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    Site Valuation: Data Needs and Valuation Techniques

    Site Valuation: Data Needs and Valuation Techniques

    Site Valuation: Data Needs and Valuation Techniques - A Scientific Introduction

    Land valuation, a cornerstone of real estate economics, plays a crucial role in informed decision-making for appraisers, investors, and property tax assessors. This chapter, “Site Valuation: Data Needs and Valuation Techniques,” aims to provide a systematic understanding of the scientific principles and methodologies underlying the accurate estimation of land value, specifically within the framework of the Sales Comparison Approach emphasized throughout this training course entitled “Land Valuation: Mastering the Sales Comparison Approach.”

    Accurate site valuation is not merely an academic exercise; it is a practical necessity. As outlined in the foundational book content, separate site valuation is a prerequisite for methodologies like the cost approach and the building residual technique of income capitalization. Specifically, the cost approach assumes that the market value of improved property is derived from the site value plus the depreciated cost of improvements, requiring a precise estimate of the underlying land’s fair market value. Furthermore, legal and regulatory mandates often demand a separate valuation of site and improvements, especially in the context of property tax assessment and condemnation proceedings. These requirements emphasize the scientific importance of accurate site valuation in complying with appraisal assignment standards and regulations, particularly as emphasized within USPAP guidelines.

    Building upon the course’s focus on the Sales Comparison Approach, this chapter will delve into the data requirements and adjustment procedures crucial for isolating the value of a site. Applying the Sales Comparison Approach requires accurate data, including comparable sales prices, financing terms, property rights conveyed, and the elements of comparison. Further, the identification and weighting of comparables, in conjunction with careful adjustment techniques, requires an analytical understanding of economic trends and market conditions. A practical comprehension of mathematical concepts such as reciprocals, percentages, and discounted cash flow is further required to perform sound financial calculations in site value analysis.

    The educational goals of this chapter are threefold. First, to identify the diverse data sources relevant to site valuation, emphasizing primary vs. secondary data and highlighting the role of mobile technologies and online resources in data acquisition. Second, to examine the various valuation techniques available, from the primary Sales Comparison Approach with its emphasis on comparable sales and adjustments to alternative methodologies like the allocation and extraction methods. Third, and most importantly, to equip participants with the analytical skills to choose the most appropriate technique based on data availability, assignment requirements, and the specific characteristics of the subject property and its market. By mastering these scientific principles and practical techniques, participants will enhance their ability to accurately estimate land value, contributing to more confident and reliable applications of the Sales Comparison Approach and ultimately maximizing their land investment knowledge and appraising to the standards of care required in federal lending law.

    Chapter: Site Valuation: Data Needs and Valuation Techniques

    Course: Land Valuation: Mastering the Sales Comparison Approach

    Description: Unlock the secrets to accurate land valuation! This course delves into the Sales Comparison Approach, equipping you with the skills to identify comparable properties, make critical adjustments, and determine fair market value. Learn to analyze market conditions, financing terms, and physical characteristics to become a confident land valuation expert. Perfect for appraisers, real estate professionals, and investors eager to maximize their land investment knowledge.

    I. Introduction: The Importance of Site Valuation in Land Appraisal

    Land valuation is a critical component of real estate appraisal, representing the cornerstone upon which the value of improved properties is built. As emphasized in the course description, this chapter delves into the methodologies and data requirements for accurately valuing land, particularly within the context of the Sales Comparison Approach. Understanding site valuation is paramount for appraisers, real estate professionals, and investors aiming to maximize their land investment knowledge and accurately determine fair market value.

    The separate valuation of land is essential in several appraisal contexts, directly aligning with the course description and building upon the book content:

    • Cost Approach and Building Residual Technique: As stated in the book content, these valuation methods inherently require a distinct estimate of the site’s value, making site valuation an indispensable step. This allows for a comprehensive analysis by combining the land value with the depreciated cost of improvements or by isolating the income attributable to the land.
    • Legal and Regulatory Requirements: Property tax assessments and Condemnation Proceedings❓❓ frequently mandate a separate site valuation, highlighting the legal and regulatory importance of this process.
    • Sales Comparison Approach: While the primary focus of this course is on the Sales Comparison Approach, even in this context, understanding the underlying land value is crucial for identifying comparable properties and making appropriate adjustments.

