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Site Valuation: Highest & Best Use and Land Appraisal Methods
Chapter 6: Site Valuation: Highest & Best Use and Land Appraisal Methods
Inclusion in “Mastering the Sales Comparison Approach: A Comprehensive Guide” Training Course
This chapter provides critical foundational knowledge for accurately applying the Sales Comparison Approach (SCA) by focusing on Site Valuation. Understanding Highest & Best Use is paramount for selecting truly comparable properties, as it establishes the benchmark for optimal property utility. Furthermore, grasping the various land appraisal methods empowers you to isolate land value, a crucial component in adjusting comparable sales within the SCA, and also for Cost Approach applications. Mastery of these concepts enhances your ability to analyze market data and make precise adjustments based on property characteristics.
I. Introduction to Site Valuation and its Significance
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Context: In the SCA, we analyze comparable property sales to estimate the subject property’s value. A core aspect of this analysis hinges on correctly assessing the land value because the land is a critical, yet often variable, component that influences the overall sales price of a property.
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Need for Separate Site Valuation: While the course focuses on the SCA, understanding Site Valuation is important for several reasons, in line with the book content and linking it to the course description:
- Cost Approach and Building Residual Technique: These approaches require separate estimates of site value.
- Legal Requirements: Property tax assessment and condemnation appraisals may require separate site valuation by law.
- Sales Comparison Approach (SCA) Accuracy: Accurately adjusting comparable sales prices necessitates isolating land value contributions.
- Highest and Best Use (H&BU) Analysis: Crucial in determining whether the current improvements maximize the site’s potential. Incorrect H&BU jeopardizes the SCA’s reliability.
II. Highest and Best Use (H&BU): The Foundation of Site Valuation
A. Definition:
The Highest and Best Use (H&BU) of a property is defined as:
the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.
B. Importance in Valuation (Relevant to the SCA):
* Comparable Selection: H&BU guides the selection of truly comparable properties. Properties with dissimilar H&BU are not true comparables, compromising the reliability of the SCA.
* Adjustment Process: Identifies key elements for comparison and informs adjustments to comparable sales prices. For example, a comparable with higher development potential due to more permissive zoning (H&BU) would warrant a price adjustment.
* Market Analysis: Understanding prevailing H&BU patterns in a market enhances the appraiserโs ability to interpret market data and identify emerging trends.
C. Four Tests of H&BU:
A scientific approach to H&BU requires demonstrating that the use meets four tests:
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Legally Permissible: The use must comply with all applicable laws, zoning ordinances, deed restrictions, and environmental regulations.
- Example: A site zoned for single-family residential use cannot have its H&BU defined as a commercial retail store, regardless of potential profitability.
- Legal Non-Conforming Use Considerations: Existing legal non-conforming uses can impact value, but vacant land cannot adopt a use that isn’t currently legally permissible.
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Physically Possible: The site’s physical characteristics (size, shape, topography, soil bearing capacity, access, utilities) must support the proposed use.
- Example: A narrow, steep site may not be physically suitable for a large multi-story building, even if zoning allows it.
- Mathematical Application:
- Required Site Area (RSA) <= Actual Site Area (ASA)
- Building Footprint Area (BFA) <= Allowable Building Area (ABA) as per zoning regulations.
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Financially Feasible: The proposed use must generate sufficient income or utility to justify the costs of development and operation.
- Quantitative Analysis: Requires estimating development costs (materials, labor, permits), operating expenses, and projected income.
- Formula:
Net Operating Income (NOI) = Gross Potential Income (GPI) - Vacancy & Collection Losses (V&C) - Operating Expenses (OE)
Profitability Test: NOI > Minimum Acceptable Return (MAR) - Paired Data Analysis (Relating to course description): Extract the effect on sales price of similar sized properties, if they are used as retail stores, or single family homes to assess financial feasibility of either highest and best use.
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Maximally Productive: From among all legally permissible, physically possible, and financially feasible uses, the H&BU is the use that maximizes the property’s value.
