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Transactions of the American Society of Civil Engineers (Volume 81) online

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not able to gather a great number of data, and must be guided to a
certain extent by the work of those who have made extensive investi-
gations. The results of work on corner lot values, however, are some-
what meager and contradictory, and it is advisable to study each indi-
vidual problem and check, in as many ways as possible, the results
obtained by the application of some rule or percentage. A corner lot
is more valuable than an inside lot by reason of the increased acces-
sibility, the better possibilities of utilization, and the additional light
and air. Increased accessibility and availability include all such



606 VALUATION OF LAND

factors as greater facility of entrance to the property, added show-
window and advertising space, increased amoiint of traffic at a corner,
and the greater possibilities in designing buildings. If those advan-
tages could be appraised and their value added to that of an inside lot,
a check on corner lot values would be obtained.

In the case of business property, where all the factors mentioned
must be considered, such a course is scarcely feasible; but it is prac-
ticable in simpler cases, such as occur in factory districts, where light
and air are the only advantages to be gained by corner locations. The
value of the advantage may be measured in such an instance by esti-
mating how much vacant frontage would be required adjoining an
inside lot in order to give it as much light and ventilation as the
corner lot, and multiplying that frontage by the unit land value. If
land has a market value of $400 per front foot and it is estimated that
22 ft. of vacant space would be required to give an inside lot as much
light and air as the corner lot, then the sum to be added for this ad-
vantage would be 22 X 400, or $8 800. The estimated additional front-
age, of course, should not exceed the width of the side street. This
method is modified by a number of factors, such as the height of build-
ings, the shape and size of the lot under consideration, and the possible
design of improvements as regards artificial lighting or the disposition
of courts and light-wells.

As a rule, corner influence does not extend across ownership lines
along the main street, and property adjoining a corner lot on the main
street is of little higher value than any other inside frontage. Only
in so far as it is located close enough to the corner to benefit by the
increased street traffic there does it have any increased value whatever.
Along the side street the corner influence generally extends beyond the
corner lot, the value of frontage grading down regularly from the main
street corner until the normal market value on the side street is
reached. As light cannot be utilized more than 40 ft. from the lot line,
the added value due to it should not attach to property more than that
distance from the corner. Moreover, if the corner lot is narrow, the
light advantage cannot be completely utilized, and is of less value.
Corner values in residence property are of much less importance than
in business property. In a district where each building is on a fair
sized lot with plenty of space around it, the corner has practically no
additional value beyond that which is due to the additional street im-



VALUATION OF LAND 607

provements; but, in more crowded sections, where there are flats and
apartment houses, the corner lot may be worth from 25 to 50% more
than inside lots.

Many of the large real estate and appraisal offices have their own
rules for handling questions of long and short lots and corner lots, and
guard them carefully as office secrets. It is hardly possible that their
private studies should yield information varying to any great extent
from that which has been discussed herein, except in cases where it
applies to peculiar local conditions. A number of the most difficult
cases in determining land values are encountered in appraising corner
lots. Every corner lot presents a different problem, and, after general
rules have been applied, each case should be studied with regard to its
peculiar features.

Plottage. — In certain classes of property, where several lots or blocks,
or an unusually large frontage, are held under one ownership, a tract
of land may have an additional value by reason of its being thus held.
Where such conditions prevail, the tract is said to have plottage, and,
where the land is more valuable by reason of such conditions, to have a
plottage value. Although a piece of land may have an unusually large
area, it does not have plottage value unless it can be occupied by some
utility which requires an extra large site. If a tract of six or eight
adjoining lots is available only for dwellings it will have to be broken
up into single lots in order to be utilized, and consequently has no addi-
tional value; but, if it were owned by a traction company, and used for
a car-barn site in a district where tracts of equal size were not readily
available, it would have a plottage value. Wlien a market value for
such a tract has been determined, it is customary to add a percentage
to cover the plottage value, and 10 and 15% are commonly used. Plot-
tage value exists by reason of the fact that it is necessary to expend
amounts in excess of market values in order to gather several adjoining
pieces of land under one ownership, and some measure of the amount to
be added for this value can be ascertained by estimating what addi-
tional expense would be incurred in gaining control of several adjoining
properties held under separate ownership. In acquiring land, ujider
such circumstances, it is not always possible to condemn, but it is
possible to obtain options and get the proposition lined up so that the
owner of one parcel cannot demand a prohibitive sum after money has
been invested in several surrounding tracts. Even with careful buying,



608 VALUATION OF LAND

however, the grantee is generally obliged to pay an exorbitant price for
one or two lots in order to close a large deal. Such a transaction, how-
ever, is not made unless a considerable portion of the tract can be ob-
tained at a reasonable market value, and though a double price may be
paid for some pieces, the percentage above market value, computed on
the entire purchase, is not apt to be excessive.