    II. Highest and Best Use: The Foundation of Site Valuation

    A. Defining Highest and Best Use (HBU)

    The concept of Highest and Best Use (HBU) is the cornerstone of land valuation. HBU is defined as the reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and that results in the highest value.

    • Legally Permitted: The proposed use must conform to zoning regulations, environmental restrictions, and any other legal limitations imposed by governmental entities.
    • Physically Possible: The site must be suitable for the proposed use, considering its size, shape, topography, soil conditions, access to utilities, and environmental characteristics.
    • Financially Feasible: The use must be economically viable, generating sufficient income or returns to justify the investment. This analysis requires a thorough assessment of market demand, construction costs, operating expenses, and potential revenue.
    • Maximally Productive: Among all legally permitted, physically possible, and financially feasible uses, the HBU is the one that yields the highest present value of the land.

    B. Scientific Principles Underlying HBU Analysis

    Several economic and appraisal principles underpin the determination of HBU:

    • Principle of Substitution: A prudent investor will not pay more for a property than the cost of acquiring a substitute property offering similar utility and benefits.
    • Principle of Anticipation: The value of property is determined by the expected future benefits of ownership.
    • Principle of Supply and Demand: The interaction of supply and demand forces in the market influences the value of land for various uses.

    C. Mathematical Modeling of HBU Analysis

    Although often qualitative, HBU can involve quantitative analysis, such as:

    • Net Present Value (NPV) Analysis: Comparing the NPV of different potential land uses to determine which yields the highest present value.

      • NPV = Σ [CFt / (1+r)^t] - Initial Investment

    • Benefit-Cost Ratio (BCR): Evaluating the ratio of benefits to costs for various land uses.

      • BCR = Present Value of Benefits / Present Value of Costs

    D. Practical Application: Experiment to Identify Highest and Best Use

    Imagine a vacant commercial lot near a busy intersection. To determine the HBU, consider these potential uses:

    1. Fast-Food Restaurant: Research market demand, potential revenue, construction costs, and operating expenses for a fast-food restaurant. Estimate the NPV and BCR.
    2. Retail Store: Conduct a similar analysis for a retail store, considering market competition, rental rates, and operating costs.
    3. Office Building: Evaluate the feasibility of an office building, taking into account vacancy rates, rental income, and development costs.

    By comparing the NPV and BCR of each use, you can determine the HBU that maximizes the land’s value.

    III. Data Needs for Site Valuation

    Accurate site valuation requires a comprehensive collection and analysis of relevant data. This includes:

    A. General Data

    • Regional and Community Data: Economic trends, demographic shifts, employment rates, infrastructure development, and government regulations all impact land values. Sources include government agencies (Census Bureau, Bureau of Economic Analysis), trade associations, and local economic development councils.

    • Market Data: Supply and demand dynamics for different land uses, including vacancy rates, absorption rates, construction costs, and rental rates.

    B. Specific Data

    • Subject Property Data:

      • Legal Description: Precise definition of property boundaries.
      • Zoning Regulations: Permitted uses, setback requirements, building height limitations, and parking requirements.
      • Physical Characteristics: Lot size, shape, topography, soil conditions, drainage, and environmental factors.
      • Easements and Restrictions: Any encumbrances that may affect the use or value of the land.

    • Comparable Sales Data: Sales prices, dates of sale, locations, physical characteristics, zoning regulations, and financing terms of comparable vacant lots or improved properties.

