Accounting Standards Now Allow Upward Land Revaluation

[Surf Cat]

First of all, this is not a condo community. It is a community of average to high end suburban homes on or adjacent to a large recreational lake. In the past, the comparable properties don't seem to show much difference between a home adjacent to a public park verses a private park the homeowner has an ownership interest in. An appraiser has never come by the HOA office and asked for a tour of the private park property to assess the value of the homeowners interest. My question is, if we revalue the park will they do so?

My bad..... Mr Hatch beat me to it. Your PUD's perceived value of the private park is already built into the sales from that development.

If I have to go on an HOA associate guided tour of the private park, it's going to be an extra hundred bucks...

 

[Terrel L. Shields]

My question is, if we revalue the park will they do so?

No.

I estimate the land is worth at least $30 million.

Doesn't matter to the value of the units themselves.

 

[jay trotta]

We have had developers come by asking to join the HOA so that their new homesites would have access to the lake. Obviously, it has tremendous value. I estimate the land is worth at least $30 million.

Don't know where you got the $30M value from, how many units in the HOA?

IMO, a good Real Estate Attorney would or should be consulted for legal issues in regard to what is, legally permissible and, then you might be able to determine a value, if possible.

 

[Patches_Pal]

The sales history of the homes in the project will demonstrate any difference in values which might be attributable to the HOA and its common elements. The most comparable sales will be those within that project area. The units which are waterfront or which have a view amenity can be compared to the units which lack as a means of isolating the value of the view and location within the project.

If the thinking in play here is that increasing the stated value or the market value of the non-usable land in the HOAs common elements will have some effect on the value of the individual units, the answer to that question is "probably not". Except perhaps to increase the HOAs operating costs (and the resulting effect on the HOA dues) via increasing the property tax assessment.

If the project approvals for the density and configuration of the developed portions were originally made contingent upon setting aside these areas for habitat or open space conservation then those legal limitations might prevent parcel usage (and the values thereof) based on any other considerations.

What's land worth if nobody other than the conservationists can do anything with it?

The HOA pays no property tax on the property. So, changing the book value would not affect any taxes.

My thinking is that since no appraiser has ever come by to ask to tour the parks they must just treat it as if it were a public park or school near their subject property. They do not look at it like a real estate investment. The property values in the area are rising so fast the annual gain in value on the 77 acres likely exceeds the entire annual HOA dues assessed to all of the homeowners. Comparable properties outside the HOA have similar values to those inside the HOA. This leads me to conclude there is no premium assigned to the homeowners investment in the private park system. How would I determine if this is true?

 

[TerryRohrer]

Who pays property taxes on the land?

 

[George Hatch]

Appraisers do not have the discretion to "create" value for a property in their appraisals. Our job is to observe/report what the market participants are doing; we have zero discretion WRT that requirement. If the buyers and sellers are coming to terms at the higher pricing for these properties then we are required to report it that way. If the market participants are coming to terms at the same or lower pricing than outside properties then we are required to report it that way.

Our personal opinions about the wisdom or foolishness of the actions of the buyers and sellers are irrelevant. It doesn't matter what we think they should do, it only matters that we see what we see and that we say what we see. Even if your dog bit me while I was inspecting the property and even if we got into some heated argument over my parking none of that is supposed to be of effect on my professional opinions and conclusions.

TLDR, even if an appraiser thought these properties were undervalued it wouldn't make any difference in the appraisal when compared to faithfully observing the past and current pricing trends in this project. Observe and report, not editorialize or advise. The market values are established by the market participants and based on what they're actually doing. Not on some appraiser's off-script opinions.

 

[Surf Cat]

My HOA has 70 acres of valuable waterfront property that has been recorded as worth $100 for the last 50 years. I now wish to revalue it to its true value of many million dollars.

Okay..... is it yours to value?

Your property deed typically includes a description of the land, including its boundaries, dimensions, and any easements or restrictions. In a PUD (a planned unit development, which I'm assuming you're in since you stated it was not a condo) homeowners own both their individual property (home) and the lot it sits on, as well as a shared interest in the common areas.

The HOA governs the community and maintains common areas, including parks. In a PUD, ownership structure of the park is usually defined in the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and the bylaws of the HOA.

In most cases, the HOA owns the park, along with other common areas, such as streets, sidewalks, and amenities like pools and fitness centers. The HOA is responsible for maintaining and repairing these common areas, and homeowners in the development contribute to these costs through their monthly or quarterly HOA fees.

As a homeowner in a PUD with a park, you do not own a specific portion of the park, but you do have the right to use the park and other common areas, subject to any rules and restrictions outlined in the CC&Rs and HOA bylaws.

When we as appraisers come into your development to appraise your property, we look at your property, and choose the sales within the development that are similar to your specific dwelling ( bedroom and bath count, gross living area, condition, lot size, location within the development). The shared interest and use of the common areas transfers to the new buyer if you're selling.

If the market decides that properties within your development are worth more due to having access to this private park then similar, competing, developments within the market area , then it will be reflected in the selling prices of competing units to yours.

 

[Red Flint]

How would I determine if this is true?

Hire an appraiser.

Common land restrictions usually defined by master deed or other recorded documents. Development rights value typically minimal. Overall common land value then discounted (severely) by number of interests. Remember, market value assumes sale at end of estimated marketing period, so sale to pool of random buyers is inherent in value definition for appraisal work.

 

[Patches_Pal]

Who pays property taxes on the land?

It is owned by a non profit corporation and is not taxable.

 

[Patches_Pal]

We have had developers come by asking to join the HOA so that their new homesites would have access to the lake. Obviously, it has tremendous value. I estimate the land is worth at least $30 million.

Don't know where you got the $30M value from, how many units in the HOA?

IMO, a good Real Estate Attorney would or should be consulted for legal issues in regard to what is, legally permissible and, then you might be able to determine a value, if possible.

There are 1500 homes in the HOA. Vacant farm land in this county sells for $250K per acre. So, 77 acres would be about $20M. Some of this is prime, low-bank waterfront. You could carve out 20-30 waterfront lots. Those lots sell for about $800K for a 12,000 SF lot. I think the $30M number is conservative.