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The need for Purdy’s Method of Commercial Land Valuation came at the bottom of the 2006 Florida residential real estate market.  With hundreds of projects on the horizon and an endless supply of capital, it seamed almost never ending.  So many people ask, what killed this seemingly invincible Florida real estate market.  There were the people that believe it was the news media, some blame the realtors, but at the end of the day, it was the absorption rate. The most basic fundamental of economics, “Supply and Demand”; create an oversupply and the market will crash.  Many people did not know, but historically over the prior ten to fifteen years, Florida’s absorption rates were well over 100%, meaning everything that was built was quickly absorbed.  With a surge of developers, who had more money than sense, developing at a rate faster than the people could move in the residential absorption rate plummeted quickly to an all time low of around 20%.  This oversupply of property mixed with a glut of over financed investors, created the ideal situation for a quickly depreciating market. 

As a real estate broker Purdy quickly realized that many of the commercial and residential development properties that were for sale in this soft market we overpriced, and not only were the properties over priced, many of the property owners had over paid to begin with. Some people believe that the properties lost value overnight, and in some cases that was the truth, but for the most part the properties were never worth what the owners paid for them. 

So how did this happen, how is it that relatively intelligent people over paid for so many properties?   It is simple; at the end of the day no one knew any better.  Quite simply there was not an easy or effective way for the average person to truly valuate the properties they were buying, so they depended on an appraisal or the “Sales Comparison Approach to Value” instead of a "Highest and Best Use Appraisal" supported by engineering, recent sales comps or a market rent survey just to name a few.  Unfortunately the "Sales Comparison Approach" to value does not take in to account the economics and dynamics of developing a property and can often provide an artificial value.   Purdy believes that by providing people with an easy and effective way for the average person to valuate land or a development project, there would be fewer victims overpaying for properties.  More importantly the properties that were for sale would be more inline with what they were really worth. 

Purdy believes that by promoting a standardized methodology of land valuation based on “Ultimate Developable Value” dictated by the highest and best use of a property, instead of the “Sales Comparison Approach" to value, people in general would be less likely to overpay for commercial real estate, and as an end result, there would be fewer real estate downturns. 

 Purdy’s Method is available on this site without charge or obligation under the Purdy’s Method Button.  It provides a simple and easy to use fill in the blank PDF form, with detailed information to arm every investor and or broker with the knowledge to make good decisions when purchasing or selling properties.

 Please do your part and help spread the word about Purdy's Method of Commercial Land Valuation.  I have provided tools in and effort to help make a difference for tomorrow. Clicking this link and Enlighten Someone  or Print A Brochure

  Purdy's Quickie Land Valuation

All New, Check It Out!  NEW Purdy's Method BPO Worksheet

Purdy's Logic

Projected Value ÷ (Developer Profit + (Opportunity and Carrying Cost x Term) + Real Estate Commissions +1) - (Per SF/Lot Construction Cost x Total SF/Lots within Project) = Land Value

Using Purdy's Logic, when valuating land will not guarantee a successful land valuation; however, it will provide a basic understanding and serve as a basis for commercial land valuation.  The techniques use in Purdy's Method of Land Valuation are similar to the ones used in "Ultimate Developable Value".  Most of this form of Commercial Land Valuation is commonsense, but some has to do with market knowledge and experience, and overlooking these two important factors can result in an inaccurate land valuation.