By Jonathan Dombrow, Mauricio Rodriguez, and C.F. Sirmans
Chicago, IL (January 1, 2000)- How does the existence of mature trees change the market value of single-family homes? This article demonstrates the use of multiple regression analysis to estimate the market value added by the existence of mature trees in a residential real estate market. The market-derived estimate shows that mature trees contributed about 2% of home values in the examined market. Although the magnitude of the reported results may be location specific, the described technique can be applied in other markets.
Appraisers have the difficult task of determining why housing prices differ and how differences can be attributed to particular existing characteristics. This article illustrates how multiple regression analysis (MRA) can be used to estimate the value added by the existence of mature trees in residential single-family housing markets.
The marker value of some attributes, such as the existence of mature trees, may be difficult to measure. However, because they may significantly contribute to the value of property appraisers should consider them in the valuation analysis. For example, a company that sells trees in Cincinnati reports that it would sell a red maple tree measuring only seven inches in diameter for about $2,400. (Price quotes of this magnitude were also obtained for different types of trees of similar size from sellers in Louisiana and Texas.) An informal survey of real estate professionals active in the subject area revealed that, all else being equal, homes with mature trees are preferred to homes without mature trees. However, the professionals surveyed did not quantify how much value could be attributed to mature trees.
The Counsel of Tree & Landscape Appraisers provides a detailed guide for establishing value estimates of trees. The recommended appraisal technique for valuing trees in residential markets focuses on a cost approach. The replacement cost approach is straightforward for transplantable trees. Current market values for transplantable trees can be used along with estimated labor and transportation costs.
A cost approach is also suggested when appraising trees that are too large to transplant. A value estimate can be arrived at by estimating a cost per unit of trunk area from the largest transplantable tree and applying this cost per unit measurement to the trunk area of the subject tree. An alternative technique involves adding the maintenance costs and compounded interest costs to the replacement cost of a transplantable tree for the number of years that it would take the replacement tree to reach the size of the subject (not transplantable) tree.
Mature trees (those more than 9 inches in diameter) are not often transplanted successfully. Therefore, mature trees are typically not transferable attributes between home sites. The lack of transferability makes cost-based estimates less applicable than market-derived methods for estimating the value associated with mature trees.
One study estimates the value of mature trees by comparing the mean sales price of homes that had mature tree cover on their lots to the mean sales price of homes that did not have mature tree cover on their lots. The study arrived at the estimated tree values by comparing the mean values of what were considered comparable house sales to estimates for mature tree values. (These values were based on the cost approach and the Guide for Establishing Values of Trees and Other Plants.) The result was a significantly higher tree value estimate from the comparable sales method than the value obtained from evaluating trees on individual lots based on the arboricultural appraisal cost method (or $9,500 versus $6,000). These authors acknowledge that the reported mean values contain properties with different characteristics (besides mature tree cover). Hence, there may be other factors driving the large discrepancy in estimated tree values.
Appropriate comparable sales are often difficult to obtain for paired sales analysis, which can determine the market value that mature trees can add. MRA, which captures multiple factors determining marker values, can be valuable in many circumstances, including determining the market value added by the existence of mature trees in a residential real estate market. Our focus is not on the replacement cost of trees- since mature trees may be difficult or impossible to replace- but on how the existence of mature trees contributes to single-family house sales prices.