- Requires comparing the potential returns of all viable uses.
- This point can be tested with an experiment. Appraisers could create a scenario of a piece of land and then propose a list of the highest and best use based on the previous rules. Appraisers could measure that scenario with market data to see if the market supports their decision of highest and best use.
- Formula: Highest Value = MAX {Net Present Value (NPV) of all feasible uses}
D. H&BU as Vacant vs. Improved:
Distinction between H&BU of the land as if vacant and the H&BU of the property as improved is crucial.
* H&BU As If Vacant: Focuses on the ideal development potential assuming the land is cleared of existing improvements. It establishes the upper limit of potential value.
* H&BU As Improved: Considers the contribution of existing improvements, factoring in demolition costs if a change in use is warranted. It determines whether the current use should continue, be modified, or replaced.
* Interim Use: Analyzing what is the “current” highest and best use of the property can help show what the actual use for the property is for a future time. For example, an appraiser may show that a current farm is actually a future housing development.
E. Principle of Consistent Use:
- Definition: This principle mandates that when valuing a property with separate components (land and improvements), each component must be valued based on the same H&BU.
- Relevance: Ensures consistency in valuation, preventing artificial inflation or deflation of value by valuing the land under one use and the improvements under another.
F. Plottage and Excess Land:
- Plottage: The incremental value gained by combining two or more adjacent parcels into a single larger site that has greater utility than the individual parcels separately. (Value of Combined Site > Sum of Individual Site Values).
- Excess Land: Land that has value that can be determined separately from that of the parcel or land that would be considered adequate for the current or pending highest and best use. (Additional parcel that can be sold off separately).
III. Land Appraisal Methods: Scientific Application
The primary goal of land valuation is to isolate the market value of the land component, allowing for informed comparisons and adjustments within the SCA.
The following methods are employed, listed in order of generally preferred reliability:
A. Sales Comparison Method (Primary Method, Emphasizing its Relationship to SCA)
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Description: Directly compares the subject site to sales of similar, vacant parcels in the market. It’s a crucial extension of the Sales Comparison Approach to isolate land value.
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Data Sources:
- Real estate brokers specializing in land sales
- County recorder offices (deeds and transfer records)
- Title companies
- Market data service providers (FNC, CoreLogic)
- Cautionary Tale (Relating to the description): Relying solely on Zillow or Trulia will give an incomplete picture of ‘sold’ comparables, hindering accurate valuation.
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Adjustment Elements (Scientific Framework for Comparison) These elements provide a framework for making quantifiable adjustments to comparable sale priceโs to reflect the characteristics of the subject site. They will be detailed and will be based on the Sales Comparison Approach described in later Chapters:
- Property Rights Conveyed (PRC): Fee simple, leasehold, etc. Adjust for differences in bundle of rights.
- Financing Terms (FT): Cash equivalent sale is the ideal. Adjust for non-market financing concessions using paired data analysis.
- Formula: Adjusted Sale Price = Sale Price - Value of Financing Concession
- Conditions of Sale (CS): Armโs length transactions are preferred. Adjust for duress, related-party sales, etc. (Difficult to quantify, requires sound judgment).
- Expenditures Immediately After Sale (EAS): Demolition costs, environmental remediation, etc. Subtract these from the sale price.
- Formula: Adjusted Sale Price = Sale Price - EAS
- Market Conditions (MC): Adjust for value changes between the comparable sale date and the appraisal date. Requires analyzing market trends.
- Formula: Adjusted Sale Price = Sale Price * (1 + % Change in Market Value)
- Location (L): Adjust for neighborhood characteristics (amenities, schools, access). Paired data analysis can help quantify location adjustments.
- Physical Characteristics (PC): Size, shape, topography, soil conditions. Quantify using paired data analysis (e.g., price per square foot, regression analysis).
- Economic Characteristics (EC): Zoning, development potential. Adjustments reflect the economic impact of zoning regulations on the development.
