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Site Analysis in Property Appraisal: Definition & Factors

Instructor: Shawn Grimsley
Correctly valuing real estate is very important because of the money at stake, even for a relatively small purchase. In this lesson, you'll learn about site analysis and some of the key components involved with it.

Site Analysis Defined

Meet Nicole. She's a property appraiser who has been retained to appraise a residential subdivision lot. Part of her appraisal process will include a site analysis. A site analysis involves analyzing the value of the site in regards to its characteristics and in relation to the real estate in the general area surrounding the site. In Nicole's case, she'll analyze the subdivision lot based on its individual characteristics and in the context of the neighborhood it's in.

Legal Characteristics of Site

Nicole will examine the legal characteristics of the residential lot when performing her site analysis. She'll need to determine the correct legal description of the property, usually from a recorded deed. The legal description will provide Nicole with the legally recognized location and boundaries of the property.

Nicole will also examine the tax burden on the property to determine whether it's comparable to surrounding properties of similar size and characteristics. Keep in mind that a high tax burden may adversely affect the value of real estate -- especially if the burden is out of sync with similar properties in the neighborhood.

Nicole will also examine the nature and extent of public and private restrictions burdening the property. She'll review the city's zoning ordinances in relation to the property, which is a public restriction. Zoning ordinances dictate how you can use a piece of property within a specific geographical area, known as a zone. For example, because the property is going to be used as a single-family residence, Nicole will want to make sure the property is zoned for residential housing instead of commercial or industrial uses.

Nicole will also determine whether the property is burdened by easements and restrictive covenants. An easement is defined as a right to use land owned by someone else for a specific purpose. For example, Nicole will probably find utility easements on the lot permitting the power and water companies to lay pipes and lines across part of the property. On the other hand, a restrictive covenant is a legally binding private agreement that places restrictions on how the land can be used. For example, it's quite common for modern residential subdivisions to assert some control over the architectural features of home exteriors, prohibit fences and prohibit boats and RVs being parked on the property.

Nicole will also want to know whether someone other than the current property owner has a legal interest in the property. For example, the owner may have leased the property to someone else. She may also determine if someone other than the current owner holds mineral or water rights that are part of the property.

Physical Characteristics of Site

Nicole will also be sure to carefully review the property in terms of its physical characteristics. She'll make sure to compare the characteristics of the subject property to the characteristics of the properties surrounding it. Nicole will take a look at the size and shape of the property, as well as examine its topography. Is it hilly or flat? Is there water on it? The nature of the soil may be examined, as well as the nature of any landscaping. Nicole will also note whether public utilities are readily available on the site (e.g., whether the site has ready access to the city's water and sewage system).

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