Proximity-Value Surveys: Valuing Cell Sites

Calling All Appraisers!
Valuing Cell Sites
Sean Heath

A homeowner, concerned about a new wireless site going in next to her condominium, stood up to speak at a recent City Council meeting.

"I realize that it takes a lot of antennas to make a wireless world work but does it have to go through my bedroom?"

Our wireless world has grown exponentially since its infancy in the early 1980s. Back then, cell phones were a bulky, briefcase-sized novelty lugged around by a relatively small number of subscribers. According to the latest estimates, there are approximately 120 million subscribers in this country alone-or in other words, almost half of our country's population.

Supported by the Telecommunications Act of 1996, which deregulated the telecommunications industry, more wireless carriers are expanding their coverage networks-all in response to rising consumer demand. Subscribers want their cell phones to work everywhere and want better service-not just along the freeway but in front of their house, at the store, and at the neighborhood park.

However, community planning groups have become quite vocal over the past two years against the construction of telecommunications antennas in or near their subdivisions. Are homeowner complaints translating into lower home sales prices? If so, can this be measured? This is a role that can be filled by a knowledgeable appraiser, using the same technique used to measure other forms of external obsolescence.

External obsolescence is defined as a defect caused by negative influences outside a site and generally incurable on the part of the owner, tenant or landlord. These influences could be one of the following four types:

Type/Examples

1) Social/A changing neighborhood
2) Governmental/A change in zoning
3) Physical/Proximity to an airport, highway, landfill, or mining operation.
4) Economic/ A change in interest rates, a shift in an area's employment base or a change in the local economy.

Based on the above categories, proximity to a cell site would be a physical form of external obsolescence. One accepted method used to measure a loss in value due to a physical externality is through sales comparison. For example, if traffic noise were to be measured, then a sale of a home next to a freeway would be compared with an identical home that sold at the same time but in a quieter portion of the tract. Therefore, to measure the loss in value resulting from proximity to a cell site, a home sale close to the antennas would need to be compared with one that is further away.

In theory, according to the concept of substitution, the amount a typical buyer would pay for a home would not be any more than the price of a comparable property. This seems reasonable since it emulates the process most consumers go through, at least in their minds, before purchasing a home. For example, if buyers perceive that a home next to a cell site is less appealing than a similar home further away, they might negotiate a lower purchase price.

This has been the basis for a number of complaints made by homeowners against new cell sites in their backyards. However, most of the objections that we have heard were unsupported or if support was presented, it was not germane to a discussion of cellular-telecommunications sites.

A frequently-cited example relates to a Sprint application to build a cell tower in New Jersey in August of 2000 and is often referred to as the "Vernon Township" case. Objecting to Sprint's application on the basis of property values, residents living next to the proposed site hired an appraiser to study the issue. This appraiser used a paired-sales analysis method to determine the effect on value from high-tension power lines. After finding three home sales which were next to high-tension lines, the appraiser then found that these homes sold for less than similar homes further away. The appraiser then jumped to the conclusion that, since power lines caused a declination in value, it would be reasonable to assume that cell towers would have the same effect.