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Mathematical Formula (Summarizing Adjustments):
Adjusted Sale Price = Sale Price ยฑ PRC ยฑ FT ยฑ CS ยฑ EAS ยฑ MC ยฑ L ยฑ PC ยฑ EC
B. Allocation Method
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Description: Establishes land value as a percentage of the total improved property value.
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Formula: Land Value = Total Property Value * Allocation Percentage
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Application: Limited to situations where vacant land comparables are scarce. Often used for mass appraisals (property tax assessments).
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Scientific Basis: Based on the premise that there is a ‘typical’ land-to-value ratio, requiring statistical support and careful validation to determine the appropriate percentage.
C. Extraction Method
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Description: Deducts the depreciated cost of the improvements from the total sale price to arrive at the implied land value.
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Formula: Land Value = Sale Price - Depreciated Cost of Improvements
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Application: Useful when improved property sales data is abundant, but vacant land sales data is limited.
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Depreciation Estimation: Requires accurate estimation of accrued depreciation (physical deterioration, functional obsolescence, external obsolescence), often using techniques outlined in cost approach valuation.
D. Development Method (Subdivision Analysis)
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Description: Projects the value of a subdivided property based on development costs, marketing, profits, and revenues.
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Formula: Land Value = Projected Gross Revenue - Development Costs - Marketing Costs - Entrepreneurial Profit - Discount to Present Value
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Application: Suitable for valuing large, undeveloped parcels intended for subdivision.
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Scientific and Mathematical Application:
- Requires a detailed market study to support sales projections and absorption rates.
- Discounted Cash Flow (DCF) Analysis:
NPV (Net Present Value) = ฮฃ [CFt / (1+r)^t] - Initial Investment
Where: CFt = Cash Flow in period t, r = discount rate, t = time period*
E. Land Residual Method (Income Capitalization Application)
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Description: Isolates the income attributable to the land and capitalizes it to derive land value.
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Formula:
Land Income = Total Property Income - Improvement Income
Land Value = Land Income / Land Capitalization Rate -
Application: Appropriate for income-producing properties where land contributes significantly to the propertyโs overall income.
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Scientific Application: Accurately estimate the economic rents for the use of the land.
- Example: The cost of constructing a high rise in a city in comparison to the potential rent that the space can be leased for.
F. Ground Rent Capitalization
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Description: Capitalizes the ground rent income to derive land value for properties subject to a ground lease.
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Formula: Land Value = Ground Rent / Land Capitalization Rate
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Application: Applies to situations where a property is subject to a ground lease.
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Scientific Accuracy: Relies on accurate estimation of market-derived land capitalization rates.
G. Depth Tables (โ4-3-2-1 Methodโ) (Less Reliable, Primarily Theoretical)
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Description: Uses tables to adjust value based on lot depth.
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Application: Typically not used in income-based scenarios, due to potential of skewed values.
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40-30-20-10 Rule: The first 25% (front) of the depth of a lot has 40% of the value. The 2nd portion has 30% of the value, the 3rd has 20% and the final 25% (rear) has 10% of the value.
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Limitation: Oversimplifies lot valuation, as lot shape and size may play a role.
IV. Scientific Principles and Application
- Paired Data Analysis: A technique crucial for isolating the value contribution of specific property characteristics by comparing sales of similar properties with and without the characteristic.
- Regression Analysis: A statistical method used to quantify the relationship between land value and key variables.
- Sensitivity Analysis: Assessing the impact of changes in key assumptions (e.g., capitalization rates, discount rates) on the final land value estimate.
V. Chapter Summary and Key Takeaways for SCA Application
- H&BU: Correct determination is foundational for selecting comparable properties and identifying elements for adjustment in the Sales Comparison Approach.
- Land Appraisal Methods: Understand their strengths and limitations for isolating land value when analyzing comparable sales. The Sales Comparison Approach to isolate land value should be the method.
