The Price We Paid vs. What It’s Worth
A Love Story Between the Developer and the Appraiser
"What difference does the purchase price make to the value of the land?"
That was my honest — and maybe a little sarcastic — response when the appraiser asked me for a copy of the APS.
We started working on this acquisition over a year ago. Since then, the market has changed. Interest rates have punched the development industry in the teeth. Lenders went from “sure, we’ll do 75% LTC” to “we might consider 50%, but only if the moon is full and you sign over your grandmother’s RRSP.”
Oh — and land values? Saying that they’ve dropped, would be an understatement of epic proportions.
But the appraiser still wants to know what we agreed to pay back in 2023 — as if that’s a helpful metric today.
What’s the APS got to do with it?
Let’s be clear:
Purchase price is a timestamp.
Valuation is a snapshot.
The $5.2 million we agreed to wasn’t pulled out of a hat. It was based on zoning potential, local comps, assembly value, and what we believed the site could be. At the time, it was aggressive — but defensible.
But in 2025? That number is a historical artifact.
Yet here we are, trying to refinance — or raise equity — in a different market, while the appraiser asks for a copy of a deal that hasn’t even closed yet. And I’m expected to just hand it over, like it’s relevant.
Valuation vs. Reality
Let’s play this out.
If we’d agreed to buy the property for $8M, would they appraise it higher?
If we’d gotten it for $3.5M, would they appraise it lower?
The answer is supposed to be no. Valuation should be based on current market data, highest and best use, and risk-adjusted return potential.
But we all know how this game works:
Anchoring bias is real. And once an appraiser sees your purchase price, they start working backward from it — consciously or not.
That’s dangerous in a volatile market like this.
What This Property Is, and What It Isn’t
This property isn’t just any patch of land. It’s:
Zoned for multi-res
Walking distance to some of the wealthiest postal codes in the country
A rare, large parcel that can scale up or pivot to rental or condo depending on market dynamics
But it’s also:
Not closed yet
Dragging a 2023 price tag through a 2025 financing reality
Facing tighter loan-to-values than any of us expected
The Developer’s Dilemma
So here's where this lands (no pun intended):
We’re being judged in the present… by a number from the past.
And the financing world doesn’t care about our story. They care about cover ratios.
So when I asked, “What difference does the purchase price make to the value of the land?”, I wasn’t being difficult.
I was pointing out the obvious:
The value of land is what someone would pay for it today — not what I negotiated during an entirely different cycle.
Final Thoughts (and a Message to Appraisers)
I get it. You’re doing your job. But if the job is to establish fair market value, then the purchase price should be at most a footnote — not a foundation.
Because if appraisals are based on last cycle’s optimism, today’s deals won’t pencil, tomorrow’s capital won’t flow, and the whole industry stalls out.
And right now? We can’t afford to stall.
Give me my proper valuation, so I can get my money.
God damn it.