid & Circle2
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6.1 PREPARING TO INSPECT THE SITE
Reasons for Inspecting the Site• Highest and Best Use Estimate• The land use that will support its highest value
(covered in more detail later)
• Identify Key Features• Physical Characteristics• Site Location Elements• Public and Private Restrictions
• Identify Possible Legal or Physical Problems 3
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POSSIBLE LEGAL PROBLEMS
•Non-Conforming Use• Encroachment•Unrecorded Easement
Notify Client if Undisclosed Problems are Discovered – and Clearly Disclose in the Report
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POSSIBLE PHYSICAL PROBLEMS
• Flood Risks
•Poor Soils / Settlement
• Environment Hazards
Discovered Problems May Change the Scope of Work – and May Require an Expert
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WHAT DATA & TOOLS ARE NEEDED?
• Sales History of Subject• Three Years History Prior to Value Date (USPAP)
• Site and Neighborhood Data• Plat Map, Flood map, Aerials, Title Report
•Data Sources• Gov’t Websites, FEMA, Zoning
• Tools and Equipment• Checklist/URAR, Laptop/Tablet, Measuring
Device, Camera, Maps, GPS 6
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SITE DESCRIPTION – URAR FORM
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6.2 HIGHEST & BEST USE ANALYSIS
Uniform Standards of Professional Appraisal Practice...• Requires Highest and Best Use Analysis if
estimating an opinion of Market Value
Alternatively defined as…The reasonable and profitable use that will support the highest land value as of the date of value
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HIGHEST & BEST USE ANALYSIS (Con’t.)
•Purpose – H&B Use helps define the…• Basis of Data Collection• Appraisal Methodology
•Alternative Use Assumptions• Highest and Best Use As if Vacant• Highest and Best Use As Improved
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AS IMPROVED (Example 6.1)
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INTERIM USE (Example 6.2)The analysis suggests that the residential use (as improved) may be determined to be an Interim Use until commercial land values increase above $350,000 (value as improved).
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HIGHEST & BEST USE CRITERIA
The Four Accepted Tests for H&B Use…•Physically Possible• Legally Permissible• Economically Feasible•Most Productive (Profitable)
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6.3 MAJOR CATEGORIES OF SITE INFORMATION
•Physical Characteristics• Site Location Elements•Public and Private Restrictions
Detailed on the following slides13
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PHYSICAL – SIZE AND SHAPE• Size Usually in Square Feet or Acres• One Acre = 43,560 Square Feet• Assemblage or Plottage• Joining of two or more parcels• May or May Not increase value (Plottage Value)• Gross vs. Useful Area (Net)• Building Footprint or Coverage Ratio• Lot Shape (Width vs. Depth)• Frontage and Excess Depth
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PHYSICAL – TOPOGRAPHY
• Irregular Topography• Hills, Valleys, Ravines, Cliffs, Bluffs and Slopes• May be an Asset – Premium Views• May be a Liability – Higher Utility, Access
and/or Development Costs
•Orientation to Surrounding Uses.
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PHYSICAL – SOIL AND GEOLOGY
• Soil Stability – Rock vs. Sand• Soils Composition•Ability to absorb moisture• Affect on Septic Systems
•Potential Hazards• Slide, Soil Liquefaction or Earthquake
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PHYSICAL – DRAINAGE AND FLOOD
• Appraiser Should Note the Water Drainage Pattern (Run-Off), Signs of Excessive Soil Erosion• Flood Maps/Flood Plain (Hazard
Area?) - Is Flood Insurance Required?
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PHYSICAL – ENVIRONMENTAL FACTORS•Radon and Methane Gas•Hazardous Wastes• Lead Paint• Former Oil Fields• Toxic Wastes
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PHYSICAL – FORM OF OWNERSHIP *
•Conventional Detached Lot•Common Interest Development (CID)•Planned Unit Development (PUD)•Airspace Condominium
* This does not mean the legal form of holding title19
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PHYSICAL – LOT TYPE & ORIENTATION
Figure 6.8
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Courtesy of CalBRE
PHYSICAL – ON-SITE & OFF-SITE IMPROVEMENTS
On-Site Improvements• Earth Leveling, Grading, Fill, Drainage,
Compaction or Excavation
Off-Site Improvements• Widening and Paving of Streets, Curbs, Gutters,
Sidewalks, Alleys, Street Lights and Parking Facilities
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ANALYSIS OF SITE LOCATION ELEMENTS
Evaluation of the Neighborhood• Convenience to Schools, Hospitals and
Community Centers• Proximity to Employment and Shopping,
and to Medical and Recreation Facilities•Market Appeal of Neighborhood
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ANALYSIS OF SITE LOCATION ELEMENTS
• Proximity to Earthquake, Flood and Environmental Hazards• Comparison with Neighborhood Properties• Utilities (Availability and Reliability)• Transportation
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PUBLIC RESTRICTIONS
• Regional and Master Plans• Zoning Regulations• Subdivision Laws• Building and Safety Regulations• Right of Access• Environmental Protection Laws• Federal Flood Zones• Geological Hazard Zones
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PROPERTY TAXES
• Ad Valorem - “According to Value”
• Direct or Special Assessments / Levies
• Property Tax Exemptions
• Property Transfer Tax
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PROPERTY TRANSFER TAX
Example• Rate of $0.55 per each $500 of new money
(Equates to $1.10 per $1,000)• Hence – Tax ÷ 0.0011 = Price• If Stamps are $209.00…
$209.00 ÷ 0.0011 = $190,000
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PRIVATE RESTRICTION
• Deed Restrictions
• Association Agreements (CC&R’s)
• Private Easements
• Leases
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6.4 COMPUTING AREA & VOLUME Length
Length Area of Square = Length X Length (L2)
Area of Rectangle = W X L
ExampleIf W = 50’ and L = 100’, what is area of the shape?
50’ X 100’ = 5,000 Square Feet (SF) 28
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Width
Length
COMPUTING AREA & VOLUME (Con’t.)
• Second Bullet should be 28
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CHAPTER SUMMARY
Site inspection is one of the most important parts of the entire appraisal process. Three major reasons of inspecting the site are:1. Estimate Highest and Best Use2. To Identify Key Site Features3. To Identify Possible Legal and Physical
ProblemsIt is desirable to have certain kinds of information before the site inspection begins.
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CHAPTER SUMMARY (Con’t.)
The tools and equipment necessary to perform the inspection were outlined. During the inspection, the appraiser should first investigate the physical characteristics of the site. Physical characteristics also include the form of ownership, type of lot, its orientation, and physical access. The improvements made to the site (on-site) or on areas surrounding it (off-site) must be noted.
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IMPORTANT TERMS & CONCEPTSAccess Flag Lot
Assemblage Frontage
Association Agreement Gross Area
Building Footprint Highest and Best Use
Common Interest Development (CID) Interim Use
Condominium Interior Lot
Corner Lot Key Lot
Coverage Ratio Location
Cul-de-sac Lot Lot Shape
Depth Lot Type
Excess Depth Net Area
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IMPORTANT TERMS & CONCEPTSOff-Site Improvements Right of Access
On-Site Improvements T-Intersection Lot
Orientation Topography
Planned Unit Development (PUD) Townhouse
Plottage Transportation
Plottage Value Useful Area
Private Restrictions Utilities
Public Restrictions
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