Outline and discuss the difference between site valuation and development appraisal processes and explain the usefulness of each of the processes in real estate development and investment analysis.
Site valuation is the process of estimating the value of a piece of land. This can be done for many reasons, such as tax assessment or purchase price negotiation. The value of land is based on many factors, including location, size, and zoning. Development appraisal is the process of estimating the value of a proposed development project (potential value of a piece of land if it were developed). The highest and best use of the land is considered, and then the potential value of the development estimated. This is typically done by developers when considering whether or not to purchase a piece of land. There are many factors to consider in a development appraisal, including zoning, maximum density, proximity to amenities, and potential for future growth.
For site valuation, valuations are required when a definitive value is needed for negotiation or decision making. For development appraisal, a valuation is only required if there is some uncertainty about the project’s future value and this needs to be taken into account when making the decision about whether or not to proceed with the development.
For site valuation you do require the best indication of price, engage the services of a qualified valuer so that you can be sure of the true value of your property. When requesting an appraisal, it is recommended that you contact a real estate agent who is familiar with the area in which your property is located.
A Court may order that a valuation be obtained as part of the process of resolving a dispute. The value of the property is relevant to the issues in dispute and will be one of the factors that the Court will take into account in making a decision. A professional valuer will use their expertise and experience to provide an independent opinion on the value of the property.
Site valuation can be done for property settlement when obtaining finance from a lending institution or establishing the value of a deceased estate.
Appraisal can be used to estimate the market value of the real property, the insurable value of the real property, the investment value, and also to determine the mortgage value of the real property.