    IV. Valuation Techniques for Site Valuation

    A. Sales Comparison Approach (SCA)

    The Sales Comparison Approach (SCA) is the primary method for valuing land, emphasizing the direct comparison of the subject site with recent sales of comparable properties. The accuracy of this approach hinges on the identification of properties sharing similar characteristics and the application of appropriate adjustments to account for differences.

    1. Identifying Comparable Properties: Identify properties that are similar in size, location, zoning, physical characteristics, and highest and best use.

    2. Adjustments: The success of the sales comparison approach hinges on the appraiser’s ability to accurately assess and quantify the differences between the subject property and the comparables. Adjustments are crucial for accounting for variations and may involve considerable expertise to be completed accurately. Apply adjustments for:

      • Property Rights: Differences in title conditions, easements, and restrictions.
      • Financing Terms: Any non-market financing arrangements.
      • Conditions of Sale: Unusual circumstances that may have influenced the sale price.

      • Market Conditions: Changes in market values over time. (Time adjustments)

        • Time Adjustments Formula: Adjusted Price = Sale Price x (1 + Market Appreciation Rate)^(Time Difference in Years)
          • Location: Differences in neighborhood amenities, access, and desirability.
          • Physical Characteristics: Variations in lot size, shape, topography, and soil conditions.
          • Economic Characteristics: Considerations for potential rental income to determine valuation to compare properties.

    B. Alternative Site Valuation Techniques

    When comparable sales data is limited or unavailable, alternative valuation techniques may be employed.

    1. Allocation Method: (Based on Book Content): Assumes that a certain percentage of a property’s value is attributable to the land. The method is not accurate, and should not be heavily relied upon.

      • Land Value = Total Property Value x Allocation Percentage
        2. Extraction Method: (Based on Book Content): The cost of improvements is extracted from the total property, in order to calculate the value of the land. The method is not accurate, and should not be heavily relied upon.

      • Land Value = Total Property Value - Depreciated Cost of Improvements

    2. Development Method: (Based on Book Content): Costs of development are deducted from the projected sales of the finished lots to arrive at the current value of the raw land.

      • The development method incorporates several appraisal concepts, such as:

        • Principle of Contribution (The worth of an improvement)
        • Principle of Increasing and Decreasing Returns (As money is spent on improvements, the return increases at a rapid rate. The returns will eventually decrease.)
          4. Land Residual Method: (Based on Book Content): Net income is calculated, then the value of the land can then be capitalized to determine land value.

      • Value (V) = Income (I) ÷ Capitalization Rate (R)

    3. Ground Rent Capitalization Method: (Based on Book Content): Analyzes the value by capitalizing the amount of ground rent, using the formula:

      • V = I ÷ R (Based on the market value of the property as a whole)

    4. Depth Tables (“4-3-2-1 Method”) (Based on Book Content): Used to determine the value for lots with a variance in depth.

      • 1st ¼ = 40% of Value
      • 2nd ¼ = 30% of Value
      • 3rd ¼ = 20% of Value
      • 4th ¼ = 10% of Value

    V. Case Study: Valuing a Commercial Site Using the Sales Comparison Approach

    Scenario:

    A commercial site in a suburban area is being appraised. The site is 1 acre in size, zoned for retail use, and has good visibility and access.

    Data Collection:

    • Research recent sales of comparable commercial sites in the area.
    • Identify three comparable sales that are similar in size, zoning, and location.
    • Gather data on the sales prices, dates of sale, financing terms, and physical characteristics of the comparable properties.

    Analysis and Adjustments:

    Comparable Sales Price Date of Sale Location Size Financing Adjusted Price
    1 $500,000 6 months ago Good 1.1 ac Cash $480,000
    2 $450,000 3 months ago Average 0.9 ac Seller Financed $470,000
    3 $520,000 9 months ago Excellent 1.0 ac Cash $500,000

    • Adjustments:

      • Comparable 1: - $20,000 (Time Adjustment)
      • Comparable 2: + $20,000 (Location Adjustment), - $0 (Seller Financing Adjustment due to market terms.)
      • Comparable 3: + $0 (Location Adjustment), - $20,000 (Time Adjustment due to market conditions)

    Value Conclusion:

    Based on the adjusted sales prices of the comparable properties, the appraiser concludes that the market value of the subject site is approximately \$485,000.