Fig. 4 is a diagram of a group of lots purchased by a large company
for a home office building site, and is a fair example of the manner in
which such a property is acquired. Twenty parcels of land were pur-
chased, constituting an entire city block. On each parcel is shown the
estimated market value and directly under it the sum paid out for that
piece of land. The market value of the entire block was $302 000 and
the total cost of acquiring the twenty parcels was $384 000. The excess
over market value was $82 000 or 27%, but, nevertheless, the deal rep-
resented a very good piece of buying, and the total tract could be said
to have a fair plottage value of $82 000. This instance is unusual, a
much more frequent case being where three adjoining lots are worth
$2 400 each and the plottage value for the three together is estimated
at $800. Plottage value may be said to range from 10 to 25% of the
market value, the percentage decreasing as the value of property in-
creases, and increasing in proportion to the number of lots or parcels
constituting the tract.

Cost of Acquiring Land.

Considered from a different viewpoint, plottage value is simply one
of three items which may be called collectively "the cost of acquiring
land", as it represents an amount in excess of market value which it is
necessary to pay out in order to purchase several adjoining pieces of
land. Another item of this group is the cost, in connection with pur-
chasing land, of buying and removing buildings or other improvements
which are on the land but are of no value to the purchaser. There are
numerous cases in connection with land purchases where large and
serviceable structures have been wrecked to make room for a different
type of improvement, and, even considering the salvage, the expense
involved is often considerable. This cost, of course, is subject to no
regular influence, and must be determined under the conditions exist-
ing where it is encountered. The third item of the cost of acquiring
land is the actual expense in connection with making the purchase, and
composes one or more of the following sub-items:



VALUATION OF LAND



609



§21000


$12000


112 000


S12 000


§15 000


23 000


12000


16 000


40 000


13 000


$6000


UOOO


$11 000


15 000


$14 000


14 000


$16 000


$7000


16 000


14 000



$45 000
70 000


$60 000
56 000


$16 000
18 000


$8000
9000


$8000
9000


$6000
0000


S5000
5000


$8000
8000


$6000
7000


$16 000
UOOO



Upper Figures =Market Value
Lower Figures=Purchase Price



Fig. 4.



610 VALUATION OF LAND

Expense of searching for and choosing a site;
Salary or commission of men engaged in buying land;
Field expenses of men engaged in buying land (railway, hotel,
livery, etc.) ;

Expense of legal services and examinations of title;

1 Fees for recording instruments;

Expense of registering title in land courts;
Surveying and setting monuments.

In most cases the purchase is placed in the hands of a real estate
broker, and his fee is the only expense. Brokers generally charge as a
commission a percentage of the consideration, vs^hich varies in dif-
ferent localities, depending often on the rules fixed by real estate ex-
changes and other brokers' organizations. The cost of abstracts and
examinations of title varies according to the condition of the title, and
bears no relation to the value of the property. In some cases, where
the title is involved, it requires litigation and the expenditure of large
sums to clear it. Such cases cannot be estimated, and the expense must
be obtained from actual records. Ordinarily, the expenditures men-
tioned under the third item of the cost of acquiring land vary from

2 to 8% of the market value of the property, the lower percentage
being more likely to occur when land reaches high values.

Different Theories Eegarding Land Values.

In the valuation of a parcel of land, there may be determined two
values : the market value and the cost to acquire the latter, representing
the cost of obtaining plottage, the cost of removing improvements not
required, and the expense in connection with purchasing. The two
values may be determined for two periods, that is, at the date when
the land is purchased and at the date when the valuation is made. At
the date of purchase both the values represent an estimate of actual
expenditures. At the date of valuation the market value may be much
higher, due to an increase in values; and the cost to acquire will be a
speculative value, also increased over the original cost, as it is to a
large extent proportional to the market value.

Assume the history of a property to be as follows : Four lots having
a market value of $3 000 each were purchased by a company for the
sum of $14 900; buildings of no value to the company were purchased



VALUATION OF LAND 611

and remuved at a net cost of $4 700 ; and the expense of purchasing
the property was $500. The total expenditure was $20 100, of which
$12 000 represents market values and $8 100 the cost to acquire.
Assume, further, that 20 years later the lots have a market value of
$6 000 each ; that a careful estimate of the amount to be added for
plottage is $5 000 ; that the net cost of removing the buildings is
placed at $11000; and the expense of purchasing at $700. What is
the value of the tract of land?



Market



Net cost of



Date. Property. „Qi„r Plottage. removing Expense. Total.

^^^"®- buildings.

1896 4 lots $12 000 $2 900 $4 700 $500 $20 100

•1916 Same property.. 24 000 .5 000 11000 700 40 700

The investment cost is $20 100. The capital charge (allowing for the
increase in land value) is

$24 000 + $2 900 + $4 700 + $500 = $32 100,

or, if the increase in plottage value is also included,

$24 000 + $5 000 + $4 700 + $500 = $34 200.

