Site Attributes: Land Analysis & Regulations

Site Attributes: Land Analysis & Regulations

This chapter delves into the scientific analysis of site attributes, encompassing land analysis and relevant regulations that significantly influence property valuation. Understanding these aspects is crucial for accurate and defensible appraisals.

1. Assessment and Tax Information

Real property taxes are primarily based on ad valorem assessments, meaning “according to value.” This implies a direct relationship between the assessed value of a property and its tax burden. While parcel taxes exist that are independent of assessed value, the primary tax levied on real estate correlates with valuation.

• Formula for Property Tax:

  • Tax Liability = Assessed Value × Tax Rate
  • T = AV × TR

  Where:
  * T is the total property tax liability.
  * AV is the assessed value of the property.
  * TR is the tax rate, often expressed as a millage rate (e.g., mills per dollar of assessed value, or $X per $1,000 of assessed value).

• Application: Analysis of assessment and tax information helps predict future taxation trends. High assessed values or rising tax rates can negatively impact property values, while stable or decreasing rates could be a positive sign.

• Caveat: Assessed values are often determined through mass appraisal techniques, which use statistical methodology to ensure tax parity. This means that individual assessed values may not precisely reflect the market value. The reliability of assessed value as a market indicator varies geographically.

2. Physical Characteristics of Land

A comprehensive site analysis involves describing and interpreting the physical attributes of a site and their impact on value. This analysis considers how the site characteristics interact with improvements and neighboring properties.

2.1 Size and Shape

• Dimensions: Site dimensions are described using frontage, width, and depth, typically in feet and tenths of feet for calculation ease.
• Frontage: Frontage is the length of the site abutting a street, lake, river, railroad, or other recognized feature. It might differ from the property width due to irregular shapes.
• Impact on Value: Size and shape significantly influence property value, depending on the intended use. An oddly shaped lot might be suitable for residential but unsuitable for commercial or industrial purposes. Triangular lots may lack the utility of rectangular lots.
• Unit Price Analysis: Analyzing sales prices per unit area (e.g., per square foot or acre) for comparable sites can reveal market trends. As size increases, unit prices generally decrease due to economies of scale. Conversely, smaller sites command higher unit prices.

• Mathematical Representation of Price Variation:

  • UP = a - bS (Linear Model)
    • Where UP is the Unit Price, S is the Site Size, a is the intercept and b is the slope of the line.
    • This is a simple representation and other functions (e.g., logarithmic) could be used to model the relationship.

2.2 Corner Influence

• Definition: Corner lots have frontage on two or more streets.
• Valuation Considerations: Corner locations can have either positive or negative effects on value, depending on the use.
• Commercial: Corner lots offer advantages in terms of accessibility and visibility. Optimal corner sites for businesses like gas stations are located at intersections of major thoroughfares with high traffic volume and controlled access (traffic lights).
• Residential: Corner lots may be less desirable due to increased traffic noise, reduced privacy, higher costs for sidewalk maintenance, and stricter setback requirements.

2.3 Plottage Potential

• Definition: Plottage is the increase in value that occurs when two or more adjacent sites are combined to create a larger site with greater utility and a different, often higher, best use.
• Conditions for Plottage: Plottage value is realized when the combined value exceeds the sum of the individual parcel values.
• Agricultural Example: Smaller agricultural parcels might be inefficient for modern farming equipment. Combining them increases their unit value.
• Urban Example: Assemblage of smaller commercial parcels into a larger site can increase value for office, retail, or apartment development.
• Negative Plottage: Extremely large lots can sometimes lead to lower unit prices due to market limitations and negative economies of scale.

• Formula for Plottage Value:

  • PV = (V_combined / A_combined) - ((V₁ / A₁) + (V₂ / A₂) + … (V_n / A_n)) / n

  Where:

  *   *PV* is the Plottage Value
  *   *V<sub>combined</sub>* is the total value of the combined parcels
  *   *A<sub>combined</sub>* is the total area of the combined parcels
  *   *V<sub>i</sub>* is the value of individual parcel *i*
  *   *A<sub>i</sub>* is the area of individual parcel *i*
  *   *n* is the number of parcels
  

2.4 Excess Land and Surplus Land

• Optimal Land-to-Building Ratio: Each land use has an ideal parcel size, configuration, and land-to-building ratio.
• Excess Land: Land not needed to support the existing or proposed use and capable of being sold separately with its own highest and best use.
  • Example: A house on one lot in a neighborhood where a single lot is the norm. The extra lot is excess land.