    VI. Conclusion: Mastering Site Valuation for Land Appraisal

    Accurate site valuation is essential for successful land appraisal, forming the foundation upon which reliable value estimates are built. This chapter has equipped you with the knowledge and skills to understand the principles of HBU, collect and analyze relevant data, and apply appropriate valuation techniques, particularly the Sales Comparison Approach. By mastering site valuation, you can confidently assess land values, identify comparable properties, and provide credible appraisals that maximize your land investment knowledge.

    Chapter Summary

    1. list and describe the four basic steps in the framing process,
    2. describe the basic design of a truss roof system,
    3. identify the advantages of a tankless water heating system,
    4. identify the most important attributes of quality home design and construction,
    5. list a number of renewable building materials that are currently available to the construction industry, and
    6. be able to recognize “green technology” in 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 “house” 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 “party walls,” 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 “type of house” 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 “type” categories (see Figure 7-2):
    7. one-story,
    8. one and one-half story,
    9. two-story,
    10. split-level, and
    11. bi-level (also known as split-entry or raised ranch).
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      Figure 7-1
      Attached Houses
      Multiples (Apartments)
      Town House
      Duplexes Row House
      Illustrations courtesy of Marshall & Swift
      Figure 7-2
      Types of Houses
      One Story
      Bi-Level
      One and One-Half Story
      Two Story
      Illustrations courtesy of Marshall & Swift
      Split Level
    12. One-Story House
      A ONE-STORY HOUSE, often called a “ranch” or “rambler,” 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.
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      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 costs 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.
    13. 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.
    14. 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.
    15. 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
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      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.
    16. 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 “raised ranch,” 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 “gross living area” for appraisal purposes in many parts of the country.
      II. Architectural Styles
      ARCHITECTURAL STYLE is the character of a building’s 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).
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      Figure 7-3
      Examples of Different Architectural Styles
      Colonial Cape Cod (1) Cape Cod (2)
      Cottage Victorian Mediterranean
      Southern
      Saltbox
      Ranch
      Chalet “A” Frame Contemporary
      Illustrations courtesy of Marshall & Swift
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      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 developments, 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 “out-of-place,” 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, would be inappropriate in an area with cool, rainy weather.
      A building’s architectural style is often defined at least in part by the materials used in its construction. Spanish style homes have clay tile roofs, Tudor’s 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.
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      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 “good” design, and what is a
      “bad” 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 property’s 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 sun’s 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.
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      Figure 7-4
      Exterior Functional Zone Example - Windbreak Layout
      Cold Winter Wind
      7 P.M. Sun
      (low)
      4 P.M. Sun
      (high)
      Morning
      Sun
      Cooling Summer Breeze
      Noon Sun
      (high)
      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 directly 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 building’s ability to perform the function for which it is intended according to current
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      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.
      Figure 7-5 Interior Functional Zones
      LIVING ZONE
      Family
      Room
      Living
      Room
      Master
      Bedroom
      Fireplace
      Ba.
      Ba.
      WORKING ZONE
      Kitchen
      Laundry Ba.
      Dining
      Area
      Ent.
      Bedroom Bedroom
      SLEEPING ZONE
      Garage
      (Appraisers can create similar figures by using floorplan apps online.)
      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.
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      A house’s value is affected by the building’s 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
    17. 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).
      Figure 7-6 Kitchen Work Triangle
      SINK
      REFRIGERATOR
      STOVE
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      Kitchen sizes vary considerably. Eighty square feet of space (8’ x 10’) 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.
    18. 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.
    19. 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.
    20. 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.
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      Chapter 7
    21. 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.
    22. 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 9’ x 10’ is the minimum needed to allow for a single bed, 10’ x 12’ 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 clos

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