- Adjustment Process: All adjustment values must be supported by a strong experiment that can be traced back to the market. All assumptions must be listed so that any value given can be traced back to it’s specific origin.
This chapter arms you with the critical skills for accurately assessing site value, ensuring that the Sales Comparison Approach is applied rigorously and delivers reliable valuation conclusions.
Chapter Summary
- list the factors that influence proper siting of a house on its lot,
- describe the three basic activity zones of a house and describe their relationships to each other;
- describe the characteristics that affect functional utility in the various rooms of a house,
- identify the characteristics of various building components that can affect value, and
- understand the technical terminology used to describe residential construction.
I. Classification of Houses
Houses are generally classified on the basis of four characteristics: the number of units, whether the building is attached or detached, the number of stories and the architectural style.
The NUMBER OF UNITS refers to the number of separate households that the building is designed to accommodate. Although usage may vary in different areas, the term โhouseโ is most often used to refer to a SINGLE-FAMILY RESIDENCE. If a building has multiple units that share a common access and other common areas, it is usually referred to as an APARTMENT BUILDING.
A DETACHED HOUSE is one that is not connected to any other property. ATTACHED HOUSES share one or more walls, called โparty walls,โ that are jointly owned by the two adjoining properties. ROW HOUSES, common in many urban areas, are an example of attached dwellings. Ownership of an attached dwelling often involves a PARTY WALL AGREEMENT, which assigns responsibility for maintenance and repair of the party wall(s) (see Figure 7-1).
A. TYPES OF HOUSES
The โtype of houseโ refers to the number of stories or levels in the house, and their relationship to each other.
Although modern construction methods allow for all sorts of variations, the vast majority of houses fall into five basic โtypeโ categories (see Figure 7-2):
1. one-story,
2. one and one-half story,
3. two-story,
4. split-level, and
5. bi-level (also known as split-entry or raised ranch).
1. One-Story House
A ONE-STORY HOUSE, often called a โranchโ or โrambler,โ has its entire living area on the ground floor. It may or may not have a BASEMENT, which is a room of full story height located below the first floor, at least partially below ground level, and primarily not used for living accommodations.
The advantages of one-story houses include: ease of exterior maintenance, flexibility of floor plan design and the fact that there are no stairs to climb.
On the down side, this type of house is relatively expensive to build; by comparison, a two-story house with the same exterior dimensions has twice the living area, with essentially no extra cost for roof or foundation. (Roof costsโ for a one-story house are often minimized by using a low pitched roofline.)
One-story houses also require a greater amount of lot space in relation to the amount of living area, so they may be inappropriate or impractical on small or narrow lots.
2. One and One-Half Story House
Also known as a Cape Cod, the ONE AND ONE-HALF STORY HOUSE has a steeply pitched roof that permits part of the attic area to be used for living space. Roof dormers, which add to the amount of usable upstairs space, are a common feature of this type of house. As in the case of one-story houses, the foundation may or may not include a basement. Construction costs per square foot tend to be lower for one and one-half story houses than for one-story houses.
One and one-half story houses are often built with expandability in mind. Because the ground floor normally has at least one bedroom (and sometimes two), the upstairs level can be left unfinished until the extra space is needed. However, ease of expandability will depend on the quality of the original design and construction, which should allow for adequate access (stairs), ventilation (windows) and plumbing (bathrooms) on the attic level.
3. Two-Story House
Compared to a one-story or one and one-half story house, the two-story house is more economical in terms of construction cost per square foot of living space.
The reason for the economy is that square footage can be doubled without doubling foundation and roof system costs. This design also allows for the most living space on a given size of lot. Bedrooms are normally located on the upper floor, providing a natural separation between the public and private areas of the house.
A concern with all multi-level houses is the design and efficiency of heating and cooling systems. Because heat rises, a poorly designed system will make it difficult to keep the lower level warm in winter, and the upstairs cool in the summer.
With a well designed system, however, heating and cooling efficiency may actually be greater than for single-story houses, since the building has less exterior surface area relative to the amount of heated or cooled interior space.
