Determining Fair Market Value for Land?

[JG183]

Originally Posted by Sergio M

The risk involved is putting out their money

right, their money -- no risk to the builder, ergo no rationale for such a ridiculously high profit margin.

[Hal Jalikeakick]

thanks all. The land is in Colts Neck. The property in question is a sub divided lot and is currently a part of a farm assessed property, so the taxes are next to nothing. Since the lot for sale is less then 5 acres I don't think it would continue to keep the farm assessment.

My feeling is that the asking price is pretty high. The lot is on a desirable street, and I'd think a builder would have grabbed it by now (even in this market) if the price were right.

Building a home is something I want to do eventually, though now may not be the time. Kids are already in CN schools, so we are not in a rush.

[Hal Jalikeakick]

Originally Posted by NORMGLO

Iwhat if I build a $500,000 house in a $300,000 neighborhood? Does my house automatically raise the value of land in the entire neighborhood?

you end up with a white elephant and wouldn't recoup your costs in the event of a short term re-sale. you need to build something that makes sense for the neighborhood.

i'd be facing the opposite scenario. it's a 3 acre lot so most people in the area would build some ridiculously big house on it. Not interested in doing that though.

[Sergio M]

Originally Posted by NORMGLO

I must be missing something with the land being 1/3 the value because:

what if I build a $500,000 house in a $300,000 neighborhood? Does my house automatically raise the value of land in the entire neighborhood?

The answer to your question is no. I'm not sure what you do not understand. 1/3 for the land, 1/3 to build the home, 1/3 is the builder's pay plus a little profit. To some it may seem like an exorborant amount, for 6 months of actual work, finding the property, getting approvals, and coordinating the trades, is a task that most people stay away from.
Overall it could take a year or more. If the work is not done properly by an inexperienced builder, it could cost way more than it should, cutting into the builders money. This dosn't even take into consideration financing the project.

[Sergio M]

Originally Posted by JG183

right, their money -- no risk to the builder, ergo no rationale for such a ridiculously high profit margin.

I'm not sure I know what you meant that this is no risk to the builder.

Some builders use their own money (not many).

I am not looking for an argument, I just wanted to make the OP aware that this is a really good way to pay a fair price for the land. ( Of course you need to do a neighborhood evaluation, put the right type and size home in the right neighborhood, and sell the homes within a reasonable timeframe. )

[JG183]

Originally Posted by Sergio M

finding the property

the fundamental point in this thread is that the OP already found the lot

I'm not looking for an argument either, I'm just posting another side to the discussion... and my position doesn't originate from being a GC

[JG183]

Originally Posted by Hal Jalikeakick

The lot is on a desirable street, and I'd think a builder would have grabbed it by now (even in this market) if the price were right.

no, don't assume that.

builders have gone into their shells like a turtle -- they've over-reached for so long that they now have inventory that they have to get rid of before buying any land.

during the boom, alot of novice's and wannabee's got into construction, and they didn't have the insight to not over-commit.

[Sergio M]

Originally Posted by JG183

the fundamental point in this thread is that the OP already found the lot

I'm not looking for an argument either, I'm just posting another side to the discussion... and my position doesn't originate from being a GC

Because the OP already found the lot He/She will not be paying a premium for it to the builder. Why should He/She pay a premiun to the Seller? An end user usually would pay a little more for a lot like that.

Where does your theory originate?

I'd like to sell you some of my lots, It sounds like you want to overpay.

[JG183]

Originally Posted by Sergio M

Because the OP already found the lot He/She will not be paying a premium for it to the builder. Why should He/She pay a premiun to the Seller? An end user usually would pay a little more for a lot like that.

Where does your theory originate?

I'd like to sell you some of my lots, It sounds like you want to overpay.

no one is advocating that he/she pay a premiun to the seller of the lot -- you and I just have different formulas for arriving at the value of the lot, and different formulas for arriving at the price to pay a builder to erect a home on said lot.

you took a nice dig at me, but I doubt you personally have lots to sell... in any event, I found one last year, had a 2100 s.f. house put up, for $96 per s.f.

the smart builders out there know they can't afford to turn away work, and the smart lot owners know they don't have to pay $125+ per s.f. to have a house built.

heck, if one uses a modular builder based out of PA, you can get a house built for $44 per s.f.

[Sergio M]

heck, if one uses a modular builder based out of PA, you can get a house built for $44 per s.f. {quote JG183}

Quality vs value you cannot compare. I wouldn't even consider or compare a modular.