The sale price to another company would be $24 000 + $5 000, or
$29 000, but the replacement value would be $40 700. The foregoing
is an extreme case, and is given to show the variation in valuation
results, worked out under different theories or for different purposes.
In public utility regulation cases, there is a strong tendency, in land
valuation at the present time, to use the market value as of date of
valuation, and add the cost to acquire as of date of purchase. This is
in conformity with a theory which allows a utility to capitalize the
increment in land values, but does not consider that it is entitled to
an increment, more or less speculative, to expenditures in connection
with land purchases.

Values Based on Special Utilization. — In frequent cases a tract of
land is held to have an exceptional value because it is particularly
adapted to the purposes of the utility by which it is occupied. A steam-
power plant may be on the bank of a river where plenty of water is
available for heating and condensing purposes, and the conditions may
be such that no other site with equal facilities is to be had. The
position often taken in such cases is that the location has a peculiar
advantage for steam plant purposes, which it would not necessarily
have for the purposes of a wholesale house, a railroad yard, or some



612 VALUATION OF LAND

other utility; and, as a similar location cannot be obtained, it has a
value in excess of the market value of adjoining lands. This additional
value may be based on the extra cost of providing a tunnel from some
other location to the river, or on the saving effected by the existing
water supply over a well supply. A further step in this direction is
to give land a value based on its highest utilization, even though such
utilization has not been accomplished. A notable instance is the case
of certain islands in the Upper Mississippi River which were taken
for public use. The jury assessed their value as waste land, and, for
any except boom purposes, at $300; but, in view of their adaptability
for the formation of a boom across the river, at more than $9 000. The
Court found the owner entitled to the larger sum, although the islands
were not at the time, in fact, used for boom purposes, but were capable
of such use. Instances of this kind are mostly encountered in land
damage and land condemnation cases, and are based on the wording
of the laws governing such cases, which state in brief that when a
man's property is taken from him he shall be recompensed to the
extent of its full value for its most valuable use. High values, in such
instances as the steam plant location, however, are based on the theory
of the cost of replacement of the property. In the majority of these
situations, neither was the actual cost of the land excessive, nor could
the land be sold to another utility for a high figure; and extra value
is claimed simply because, if the power company did not own the
site, it would require great expenditure to obtain one which would
be as suitable.

The method of handling such cases depends on the theory under
which the valuation is undertaken. If the basis of the work is "what
would it cost us to replace this land if we did not own it", or "what
expenditures would be entailed if we could not obtain it", it is easy
to justify extreme values. Consideration should be given, however,
to factors which sometimes modify these values. A small rocky island
in a river may be said to be very valuable to a water-power company
as an anchorage for a dam, but, in valuing the entire property of
the company, the fact that a high value has been placed on a bit of
waste land increases the theoretical cost of developing the water-power,
and, when the value of water-power rights is computed, they will be
found to have a lesser value to exactly the extent that the theoretical
cost of development has been increased by placing a high value on the



VALUATION OF LAND G13

island. Such an island may save many dollars to a railroad company
as a footing for a bridge pier, but, if it has been necessary to change
the grade or alignment of the road in order to cross the river at that
point, the saving may be greatly reduced. Even though the island
were directly in the path of the railroad line and could be utilized
for a bridge foundation without any extra expenditure to make it
available for that purpose, it is questionable whether the land would
have any but a nominal value. The island is only a natural feature
of the territory crossed by the railroad, and to claim a high value for
it is akin to placing a higher value on railroad right of way in a level
district than in a hilly one, where land has the same value for farm
purposes, but where earthwork and curves make railroad construction
and operation more expensive. It is evident that appraising land
on the basis of its value for certain uses may be carried to absurdities.
To return to the case of the steam-power plant, previously cited:
There are in every large community utilities which require facilities
tor coal and water supplies, and, if locations with such facilities are
limited, the competition is bound to develop a stiff market value for
land of that class. On the contrary, in situations where the plant
is on land which, if not used for power-plant purposes, would be
occupied by a utility which would not take advantage of the special
facilities offered, the market value of the land should be based on that
class of utilization. Sometimes a utility, in buying a piece of land
particularly suited to its purposes, pays a large sum for it when no
other utility is competing for the location, simply because the owner
recognizes that the purchaser is especially desirous of obtaining it and
holds to a figure above the market value. The utility may want
the land because it has special facilities for coal and water supplies
or because it adjoins land already owned, but in either case it is
simply a circumstance that confronts the purchaser, and the market
value of the land is not increased thereby. Generally, the sum paid
for a piece of land having a special value to the purchaser is not
excessive, due to the fact that the seller frequently considers the value
from the viewpoint of his own utilization of it, and does not ask
himself "what is it worth to the purchaser". A railroad company
requiring earth for a large fill may acquire a particularly suitable piece
of land at the market value, the seller having in mind only its value
as farm land and not considering that the purchaser wants it for filling



614 VALUATION OF LAN'D

material and would have a long haul if the material were obtained
elsewhere. Under such conditions, the purpose for which property is
wanted is concealed, and, where the identity of the purchaser would
suggest it, the transfer is made through a third party.

