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Old 10-06-2010, 10:29 AM
 
Location: Living on the Coast in Oxnard CA
15,371 posts, read 25,579,836 times
Reputation: 19646

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Just wondering how the value of a given market is created.

Just wondering if they have a calculator for all this.

First off lot size: Lets say that land is selling for $100,000 an acre. Can you figure that the dirt cost the equivalent to that price range? So if one home is on a 10,000 square foot lot and another is on a 6,000 square foot lot would you take that into consideration with homes in the same market?

Second square footage: That is easy to figure based on the numbers given. Do you first deduct the value of the land though? I have seen people base everything on this alone. But if the lot size is larger what do you do?

third. Cost to maintain the land

fourth. Cost to maintain the structure

Considering these items in the same market is it possible to make a clear cut offer?
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Old 10-06-2010, 10:58 AM
 
Location: OK
2,717 posts, read 6,291,717 times
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Quote:
Originally Posted by SOON2BNSURPRISE View Post
Just wondering how the value of a given market is created.

Just wondering if they have a calculator for all this.

First off lot size: Lets say that land is selling for $100,000 an acre. Can you figure that the dirt cost the equivalent to that price range? So if one home is on a 10,000 square foot lot and another is on a 6,000 square foot lot would you take that into consideration with homes in the same market?

Second square footage: That is easy to figure based on the numbers given. Do you first deduct the value of the land though? I have seen people base everything on this alone. But if the lot size is larger what do you do?

third. Cost to maintain the land

fourth. Cost to maintain the structure

Considering these items in the same market is it possible to make a clear cut offer?
It is not that simple. Yes, land values are always considered and no, a 10,000 sf lot is not necessarily higher in value than a 6,000 sf lot.

There is nothing easy about figuring the square footage. Yes, the land, and any other factors that makes the subject different from the comparable sales, should be removed first. Then location, economic influences, possible internal and external obsolescences as well as depreciation of the Subject and comparable(s) should be considered.
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Old 10-06-2010, 11:39 AM
 
4,031 posts, read 8,301,481 times
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Price is what buyers will pay in a given market vs how long sellers are willing to hold.

Never has this been so evident to me as recently.

I live in a run down suburb of Los Angeles(Van Nuys) that was once a very nice place. As a result, there are still pockets that are quite nice, and even upscale.

Homes in the $500K range that are larger homes(2200+sq ft) have been selling. However, recently a couple homes on large lots came up for sale. One is on something like 60,000 sq ft lot, and the home itself at 2200 sq ft is not bad. It's listed at $849k I believe. And not selling. And neither is the larger home across the street on a smaller lot listed in the 600K's.

Its because the price is too much for the area, and it simply doesn't matter that its a lot of land. No one wants to deal with that right now. Both properties will sell when the sellers drop the price to a point where it makes sense for an investor, because there is no individual in the market right now for such high priced properties in a rapidly declining neighborhood. And it doesn't matter how large the home or property is. No market exists for the properties at current price points.
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Old 10-06-2010, 11:41 AM
 
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Default What is your goal / purpose?

If you are a professional residential real estate appraiser probably 99% of your work is to help determine values for the purposes of lending to the home owner. The lender wants to protect themselves against allowing the borrower to leave them holding the bag, while still making the largest, most profitable loan possible.

At the other end of the spectrum that same appraiser could be hired to assess the potential assists of a builder facing hard times. In such a case the "floor price" is more of an emergency liquidation price -- the absolute lowest price that some other builder / development company might suggest the whole area with all unsold homes / land was worth. Lot size / location pricing variations will be far less than in a retail sort of sale, even the specifics on sq ft of completed homes are probably less influence than the simplest "bedroom/bathroom/garage slot" counts....


If you rely on the information in MLS about comparable sales you are much much safer.
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Old 10-06-2010, 12:59 PM
 
Location: Living on the Coast in Oxnard CA
15,371 posts, read 25,579,836 times
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Thank you all for the responses. We are in the market and have looked at homes in areas of our city that we like. In the neighborhood that I grew up in you can find homes selling for $200,000 to $260,000. The $200,000 home on the market now is 1,100 square feet and on a 6,000 square foot lot. That works out to about $181.82 a square foot. The homes were built in 1958 but are in a well kept neighborhood.

