Guest Post by Anthony F. DellaPelle, CRE
Value is often hidden below the surface. Oil must be drilled for many miles below the earth’s surface. Diamonds must be mined. Likewise a property may not instantly reveal the best way to appraise or value it. A little digging into how market participants actually determine a property’s utility may provide insight into methods of valuation that are distinct from the standard price per square foot or price per acre units of comparison utilized in “ordinary” cases.
Discovering a “diamond in the rough” may require what is thought of as an uncommon approach to appraisers and attorneys. Although appraisers employ one or more of the three traditional approaches to value, the way the information is analyzed within each approach is the key to finding the real value of a “diamond in the rough” property. Take, for example, an automobile dealership property.
Automobile Dealership Valuation
Automobile dealership property comes in all shapes and sizes. Urban dealerships often have vertical or multi-story space with little land, while dealerships on suburban highways or in rural areas may ordinarily contain single story structures with substantial highway frontage and surface parking for the display and inventory of automobiles for sale. Two factors are most important for every car dealership:
• The number of cars visible from the street frontage; and
• The number of cars that can be held on the lot in general.
Standard units of comparison employing comparable market sales and price per-square-foot valuation methods can result in the need to make significant adjustments. In this case, adjusting the subject property’s value based on the number of cars for sale that the property could hold. This ‘per car’ approach can create a more equitable and accurate way to measure the utility and the value of the subject property than the dollar per square foot or acre approach.
While not every property will reveal a diamond in the rough, valuing a property using market standards can yield a more reliable indication of fair market value. Investigating how market participants approach their valuation decisions provides a glimpse of the diamond before it’s fully revealed through a little extra work and research.
This is a summary of an original article found at McKirdyRiskin.com
Anthony F. DellaPelle is a shareholder in the law firm of McKirdy & Riskin. He has represented property owners in eminent domain, redevelopment and real estate tax appeal matters for more than 25 years and is a Certified Civil Trial Attorney by the New Jersey Supreme Court. Mr. DellaPelle has written articles in publications such as the New Jersey Law Journal, The Practical Real Estate Lawyer, American Law Institute, and American Bar Association. He’s also a frequent contributor at the New Jersey Property Tax Appeal blog.