Finance Focus April 2008, by Steven Cole

I was recently asked, “What are land values today for tracts of residential subdivision land?” and “How do appraisers value such properties in a market with few transactions of this type of property?”

The answer to the first question is that appraisers must reflect the current actions of buyers and sellers in the market. To the extent that they anticipate the future, so must our appraisals. Often, brokers and lenders think that appraisals are historically based because appraisers use closed transactions of comparable sales in order to deduce an opinion of market value. That works when a market has stable prices. However, when prices are moving rapidly either upwards or downwards, looking backwards simply doesn’t work. In estimating market value, it is always the assignment of appraisers to accurately and competently interpret the market in order to arrive at an appropriate opinion of value. Appraisers who unthinkingly apply the three approaches to value are not doing their jobs. More →