Chapter #6
Property Inspection and Analysis:
The Site
Basic Real Estate Appraisal: Principles & Procedures – 9th Edition
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STUDENT LEARNING OUTCOMES
Page
146
• 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 & Circle
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6.1 PREPARING TO INSPECT THE SITE
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147
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
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148
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
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148
• 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?
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149
• 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
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SITE DESCRIPTION – URAR FORM
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152
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6.2 HIGHEST & BEST USE ANALYSIS
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153
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.)
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153
• 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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155
AS IMPROVED (Example 6.1)
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156
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
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156
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
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157
• Physical Characteristics
• Site Location Elements
• Public and Private Restrictions
Detailed on the following slides
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Page
158
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
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160
• 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
Page
161
• 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
Page
161
• 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
Page
161
• Radon and Methane Gas
• Hazardous Wastes
• Lead Paint
• Former Oil Fields
• Toxic Wastes
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PHYSICAL – FORM OF OWNERSHIP *
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162
• Conventional Detached Lot
• Common Interest Development (CID)
• Planned Unit Development (PUD)
• Airspace Condominium
* This does not mean the legal form of holding title
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PHYSICAL – LOT TYPE & ORIENTATION
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164
Figure 6.8
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Courtesy of CalBRE
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PHYSICAL – ON-SITE & OFF-SITE
IMPROVEMENTS
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167
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
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168
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
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168
• Proximity to Earthquake, Flood and
Environmental Hazards
• Comparison with Neighborhood
Properties
• Utilities (Availability and Reliability)
• Transportation
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172
PUBLIC RESTRICTIONS
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•
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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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174
PROPERTY TAXES
• Ad Valorem - “According to Value”
• Direct or Special Assessments / Levies
• Property Tax Exemptions
• Property Transfer Tax
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175
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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176
PRIVATE RESTRICTION
• Deed Restrictions
• Association Agreements (CC&R’s)
• Private Easements
• Leases
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6.4 COMPUTING AREA & VOLUME
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178
Length
Length
Area of Square = Length X Length
(L2)
Width
Length
Area of Rectangle = W X L
Example
If W = 50’ and L = 100’, what is area of the shape?
50’ X 100’ = 5,000 Square Feet (SF)
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COMPUTING AREA & VOLUME (Con’t.)
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180
• 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 Use
2. To Identify Key Site Features
3. To Identify Possible Legal and Physical
Problems
It is desirable to have certain kinds of
information before the site inspection begins.
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CHAPTER SUMMARY (Con’t.)
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186
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 & CONCEPTS
Access
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
Page
188
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IMPORTANT TERMS & CONCEPTS
Off-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
Page
188
Public Restrictions
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