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Mayor Mary C. Butler and et. al. June 5, 1985 Page rwo As the basis for the estimated market value has two compo- nents (i.e. the value of the land and the value of the structures and other improvements on it), it must be pointed out that the value of an identically sized and located lot which is unimproved is greater than that of a lot with a structure already built upon it. The rea- son for the greater value of the "raw" land parcel is that the owner is free to place whatever type and size of structure on the property which is legally permissible, while the owner of a parcel which al- ready has a structure on it has those choices substantially curtailed. Therefore, it is not just to place the land value component of esti- mated market value based upon raw land sales unless a deduction is made for the loss -of -choice factor. Basically, the separate values of a piece of land and of a particular structure individually are greater than when those two components are together. There are three usually accepted approaches to arriving at "fair market value" which are used by appraisors. These are: (1) cost of construction less depreciation; (2) comparable sales; and (3) income generation. Of course, in owner -occupied residences the income approach has little value. The comparable sales approach is limited by the fact that no two properties are identical and, therefore, subjectively based adjustments must be made to approxi- mate the value of the differences. The cost of construction minus depreciation approach relies on averaging certain construction costs and factors which differ from contractor to contractor and upon the correct ascertainment of the deductions which are to be made in assessing both physical depreciation as well as functional depre- ciation. It can be seen by this brief analysis of the appraisors' approaches to value, that an appraisor's opinion as to value is just that, an opinion. It is not unusual for two or more qualified appraisors to arrive at different opinions as to value. These differences usually are relatively minor, perhaps plus or minus 5%, but they can be more substantial. Recent Minnesota Tax Court cases have stated that: "The very best evidence of market value is a recent arms -length crash sale of the subject property." In applying this case law, it must be remembered that the sale must be between persons who are willing buyers and sellers and that they are informed as to values and as to the property itself. If either the buyers or sellers are in a disadvantageous position, having timing or financial problems, the sale prise may be skewed. The same is true if either of the parties has some knowledge about the property which is not shared by the other. of course, if the buyers and sellers have a special relation- ship to each other the sale price is not necessarily a true indica- tion of value, which is the reason that the Tux Court•'s above -quoted language specifies that the sale must be arms -length.