4. Split-Level House
A SPLIT-LEVEL HOUSE has three or four different levels, which are staggered so that each level is separated from the next by half of a flight of stairs. Bedrooms and baths are located on the top level. Half a flight down are the main entry, living room, dining room and kitchen. Down another half-story, beneath the bedroom level, is space for a family room, den or spare bedroom; the garage is often located on this level as well. A fourth level, equivalent to a basement, may be located below the living/dining/kitchen space.
The design of a split-level home lends itself to a sloped lot, where the garage and main entry can both open out at grade level. On a flat site, the main entry will be raised one- half story above the finished grade.
A split-level house has some of the same benefits as a two-story house in terms of construction, cost efficiency and natural separation of the various functional areas of the home.
5. Bi-Level House
A BI-LEVEL or SPLIT-ENTRY HOUSE has two main levels, one atop the other, with an entry or foyer located on a level halfway between. The lower level is sunk about halfway below ground, so the entry is even with the grade level. This design is sometimes called a โraised ranch,โ since it is essentially a one-story home with a finished basement that has been raised partially out of the ground. The main rooms of the house are all on the upper level, with the lower story used for a family room or rec room, and perhaps a spare bedroom.
Since the lower level of a split-entry house is partly below ground, special care must be taken to provide adequate insulation and moisture proofing. Another drawback to this design is the lack of a basement or crawlspace in which to run pipes and ductwork.
Nevertheless, split-entry homes are cost-effective to build, and the finished lower level space is considered part of the โgross living areaโ for appraisal purposes in many parts of the country.
II. Architectural Styles
ARCHITECTURAL STYLE is the character of a buildingโs form and ornamentation.
If homebuyers in a particular area do not find a particular architectural style desirable, homes of that style are likely to sell for less than similar size homes having architectural styles which are more desirable within that community.
Architectural styles have traditionally been influenced by local factors such as climate and the availability of different building materials.
There are many examples of traditional architectural styles that are adapted to a particular location: Spanish style houses with thick adobe walls and tile roofs in the southwest desert, Southern Colonial houses with deep shaded porches in the hot, humid South, or Cape Cod style homes designed for protection from cold northern winds in New England (see Figure 7-3).
Local traditional styles can still be found in many areas, but location is much less of an influence on architectural style than it used to be.
Builders are no longer limited to using local materials, since modern transportation systems make different building materials widely available at reasonable costs. The invention of central heating and cooling, as well as improved insulating materials, has broadened the range of architectural styles that can be adapted to local climates.
A. COMPATIBILITY
COMPATIBILITY means that a building is in harmony with its use or uses and its environment. In terms of value, one type or style of house is not inherently better or worse than any other. What is most important to value is the compatibility of the design. Compatibility has several different aspects. To maximize value, the design of a house should be compatible with the designs of other homes in the area, with the physical and environmental characteristics of the building site, with the materials used in the construction, and with the preferences of the local market.
First of all, the design of a house should be compatible with the styles of other houses in the local neighborhood.
The market may welcome a limited degree of uniqueness in design, but value will generally suffer if the design contrasts too radically with surrounding houses.
Subdivision developers often impose design restrictions on their developmentโs, because they know that compatibility of design will have a positive impact on property values in the subdivision.
Case/Example: A contemporary style house located in a neighborhood of other contemporary style houses is likely to be viewed positively by the market. But the same house located in a neighborhood of traditional style homes might seem โout-of-place,โ and its value could suffer as a result.
Compatibility of design also refers to the suitability of the design for the particular building lot and location. Value is enhanced by a design that takes advantage of physical site characteristics, such as views. The design should also be appropriate for the topography of the site. For example, split-level designs often work well on hilly sites, while colonial style houses do not. Finally, the design should be appropriate for the local climate. A design that is specifically adapted to a hot desert climate, for example, would be inappropriate in an area with cool, rainy weather.
