UP Standards

2.3.3.2. Land Valuation.The appraiser shall report the opinion of value of the land for its highest and best as if vacant and available for such use. See Sections 1.5.1 and 4.4.2 for a detailed discussion concerning the approaches to value and the legal foundation for these Standards. In all assignments, the sales comparison approach is the preferred valuation approach for forming an opinion of the market value of the land as if vacant. However, in some assignments the subdivision development method may be appropriate. The following sections describe the reporting requirements for the land valuation process. 

2.3.3.1.2. Larger Parcel.In every appraisal report prepared under these Standards, the appraiser must describe the factual basis and analysis underlying the conclusion of the larger parcel analysis. The three tests developed under the larger parcel analysis—unity of highest and best use, unity of title, and contiguity—should be addressed here.130 Each of the three tests (with emphasis on the unity of highest and best use) must be reported in sufficient detail for the client and intended users to fully understand the factual and analytical basis for the conclusion.  Application of the Approaches to Value 

2.3.3.1.1. Four Tests.The four tests of highest and best use are physically possible, legally permissible, financially feasible, and highest value. Each of these four criteria must be addressed in the appraisal report. The level of supporting data and analysis presented in the report for each criteria will depend in part on the complexity of the appraisal problem.  In all assignments, the appraiser must describe the analysis developed under Section 1.4 concerning the highest and best use of the property as if vacant. The physical characteristics of the property that impact value must be addressed. Property size, shape, topography, access, road frontage, and utilities are all examples of physical characteristics of a property that may influence use and value and should…

2.3.3.1. Highest and Best Use.The appraiser’s determination of highest and best use is one of the most important elements of the entire appraisal process. Therefore, appraisers must apply their skill with great care and clearly support the highest and best use conclusion in the appraisal report. The highest and best use of the land, as if vacant, is addressed first. If the land is improved, the highest and best use of the property, as improved, is then addressed. In some cases, the highest and best use of property cannot be reliably determined without extensive marketability and/or feasibility studies, which in complex cases may require the assistance of special consultants. 64 

2.3.3. Data Analysis and Conclusions – Before Acquisition.

2.3.2.3.8. Zoning and Other Land Use Regulations. Identify the zoning for the subject property. This must be reported in descriptive terms (e.g., multifamily residential, 5000 sq. ft. of land per unit) rather than by zoning code (e.g., MF-2). Other local land use regulations that have an impact on the highest and best use and value of the property, including setback requirements, off-street parking requirements, and open space requirements must be reported. The appraiser should also note any master or comprehensive land use plan in existence that may affect the utility or value of the property.  If the property was recently rezoned, that must be reported. The appraiser must determine whether such rezoning was a result of the government’s project for…

2.3.2.3.7. Assessed Value and Annual Tax Load. Include the current assessment and dollar amount of real estate taxes. If assessed value is statutorily a percentage of market value, state the percentage.  Some jurisdictions have developed programs wherein property will be assessed based on its current use rather than its highest and best use. These programs often relate to farmlands, timberlands, and open space; for purposes of eligibility, owners may have to agree to leave the property in its existing use for a certain period of time.125 In such a case, the appraiser should report both the current assessed value and taxes for the property’s existing use and the estimated assessed value and tax load for the property at its highest…

2.3.2.3.6. Rental History. Report the historical rental or lease history of the property for at least the past three years, if this information can be ascertained. All current leases should be reported, including the date of the lease, name of the tenant, rental amount, term of the lease, parties responsible for property expenses, and other pertinent lease provisions. The appraiser must describe the verification process and whether the lease(s) meets the conditions required for a comparable lease.  

2.3.2.3.5. Sales History. Include a 10-year record of all sales and, if the information is available, any offers to buy or sell the subject property. If no sale of the property has occurred in the past 10 years, the appraiser must report the last sale of the property, irrespective of date.  Information to be reported must include the name of the seller, name of the buyer, date of sale,124 price, terms and conditions of sale, and the appraiser’s verification of the sale and whether the transaction met the conditions required for a comparable sale under Section 1.5.2.2. 124 Terms and conditions of sale cannot, of course, be conclusively determined from the public record. Therefore, appraisers should confirm the sales of…

2.3.2.3.4. Use History. State briefly the history of the use of the property as vacant and as improved. If improved, state the purpose for which the improvements were designed and the dates of original construction and major renovations, additions, and/or conversions. Include a 10-year history of the use and occupancy of the property.123 If any of the foregoing information is indeterminable, the appraiser must report that fact. 123 Past uses of the property may suggest its historical contamination by hazardous substances.