By: Mike Weeks
We were asked to re-publish this article.
“Accurate land values are crucial to an effective assessment system.” This is the first sentence in Chapter 7 Land Valuation in our handy dandy red Property Appraisal and Assessment Administration books. And we all know how true it is. Joe, Bob and Rich, (we’re on a first name basis) the editors/authors of this book go on to explain “Wars have been waged over land, and the rights to the ownership of land are embedded in the laws of all free nations and defended by their courts.” “Land is the source of all our wealth.” As well as Highest and Best Use, Supply and Demand, Surplus Productivity, etc. and etc… I know, in the past, I’ve tried to push a grade, condition, map area factor or manual level because I just couldn’t reach the value of that property but never once considered my land value. As you finalize your values for 2009 (2018/2019), now is the perfect time to take a look at your land. Also, it’s a perfect time to update land values before the new 2020 Appraisal Manual.
But how does one effectively and accurately value land using VCS? Easy! You should already have, PDF’s and Map Areas determined in your jurisdiction, first step… Done. Using VCS Sales Ratio we can sort or Stratify by PDF, Map Area, Subdivision and NUT Code. After performing a Get Sales, we can then Time Adjust, if you need to use sales from previous years, and then Prepare your sales. After preparing your sales and clicking next you should receive a list of Reports. The very last two reports will assist you in your land valuation, Vacant Lot and Land Ratio (Residual).
When using the Vacant Lot report, you will be asked for an Adjustment Factor. As explained in VCS, this is the percentage that a current vacant lot sale must be increased to reflect a sales price with improvements. This factor may vary between jurisdictions and possibly even map areas or classes, for example Res or Rural Res. Whatever obsolescence you apply to a vacant lot, I would use that figure. After running your query, clicking Report then Preview, you will receive your Vacant Lot Report. This report gives us a lot of good information including an Indicated Unit Price. After further analysis you determine your land values are approximately 5% too low. Or all Front Foot priced land at R-320 need to go to R-325. Now what?
In the Batch Process portion of VCS, you can choose Update Land. Using this tool, you can factor your land in any PDF/Map Area by the Land Basis type. You simply select Front Foot for a basis, enter the current rate of R-320 and the new rate of R-325. Be sure to use your TEST only option and review the report given before making your actual changes. Also, be cognizant of the rates you’re changing. If you start with the lower numbers, R-320, and move all to R-325, then all R-325 to R-330 so on and so on, you will end up with all Land Values at the highest rate you chose, for example R-1000. (A restore would be needed at that point.) Start with your higher land rates and work your way down.
What if you don’t have many or any vacant lot sales? Using the Land Ratio (Residual) report, aka Abstraction Method, you can determine a vacant lot value. First, you must enter the residual percentage. To figure, use this formula: Sale Price – Improvement Value = Land Value on sales in an established neighborhood. Find the average, enter that percentage in CAMAVision, and run your report. After doing your analysis and determining your changes, go back into Batch and Update Land.
Updating land might take some time but it could mean the difference between an equalization order or not, as well as knowledge that your values are fair and equitable.