A buildingโs architectural style is often defined at least in part by the materials used in its construction. Spanish style homes have clay tile roofs, Tudorโs utilize timber framing, contemporary designs incorporate large areas of glass. A compatible design is one where the materials are appropriate to the style.
Case/Example: A clay tile roof on a Cape Cod house would look ridiculous to most potential homebuyers.
The final aspect of design compatibility is perhaps the most important: the design must be compatible with the demands of the market.
The popularity of any given design is influenced by the economic and social forces that affect value. As lifestyles and demographics change, so does the demand for different design features in housing.
Ultimately, it is the local market that determines what is a โgoodโ design, and what is a โbadโ one.
Case/Example: A development of new contemporary style houses is built in an older community with mostly traditional style housing. If the market places an emphasis on the historic character of the community, the contemporary homes will be viewed as incompatible, and their value will suffer. On the other hand, if market forces are creating a demand for more modern housing in the community, the contemporary homes may not be incompatible at all, but may simply represent a new trend in community standards.
III. Elements of House Design
An appraiser must be able to identify the various elements of house design and evaluate any defects in those elements. The elements of house design include siting, interior functional zones, and room characteristics.
He or she may use mobile apps to reproduce accurate renderings to use for comparison purposes.
A. SITING
SITING refers to the placement of the house on the building lot. Placement is normally limited to some extent by building code set-back requirements, which call for minimum distances between the house and the propertyโs boundaries. Topographic considerations such as slopes or poor soil conditions may also limit where the house may be placed on the lot. Within these limits, however, careful placement of the house on the lot can have a significant impact on value.
There are four basic considerations in designing the placement of a house on its lot: orientation to the sun, orientation to prevailing storm winds, orientation to views, and the division of the lot into functional zones (see Figure 7-4).
Appraisers can create figures like the one above by using appropriate mobile apps.
Orientation to the sun affects the amount of light and heat that can enter the house. In most areas, a design where the living areas of the house face south is considered optimum. This orientation takes best advantage of natural lighting in the most used areas of the home, and helps maximize solar heat gain in the winter. Excessive summer heat gain can be avoided by using wide roof overhangs, which shade the house in summer when the sun is high in the sky, but allow light and heat to penetrate in the winter when the sunโs path is lower.
Screening with deciduous trees is another effective way to block the summer sun but still allow it to shine through in the winter when the trees are bare.
In some areas, orientation to prevailing storm winds is an important siting consideration. In areas that are subject to frequent or heavy storms from a particular direction, it is best to minimize the amount of window area that is directlyโ exposed to the winds, in order to cut down on heat loss. Entries should also be sheltered from the direct path of the storms.
An attractive view can add significantly to the value of a house. Views should be visible from the most used areas of the house. Even if the site does not have an attractive territorial view, careful landscaping can provide a pleasant view of the lot from the living area.
The last aspect of house siting is the division of the lot into functional areas or zones, the so-called public, private, and service zones. The area that can be viewed from the street frontage is the public zone. Areas shielded from the street by the house, or by fencing or other landscaping, constitute the private area. The service area includes access ways (driveway, walkways, etc.) and outdoor storage areas. Good design maximizes the amount of private area available for household activities.
B. INTERIOR FUNCTIONAL ZONE
An appraiser cannot underestimate the importance of FUNCTIONAL UTILITY, which concerns a buildingโs ability to perform the function for which it is intended according to current market tastes and standards; as well as the efficiency of use in terms of architectural style, design and layout, traffic patterns, and the size and type of rooms.
A well-designed house should provide space for three basic activities: living, working, and sleeping.
Ideally, the spaces provided for each of these activities should be separated, so that one activity does not interfere with another. For example, bedrooms should be located where they will not be disturbed by activities in the living and working areas of the house.
Figure 7-5 shows how the spaces for the three different activities can be separated into zones. The LIVING ZONE includes the public areas of the house: the living room, dining room, family room and guest bath. The WORKING ZONE is comprised of the kitchen and laundry/ utility room. Bedrooms and private baths are located in the SLEEPING ZONE.