• Surplus Land: Land not needed to support the existing or proposed use and cannot be sold separately with its own independent highest and best use.

  • Example: An industrial warehouse with a high land-to-building ratio where the surplus land is at the rear of the site with no independent street access.

• Treatment in Valuation: Excess land requires separate valuation, considering the costs and legal requirements for separation. Surplus land’s value contribution may be less than vacant land due to its limited utility. The appraisal report needs to clearly disclose the individual values and the total combined value.

2.5 Topography

• Definition: Topography encompasses the land’s contour, grading, natural drainage, geological characteristics, view, and overall physical suitability.
• Factors Influencing Value: Steep slopes can impede construction, while drainage issues can limit usability. Upland areas with good drainage are generally more valuable.
• Topographic Maps: The US Geological Survey (USGS) provides topographic maps (quadrangles) that are valuable for land descriptions. These maps show elevation contours, rivers, lakes, roads, buildings, and other features.
• Geodetic Survey Program: USGS topographic maps provide information useful in land descriptions. Base lines, principal meridians, range lines, and township lines are shown, along with topographic and man-made features.

2.6 Geology and Soil Analysis

• Soil Composition: The composition of surface and subsurface soil is crucial for both improved properties and agricultural land.
• Building Suitability: Soil suitability for construction and septic systems is a primary consideration, especially for large buildings. Special foundations (e.g., pilings) might be required, impacting development costs.
• Agricultural Applications: Agronomists and soil scientists assess soil qualities for specific agricultural uses.
• Engineering Applications: Engineers trained in soil mechanics analyze soil consistency and load-bearing capacity.
• Soil Testing: When soil conditions are uncertain, a soil study is essential to determine the land’s highest and best use.
• Structural Distress: Cracks in walls or foundations can indicate geotechnical problems like subsidence or slope creep, often requiring expert analysis from geologists or structural engineers.
• Soil Triangle: A graphical representation (e.g., the USDA soil triangle) illustrating the proportions of sand, silt, and clay that define soil texture and influence its properties.

• Formula for Soil Texture Classification (Simplified): Though not a direct formula, the percentage composition of sand, silt, and clay is crucial:

  • %Sand + %Silt + %Clay = 100%
  • These percentages are then plotted on a soil texture triangle to determine the soil type (e.g., sandy loam, clay loam).

2.7 Floodplain and Wetlands Analysis

• Flood Zones: Proximity to flood zones significantly affects property value. Floodplain maps prepared by local governments and FEMA indicate properties within the 100-year floodplain, floodways, and other districts.
• FEMA Maps: FEMA maps provide base data for flood insurance rate maps (FIRMs).
• Wetlands: Wetlands, critical ecosystems, are subject to stringent regulations. Their presence can severely restrict development.
• Hydrologic Modeling: Computer-based models that simulate water flow and predict flood extents based on rainfall, topography, and land cover. These models, like HEC-RAS (Hydrologic Engineering Centers River Analysis System), are used for floodplain mapping and risk assessment.
• Base Flood Elevation (BFE): The elevation to which floodwater is anticipated to rise during a base flood. Crucial for determining flood risk and insurance rates.

3. Land Use Regulations

Land use regulations, primarily zoning ordinances, dictate permissible uses, building heights, setbacks, and other development parameters. Understanding these regulations is paramount for determining a property’s highest and best use and market value. Appraisers often need to consult with multiple agencies to obtain comprehensive zoning information.

• Zoning Ordinances: Regulations that control the use of land within a jurisdiction.
• Setbacks: Minimum distances required between structures and property lines.
• Height Restrictions: Maximum permissible building heights.

• Density Regulations: Restrictions on the number of dwelling units per acre or the floor area ratio (FAR).

• Floor Area Ratio (FAR): The ratio of a building’s total floor area to the size of the lot upon which it is built.

  • FAR = Total Building Floor Area / Lot Area

• Experiment: Conduct a case study of a property with a zoning change (e.g., from residential to commercial) and analyze the resulting change in market value. This can be accomplished using market data, paired sales analysis, or other appraisal methods.