In the neighborhood we are looking at homes were built from 2001 to 2006. One 2000 square foot home on a 4,800 square foot lot that was built in 2001 is listed at $335,000 or $167.50 a square foot. It is much more modern than the older home selling for $200,000. The home owners still live in this home

In the same neighborhood is a 1,700 square foot home selling also on a 4,800 square foot lot selling for $309,000. or $181.76 a square foot. That home is bank owned. Funny thought that the home selling for $335,000 is much nicer but the cost per square feet is less.

Is the better thing to do make an offer on the price per a square foot of the home? That would bring the cost of the home we want down to $284,750. Then again I am thinking of offering $250,000 and seeing what happens. LOL
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Old 10-06-2010, 01:10 PM
 
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Default Does not work that way...

I like to ask people : "Do you buy ties by the pound?" because that makes about as much sense as making offers based of just sq ft.

Some tires are good for rainy conditions. Motorcycles need two tires, cars and SUVs four, heavy duty truck six or more. Sports car drivers might want pierellis, mud racers might want cepeks....


Honestly, even in a condo, where location is not much of a factor, the price per sq ft can be all over the map. Some units have shiny new kitchens, others are trashed.


Offer what you want, but do not be surprised when your offers that are not based on sold comparable are rejected...
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Old 10-06-2010, 01:25 PM
 
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,958 posts, read 18,535,708 times
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In the replacement cost approach to appraising, the structure is valued on a replacement cost minus depreciation, then the land value is added back in. This approach is most often used in valuing commercial property, where land values are more a function of utility than desirability. (More land = more parking, factory space, etc.).

Residential property is more likely to be valued at a comparable sales and making adjustments for features not found in the subject property. In my area we deal in acreage and not square footage and there is very little difference allotted by appraisers if the property is within a couple of acres of each other.

If the p/sf was a real valid way of valuing residences, almost anyone could do the simple math and come up with a number.

In theory there is no difference between theory and practice. But, in practice, there is.
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Old 10-07-2010, 05:44 AM
 
5,463 posts, read 5,782,850 times
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Another variable to add in - all else being equal(*) a larger house will sell for less per square foot. There are fixed costs to any house, and in a smaller house you have fewer square feet per dollar of fixed cost. For example, building a 1000 sq ft house on a $10,000 lot means that you're paying $10/sq ft for land. Build a house twice as big and you're now paying $5/sq ft just for the lot.

* - as everyone has mentioned, the rest is never quite equal. But it might explain some of why the $335K house is cheaper per sq ft than the smaller house on the same sized lot in the same neighborhood. Factor out the estimated value of the land for each and see if the numbers make more sense.
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Old 10-07-2010, 07:06 AM
 
Location: OK
2,717 posts, read 6,291,717 times
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Quote:
Originally Posted by KCfromNC View Post
Another variable to add in - all else being equal(*) a larger house will sell for less per square foot. There are fixed costs to any house, and in a smaller house you have fewer square feet per dollar of fixed cost. For example, building a 1000 sq ft house on a $10,000 lot means that you're paying $10/sq ft for land. Build a house twice as big and you're now paying $5/sq ft just for the lot.

* - as everyone has mentioned, the rest is never quite equal. But it might explain some of why the $335K house is cheaper per sq ft than the smaller house on the same sized lot in the same neighborhood. Factor out the estimated value of the land for each and see if the numbers make more sense.
How does the lot value change with a larger house?
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Old 10-07-2010, 08:54 AM
 
Location: Living on the Coast in Oxnard CA
15,371 posts, read 25,579,836 times
Reputation: 19646
Quote:
Originally Posted by Annemieke Roell View Post
How does the lot value change with a larger house?
I think what KC was getting at is that the land is a fixed cost. If a lot cost $10,000 and you put a 1,000 square foot home on it the sale price may reflect a smaller amount but more per a square foot than if you had built a 2,000 square foot home on the same lot.

In one of my earlier examples I mentioned a 2,000 square foot home selling for $335,000 or $167.50 a square foot and a 1,700 square foot home selling for $309,000 or $181.76 a square foor. both homes are on the same size lot. I guess that answere my question as well.

The fixed cost won't change at all. The builder still needs to get a return on the land. All things being equal the land cost the same either way. Ans as was mentioned a home can have more room or space but when it comes down to it a bathroom may only have a toilet, sink, tub and still be a bathroom weather it has 100 square feet or 300 square feet.
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