The separate activity areas of the home are connected by hallways, stairs and entry ways, which are sometimes referred to as a fourth zone of the house, the CIRCULATION ZONE. While the three activity zones should be designed to provide separation of the activities, they should also allow for easy circulation between and within zones.
Design features that affect desirability affect value because value is determined by supply and demand features of the marketplace.
A houseโs value is affected by the buildingโs FLOOR PLAN, which is an architectural drawing indicating the exact layout of rooms and illustrating the functional or nonfunctional relationship between them. Structures with wasted space might lack space where it is otherwise desired so that the property will be less desirable to buyers than similar size homes.
How the designer allocates space affects desirability for many buyers. An example is while a custom 3,000 square foot home might have only two bedrooms because that is what the original owner wanted, to most potential buyers, the design would be a negative feature.
Case/Example: In a retirement oriented community, a two-story home without a bedroom on the first level is likely to be far less desirable than one with this feature.
C. ROOM CHARACTERISTICS
1. Kitchens
The kitchen is commonly the most used room of the house, so its design and location have a large impact on the functionality of the overall floor plan.
Kitchens should be conveniently accessible from both the main entrance and service entrance of the house, and should be located adjacent to the dining room and family room, if these rooms are included in the design. Also, the kitchen should be designed so that it is not necessary to walk through the working area in order to reach other rooms of the house.
A critical aspect of kitchen design is the work triangle, which is formed by the sink, refrigerator, and range. The distances between the three points of the work triangle can make the difference between an efficient kitchen design and a poor one. If the distances are too small, the kitchen will be cramped; if they are too great, preparing a meal will seem like a five-mile hike. A distance of four to seven feet between each point of the work triangle is considered optimal (see Figure 7-6).
Kitchen sizes vary considerably. Eighty square feet of space (8โ x 10โ) is considered a minimum, but kitchens twice that size are not uncommon. Larger kitchens often include an eating area or family activity area. The design should include adequate counter and cabinet space, and plenty of electrical outlets for kitchen appliances.
Lighting and ventilation are important considerations in kitchen design. Overhead lights should illuminate all areas of the kitchen, and a vent or fan should be located over the cooking area to allow cooking fumes to escape. Natural lighting is desirable, but the placement of windows can be a problem. The best location for a kitchen window is over the sink. Additional windows are desirable so long as they do not take up space needed for wall cabinets.
Windows should never be placed over the cooking area.
2. Laundry/Utility Rooms
Laundry areas are best located where they are convenient to the sleeping area of the house, off the bedroom hallway for example. However, location of the laundry area is not as critical as most other rooms of the house, and laundries are often located in the garage or basement.
The laundry area should be well-ventilated, and located where noise from the appliances will not disturb others.
3. Living Rooms
The living room is the main public room of the house.
It should be located near the main (guest) entry, be separated from the sleeping area, and preferably be on the south side of the house. If the house has a dining room, it should be next to the living room. It should not be necessary to cross through the living room in order to reach the kitchen or bedrooms.
The size and shape of the living room should allow for easy arrangement of furniture. About 200 square feet is the minimum size, and rectangular shaped rooms tend to work best for furniture placement. The modern trend is for smaller living rooms, particularly in homes with a separate family/recreation room.
4. Family Rooms
In many areas, the FAMILY ROOM (also called a recreation room) has taken over the role of the living room as the main center of entertainment and socializing in the house. As part of the living zone, the family room should be separated from the sleeping zone; however, it is usually considered an advantage if the family room is next to (or near) the kitchen.
Since the family room is a center of activity for household members, direct access to the outside is also an asset.
5. Dining Rooms
Dining rooms may be formal or informal. A formal dining room or area is a separate room that is designed for that purpose. Informal dining areas are usually attached to or part of the kitchen itself, and may take the form of a nook or alcove.
