highest and best use 2015
TRANSCRIPT
Why bother with Highest and Best Use?
USPAP Standards Rule 1-3(b)
“When necessary for credible assignment results in developing a market value opinion, an appraiser must develop an opinion of the highest and best use of the real estate”
193.011 Factors to consider in deriving just valuation.—In arriving at just valuation as required under s. 4, Art. VII of the State Constitution, the property appraiser shall take into consideration the following factors:
1. Present Cash Value2. Highest and Best Use3. Location4. Quantity or size5. Replacement cost6. Condition7. Income 8. Cost of Sale
Florida Statutes 193.011 - Eight Criteria
193.011 (2) The highest and best use to which the property can be expected to be put in the immediate future and the present use of the property, taking into consideration the legally permissible use of the property, including any applicable judicial limitation, local or state land use regulation, or historic preservation ordinance, and any zoning changes, concurrency requirements, and permits necessary to achieve the highest and best use, and considering any moratorium imposed by executive order, law, ordinance, regulation, resolution, or proclamation adopted by any governmental body or agency or the Governor when the moratorium or judicial limitation prohibits or restricts the development or improvement of property as otherwise authorized by applicable law. The applicable governmental body or agency or the Governor shall notify the property appraiser in writing of any executive order, ordinance, regulation, resolution, or proclamation it adopts imposing any such limitation, regulation, or moratorium;
Highest and Best Use determines the selection of comparables...
This might be the most important slide today!
Single Family Home, Warehouse,
Service Station, Conv/Store, Bank, School, Office Building,Restaurant, Regional Mall,
Duplex, Beauty Salon, Church,
Amusement Park, Townhouse, Manufacturing
Plant, Condo,Retirement Home, Hotel,
Stadium, Power Plant, Mobile Home Park, Hospital,
Drugstore, Golf Course, Apartment Project.
Subject Property is a 10 Acre sitein Brandon.
Single Family Home,Warehouse,
Service Station, Conv/Store, Bank, School, Office Building,Restaurant, Regional Mall,
Duplex, Beauty Salon, Church,
Amusement Park, Townhouse, Manufacturing
Plant, Condo,Retirement Home, Hotel,
Stadium, Power Plant, Mobile Home Park, Hospital,
Drugstore, Golf Course,Apartment Project.
Subject Property is a 10 Acre sitein Brandon zoned Residential/Multifamily.
Single Family Home, Duplex, Church,
Townhouse,Condo, Retirement
Home, Hotel, Apartment Project.
Subject Property is a 10 Acre sitein Brandon zoned Residential/Multifamily.
Retirement Facility
Expected Sale price: $3,000,000Cost to construct : - 2,450,000Profit: $ 305,000___________________________
Hotel
Market Value: $2,300,000Cost to construct : 1,840,000Profit: $ 460,000
____________________________
Apartment Complex
Market Value: $5,500,000Cost to construct : - 4,950,000Profit: $ 550,000
Subject Property is a 10 Acre sitein Brandon zoned Residential/Multifamily.
Retirement Home, Hotel, Apartment Project.
So the ideal comps to valuethis 10-acre vacant sitewould be sales of other
Multifamily sites, preferably in Brandon.
Subject Property is a 10 Acre sitezoned Multifamily in Brandon.
In Mass Appraisal Highest and Best Use is accomplished
through coding•Property Use• Land Use• Building Use• Zoning • Land Size• Frontage• Depth• Special Features
What does that mean??
Using coding, similar properties are “linked”. When any of those properties sell, they will be used to value properties with similar coding.
A vacant site coded with a residential land use will be valued using sales of properties that have similar coding.
Before I forget!!!!!
We value all land as if vacant.We value all land as if vacant.We value all land as if vacant.We value all land as if vacant.We value all land as if vacant.We value all land as if vacant.
(What is built on the land does not increase or decrease the
land value)
Folio 133429.0000South Tampa – one lot in from Dale Mabry
Zoned CG – CommercialWhat is the highest and best use as-vacant?
Folio 133429.0000South Tampa – one lot in from Dale Mabry
Zoned CG – Commercial
In a perfect world, we would have salesof commercial zoned
sites on residential streets.
But without those sales,how should we value this?
Dale Mabrycommercial sales?
Residential lot sales?An average of both?
What does the Appraisal of Real Estate say about assuming a zoning change?
“It is possible and logical for an appraiser to select a highest and best use not allowed under current zoning if market conditions, trends, activities or opinions of knowledgeable people (the zoning director, for instance) indicate a change of zoning is likely. An appraiser should not assume a zoning change is likely, however, without substantial evidence to support such a conclusion.”
What have the courts said about assuming a zoning change?
Speculation as to zoning change was improper: Williams v. SimpsonFlorida Rock Industries, Inc. v. BystromBal Harbor Club, Inc. v. Dade Cnty.Keith Investments, Inc. v. JamesR-C-B-S Corp. v. WalterStraughn v. TuckSt. Joe Paper Co. v. Atkinson
May assume zoning if likelihood exists:Broward Cnty. v. PatelUnited States v. Meadow Brook Club
Highest and Best Use As-Improved uses the same test!
With H&B Use As improved, we are trying to decide: 1.Continue the existing use?
2. Modify the existing use?
3. Demolish the existing improvements and redevelop the site?
What is the highest and best use of a 3-story office building in downtown Tampa where condo development has become very profitable?
H&B Use as Improved Most of the time the H&B use of a property as
improved is the current use.
This is because the cost of conversion to something else can be very expensive.
New market value as condos
Existing Building Value
Construction Cost and Marketing
Lost income during conversion
In 2005-2006 many apartment complexes were converted to condos in
Hillsborough County
. Why? . * Higher price as a condo * Captive Audience
* Flipping
* Hot Real Estate Market
Many converted condo projects did not sell out and they reverted to leasing the
unsold units. This created new terms like “Fractured Condos”
Tax reps for Fractured Condos sought assessment reductions based on rental value instead of sales of condo units.
What is the highest and best use of a fractured condo unit?
The use that is “maximally productive” or put another way, the use that brings the highest price.
Folio 114399.0000Former Borders Bookstore
The physical changes to the building changed highest and best use.
Folio 068067.0000Warehouse recently occupied by a fitness center
A change in the occupant does not necessarily change the highest and best use (or the DOR code
and building use).
Building write-offFolio 204784.0000
Southern Hospitality Furniture and Decor
Just because a property is being used, Doesn’t mean it’s the highest and best use
Building write-offFolio 204784.0000
Southern Hospitality Furniture and Decor
Land Value = $875,982Income Approach = $726,200
1. Continue the existing use?
2. Modify the existing use?
3. Demolish the existing improvements and
redevelop the site?
If the value of the entire property via the income approachdoesn’t exceed land value, what is the highest price that you would pay for this property?
The Highest and Best Use of a Drugstore is……..a Drugstore!
(not “general retail” like an auto parts store, used furniture store, kitchen store, etc.)
“The functional utility (hence the H&B use) of a special-purpose building depends on whether or not there is continued demand for the use for which the building was designed”
Source: The Appraisal of Real Estate, 14th Edition, (Appraisal Institute, 2013) pg. 269
What is the highest and best use of a drywall manufacturing plant (folio 051479.0000)?
“The functional utility (hence the H&B use) of a special-purpose building depends on whether or not there is continued demand for the use for which the building was designed”
Source: The Appraisal of Real Estate, 14th Edition, (Appraisal Institute, 2013) pg. 269
What is the highest and best use of the Tampa Greyhound Track (folio 100611.0000)?