Site Value Extraction : Case Studies

So what do we do if we are appraising in a completely built-up area where there are few land sales? We may need to extract the value of the land from the depreciated value of the improved property. This requires a number of assumptions. We must assume that the sales price actually reflects the market value of the property being analyzed, and we must assume that we can account for all forms of depreciation. We must also realize that we will arrive at a range of value.

For our case study, we will choose an Akron market area, within the CRIS MLS Southwest Akron market (SUM34). Using a map search, the area studied was bounded north by Vernon Odom Blvd, west by Manchester Road, south by I-76, and east by the MLK Innerbelt. The area chosen is roughly described by Census Tract 5018 and Census Tract 5052, Block 1, with Year 2000 owner occupancy rates of 52% and 54%, respectively. The high ratio of investor-owned properties and the related "flipping", with equity cash-out refinancing, has created a market with very high foreclosure rates.



In the period from 1-1-2004 through 12-31-2006, that area returned 69 MLS sales. The sales prices ranged from $3,200 to $50,000, with a mean of $15,233 and a median of $13,500. The predominant price range was under $19,999. Of the 69 sales, 55 were bank repos. Out of the remaining 14, four sales of homes of similar design and quality were studied.

One land sale was found for that time period. It was a 45 x 108 lot (4860 sf) that sold 3-17-2004 for $5,600, cash, after 25 days on the market at $9,900. The parcel had previously had an older home which was condemned and razed, and the site was vacant and ready for new construction. The low sales price for a house (429 Berry Avenue) for $3,200 was a Freddie Mac repo for which the MLS remarks stated, "This house has been condemned." That site was a 25 x 125 parcel (3125 sf) which sold 12-17-2004; instead of being razed, it appears to have been cosmetically enhanced and "flipped" 9-2-2005 for $60,000 with a $54,000 loan from IndyMac Bank (according to Realist.com).

We will examine four relatively similar homes in this market pocket. We will compare the extracted site values with the lot sale that was found, and also with the 2006 Auditor's appraised value. I predict (because I already know the outcome) that we will demonstrate that appraisers who use the Auditor's site value in their reports are stupid and lazy.