The main considerations for the dining area are that it should be large enough to accommodate a dining table and chairs (including room to get in and out of the table), and it should have easy access to the kitchen so that food does not have to be carried through other areas of the house.
6. Bedrooms
The number of bedrooms has a major effect on house value.
Normally, homes with different numbers of bedrooms appeal to different segments of the market, that is, to families of different sizes or lifestyles. The average household size in the market will have a large impact on the desirability of three- or four-bedroom homes, as opposed to two-bedroom homes.
Ideally, bedrooms should all be located in a separate sleeping zone, to provide both privacy and noise insulation. The most common arrangement is to locate the bedrooms on a separate story or wing. Each bedroom should have convenient access to a bathroom, either directly or via a private hallway. Also, it should not be necessary to go through a bedroom to reach another room (other than a private bath).
Depending on the room layout, a size of 9โ x 10โ is the minimum needed to allow for a single bed, 10โ x 12โ for a double bed. Whether larger room sizes will add to value depends on local market preferences. Most homes have at least one bedroom that is larger than the others, the MASTER BEDROOM. Modern master bedrooms will often have walk-in closets and other amenities.
Each bedroom should have its own cloBased on the provided content of the chapter "Residential Construction" from a training course entitled "Mastering the Sales Comparison Approach: A Comprehensive Guide", this detailed scientific summary encapsulates its main points, conclusions, and implications, emphasizing its relevance to the course description. The chapter establishes a scientific foundation for residential appraisal by detailing construction types, architectural styles, and design elements. This directly supports the broader course objective of mastering accurate property valuation by equipping students with the technical knowledge needed to identify <a data-bs-toggle="modal" data-bs-target="#questionModal-310179" role="button" aria-label="Open Question" class="keyword-wrapper question-trigger"><span class="keyword-container">comparable properties</span><span class="flag-trigger">โ</span></a> and make appropriate adjustments within the Sales Comparison Approach. Understanding these construction details allows for more informed comparative analysis. First, it categorizes houses based on structural characteristics (single vs. multi-family, attached vs. detached) and floorplan (one-story, split-level, etc.). This typology provides a standardized framework for comparison, linking directly to identifying comparable properties that share similar structural features. Next, the chapter discusses architectural styles, highlighting their regional origins and the principles of compatibility. It explains that style influences market desirability and that assessing the conformity of a property's design to neighborhood aesthetics is critical in the sales comparison approach. This connects to the course's emphasis on analyzing market data for precise adjustments related to property characteristics. The core of the chapter dissects the elements of house design, introducing concepts crucial for <a data-bs-toggle="modal" data-bs-target="#questionModal-310185" role="button" aria-label="Open Question" class="keyword-wrapper question-trigger"><span class="keyword-container">accurately</span><span class="flag-trigger">โ</span></a> assessing functional utility. It details optimal siting considerations such as solar orientation, windbreak strategies, view maximization, and functional zoning (public, private, service areas). Furthermore, it describes the ideal placement and characteristics of individual rooms (kitchens, bedrooms, etc.) and functional relationships. This directly supports skills development outlined in the course description, enabling appraisers to make precise adjustments based on room layouts, room dimensions, and locations, as well as functional use for objective appraisal. Finally, the chapter presents a basic overview of construction methods and materials, covering foundational aspects, framing techniques, exterior finishes, interior finishes, and essential equipment. The chapter emphasizes the importance of correctly evaluating these components and the value impact of material, build quality, plumbing, electrical and HVAC systems. It also discusses important exterior features like doors and windows. This part of the chapter supports the accurate and consistent identification of key elements to property that can be used during an appraisal, like quality, insulation, and equipment standards. In summary, the chapter's scientific value lies in providing a systematic understanding of residential construction that empowers appraisers to make well-informed judgments in the Sales Comparison Approach. By mastering this foundational knowledge, students improve their ability to assess property comparability, accurately quantify adjustments, navigate complex market scenarios, and make informed decisions, in complete alignment with the overall course objectives.