In concluding this phase of land values it may be said that the cost
of replacement as applied to land may lead to extreme results, and fur-
thermore, it is a theory which is considered by many authorities to be
unsound for most appraisal purposes. If a market value is to be deter-
mined for land which has special advantages for certain utilizations,
it should not be abnormally high unless there is competition for the
location based on its peculiar facilities.

Value of Railroad Land. — The valuation of railroad lands is a
problem which has confronted appraisers in recent years. Such valua-
tions are generally made by employing men familiar with land values,
and they gather sales and other data regarding the value of land along
the railroad right of way, and use the information collected, supple-
mented, with personal opinions, assistance from real estate dealers, and
notes from the company's records, to fix the values. Railroad lands are
so extensive, and include so many grades of property, that an appraiser
is not warranted in going into details to the extent that is customary
in making ordinary land valuations. Not only would it be too laborious
a procedure under most circumstances, but there would be little net
gain in the accuracy of results. By using a rougher method, any
individual tract of railroad land may be given a market value that is in
error, but, if all inaccuracies are compensating, the net error through-
out a State, or even in one city, is a very small percentage of the total
value.

The method of using tax assessments which has been outlined here-
tofore is particularly applicable to the valuation of railroad lands.
Maps are first provided showing the railroad lands and also the adjoin-
ing property for several blocks on each side of the right of way and
terminal grounds. Owing to the nature of railroad lands, the units,
such as lot values and front-foot values, cannot be readily applied, and
it is necessary to use the value per square foot. In order to compare
and apply the assessments on adjoining lands, they -must be reduced to
the square-foot unit, if they do not exist in that form in the public
records. The assessments are recorded on the map, and the right of
way is then inspected in the field in order to determine its relative value



VALUATION OF LAND 615

as compared with adjoining lands. In the light of the inspection and
the data recorded on the maps, the railroad lands are given an assessed
value which is subsequently converted to market value by applying the
ratio which has been found to exist in that particular district between
market values and assessment values. The market value determined
for any given piece of railroad land may be slightly incorrect, but the
net result for a city is accurate, as no cumulative errors are introduced.
This method may be used in either city or country districts, and is
very convenient where good sales are scarce, which is generally the
case.

Cost of Acquiring Railroad Land. — In acquiring railroad right of
way, many expenditures are incurred in addition to paying the market
value of the land purchased. Among the more important may be listed
the following:

1. — Wages and commissions of men engaged in purchasing land;

2. — Field expenses, traveling, livery, board, etc., of men engaged
in piirchasing land;

3. — Printing and advertising, notices, etc.;

4. — Abstracts and examinations of title;

5. — Fees for filing and recording documents, etc.;

6. — Condemnation and legal expenses;

7. — Purchase of buildings, orchards, crops, etc., on land required
for railroad purposes;

8. — Damages to adjoining property;

9. — In addition there are the amounts paid out which represent
no value received or damage inflicted, but merely the simis
which it is possible for land owners to extort from a railroad
company under the conditions which prevail in buying rail-
road lands.

The first six items are small, and range from 4 to 12% of the total
amount paid for land. The smaller percentage obtains in the case of a
large railrofid having a land department and a purchasing organization,
and the larger percentages are found in the case of small electric lines
acquiring only a few miles of right of way, and using only a temporary
organization for the purpose. These items are of minor importance,
however, and the cost of acquiring railroad land is determined chiefly
by the magnitude of Items 7, 8, and 9. These three items are not



616 VALUATION OF LAND

governed by any established laws or ratios, but are controlled to a cer-
tain extent by the following factors, and it is impossible to determine
the extent of any one influence separately :

1. — Value of Land. — As the value of land increases, the propor-
tional cost to acquire decreases. In buying cheap lands, the
railroad companies do not make the effort in purchasing that
is made in cities, where the investment is larger, nor are they
so likely to resort to condemnation, for it is sometimes cheaper
to pay five or ten times the market value of poor lands than
to undertake the expense of condemnation.

2. — Ownership. — The class of ownership and the area of land
under single ownerships is a factor. In some of the lumber
States there are thousands of acres of cut-over timber lands
held by single lumber companies, and it is possible to obtain
large portions of a right of way at reasonable figures by deal-
ing with only a few such land-holders.

3. — The extent to which a community is built up obviously affects
the matter of damages in both city and country lands. In
undeveloped territory, it is possible to buy land cheaper by



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