Found out why even though it has been surveyed why the parcel hasn’t been split off. The owner is waiting for a buyer first. How can you write a land contract without the parcel existing?
Sounds a bit like your counterparty is a wacko or an amateur. Neither bode good for your own success.
Good luck! Seriously, not snarkily.
In dealing with the real estate agent, I’m voting for the latter.
Not sure if I misunderstand, but I believe in IL, by law, property has long been assessed at 1/3 FMV.
Update!
Last month he finally split off the parcel but it does not appear to be for sale. Maybe he did it for a buyer and so it is not listed or maybe no one (like me) would touch it until it was split off. Some research indicates the FMV is $16,250 for the 3 acres. A little high but it is almost 100% woodland. Time to see what offers the realtor might take and if the planner will let me make the improvements I want to.
Hooray for progress of sorts. And thanks for keeping us up to date.
I was a real estate appraiser in the mid-80s. Valuing vacant land is pretty easy, but the first thing you have to remember is that assessed value is a complete and total non sequitur in most parts of the country (possibly all). It doesn’t matter much how the local tax assessor values the property and has only a fleeting relationship with fair market value.
There are three approaches to value for real estate: Market approach, cost approach, and income approach. Undeveloped land is almost always appraised using a market approach, which some people call the ‘direct comparison’ or ‘market comparison’ approach. The cost approach is not appropriate for unimproved property because it starts with the value of the land, and then estimates the value of the land and improvements by valuing (costing) the improvements, including a measure of depreciation, so the cost approach has no built-in way to develop a land value, and relies on another form of estimating the land value. The income approach values properties for their potential to generate income, which, by applying an accurate capitalization rate, theoretically provides a valuation of land and improvements combined, so there’s no way to segregate the two components. That leaves us with the market approach.
The American Institute for Real Estate Appraisal has several components of fair market value. Some of the important elements assume a knowledgeable buyer and knowledgable seller, both presumably aware of the highest and best use to which the subject property may be put, neither one of which is acting by compulsion to buy/sell. Consequently, the first analysis the appraiser must undertake is the highest and best use.
For some properties, HABU is easy. If it’s in a residential area and zoned residential, the likely HABU is consistent with the zoning, whether it’s SFR or any sort of MFR (eg 2-4 units, apartments, etc). Other properties are more difficult, such as when an area is in transition - gentrification can be a huge wild card in many communities - or if there is potential for change in the near future. For instance, if a freeway interchange is planned nearby (the basic plot driver in that Kurt Russell/Jack Warden classic, Used Cars). HABU analyses is really where different opinions of value live, most of the time, because often the appraiser must decide whether a change in use is either likely or remote speculation.
After the appraiser decides on a HABU, then it’s time to look for comparable properties that have sold recently. Those comparables (“comps”) should have the same HABU (or HABU potential) as the subject property, similar in size, access, topography, encumbrances (eg a utility easement or in a flood plain), access to utilities, and any other condition that could affect value. Ideally, the appraiser can find at least two or three such properties. Rarely are there comps that match up in more than just a few categories, so the appraiser must then look at the differences between the comps and make adjustments according to the differing attributes of the comps and their sales prices. The mythical “perfect comp” is the sale of the subject property itself, but that rarely happens, and even then it would require an analysis. More often, the appraiser makes adjustments for time (ie how long ago was the sale of the comp, and is there an indication that the market has moved either up or down), size, location, development costs (if we’re talking about undeveloped property), or potential financing considerations. Of course, there are many more factors the appraiser needs to consider, but these are some of the biggies. Sometimes listings are used as comps to suggest the top of the market.
There’s more, but since it’s been close to 40 years since I appraised a property, all my notes and books are in a box somewhere and I’m just flying by the seat of my pants. Real estate appraisal is part art and part science, but it’s not terribly complicated at it’s heart. The arguments all revolve around highest and best use: once that is agreed upon, everything else falls into place without too much trouble.