Cost Approach Paper

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Cost Approach

The first step of the cost approach is to determine the value of the property as vacant. The sales comparison approach is considered to be the most reliable method of valuing vacant land when there is an adequate volume of sales comparable in character to the subject property available for analysis within the local land sale market area. The market area appears to have an adequate volume of land sales within the Tri-County Region as defined by the Tri-County Regional Planning Commission including, Clinton, Eaton and Ingham counties as indicated by the following Tri-County Regional Planning Commission Map:

Ultimately, three sales of comparable vacant property having the same highest and best use as the subject were selected …show more content…
Vacant land sale price units of comparison, traditionally used in the subject property local market include sale price per building site, price per net square foot and price per front foot of land area. Analyzing the sales presented reveals the sale price per units of comparison range from:

• $615,000 to $715,000 per building site
• $2,020 to $3,743 per front foot
• $12.63 to $17.22 per square foot of net land size

This information is analyzed in the following chart to determine the most stable and consistent unit of comparison to be applied in valuing the subject property based upon the sale price per unit of comparison coefficient of dispersion (COD). Per the IAAO COD is “the most generally useful measure of variability or uniformity.” The COD measures the average percentage deviation of the ratios from the median ratio and is calculated by the following steps:

1. subtract the median from each ratio
2. take the absolute value of the calculated differences
3. sum the absolute differences
4. divide by the number of ratios to obtain the average absolute …show more content…
Jeff Brinks of Williams & Works, engineer for the subject property rebuild project told the Lansing State Journal regarding the subject property and functional obsolescence “When the building reaches a certain age it limits what you can do when you decide to remodel. This is especially true in the restaurant business where you have to adapt to changes in customer behavior as well as technology. At this point it makes more sense to scrap the building and start over from scratch.” The Lansing State Journal went on to elaborate regarding the design and functional utility of the rebuilt subject property improvements saying “based on McDonald’s latest building design. Among the notable changes is a drive-thru ordering system that features two ordering kiosks instead of one.” Jeff Brinks then went on to further elaborate regarding the subject property, building improvements saying ““This is a way that McDonald’s is looking to improve the customer experience. Studies have shown that drive-thru traffic is increasing, especially when the restaurant is close to the freeway. In those cases, the drive-thru business is close to 70 percent of the restaurant’s total business…the two-kiosk system will allow each restaurant to serve 40 to 50 more vehicles per hour over the single kiosk system.” Based on these comments from Jeff Brinks of Williams & Works, engineer for the subject property rebuild

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