Driveway Easment Value-HELP

[Ruben Ramon]

You need to be cautious about this appraisal, and if you plan on accepting it. You are to obtain your methods from reliable sources. You should read a book from the Appraisal Institute entitled, "Valuation in Litigation." There is an excellent section on easements and it deals a lot with partial interests and property splitting. Listen to this book any more than any of us!!

 

[BONNIE BALDWIN]

Registry Search

Fred....What a wonderful idea. I will definitely try your suggestion. It is in fact Middlesex south that I will be searching.

Thanks again!

Any other suggestions are of course always welcome.

 

[Fred]

You are to obtain your methods from reliable sources. You should read a book from the Appraisal Institute entitled, "Valuation in Litigation." There is an excellent section on easements and it deals a lot with partial interests and property splitting. Listen to this book any more than any of us!!

Have to disagree, Ruben. Eaton's book is good, but it's for condemnation. Buy-sell is a different intended use.

 

[CANative]

Wouldn't it be ok to say Eaton's book is geared toward condemnation but some of the methodolgy outline in the book can be applied to other uses?

I'm slogging my way through it and find it almost as interesting as Lord of the Rings.

 

[xm39hnu]

I don't think you can do a market value appraisal on an easement such as this--at least not with the standard MV definition.
1) The easement has not been exposed to the general market. They seldom if ever are.
2) The buyer is seriously motivated, not the ho-hum, maybe-I'll-buy-it person contemplated by the MV definition.
3) The seller has the buyer over a barrel.
Any comparable easement sales you uncover will suffer the same defects.

Hardly the arm's length transaction we're looking for in market value.

The Appraisal of Real Estate, 4th ed. defines "Use value" as the value a particular property has for a specific use. Looks like that's what you'll be doing. And that sorta takes the servient estate's loss out of the loop, if your scope states that you're measuring the value in use to the buyer.

 

[Fred]

Greg

Wouldn't it be ok to say Eaton's book is geared toward condemnation but some of the methodolgy outline in the book can be applied to other uses?

That’s partially true, but it’s really the other way around. The larger issue is economic damages of any type and some of that applies to the economic losses that result from eminent domain.

What is in question is not methods, but valuation theory. The methods are always capitalization, comparison and cost, but the question is what to apply them to. What elements of the property and in its interaction with it surroundings have value and to whom? People can and do pay for all sorts of things that the courts have said the government can take for free.

 

[BONNIE BALDWIN]

There has to be a way.......

Fred, checked the registry and while there are quite a few there they all appear to be for a nominal value and do not reflect use value.

Jim, I am sure that there is a WAY, some way, to value this easement even though it is of value to only one person.

Its contributory value to the buyer is quantifiable and is about $60,000.

Any other ideas anyone????

 

[xm39hnu]

Jim, I am sure that there is a WAY, some way, to value this easement even though it is of value to only one person.

Sure there is. Use value. Doesn't have to be market value, does it? Just describe what you're appraising, and define the value you're after. After all, your client isn't applying for a loan, is he? Talk to him. He's the seller. See whether he wants to know the diminution in his own value by accepting the servient estate, or whether he wants to know the dominant estates appreciation in value as a result of the easement. Either way, it'll be a use value appraisal. You need market value only if it'll be tendered on the general real estate market anyway, or if it's collateral for a mortgage.

 

[Fred]

Jim, I am sure that there is a WAY, some way, to value this easement even though it is of value to only one person.
Its contributory value to the buyer is quantifiable and is about $60,000.
Any other ideas anyone????

You have answered your own question. Greg and I discussed some of the principles involved in this type of decision-making. If the 60k were the right measure (and I don’t think it is), then you would have established a benchmark (an upper or lower limit or an adjustable basis) against which you can determine what something might be worth to someone.
Example: Using your 60k incremental value. If it cost 5k to adapt the strip and the buyer pays 45k, then the buyer realizes a gain of 10k on an investment of 50k - when the increment of 60k is realized. You would ask - given the risks and variability of the values, is it worth it - or would the easement buyer be better off holding.

You say three parking spaces are worth 20k each. But is the buyer’s objective to sell the three spaces and the easement to gain 60k? It sounds like the objective is to enhance the existing improved space by creating access. The buyer’s gain has to be measured by including that increment.

 

[Wayne Tomlinson]

The required approach in an eminent domain taking is determined the the value of the subject property and then the value after the taking.

I would think that this is the approach that I would take on this problem.

If the subject property is harmed in any way, then there will be a deminuation of value to the subject. That would be the amount paid to the owner of the property.
If, on the other hand there is no harm found, (and I can not imagine that would be the case) then you can go to the other approaches mentioned above.

In the problem, I would certainly consider the contributory value to the buyer. You are really working with a (in this case) a very rare commodity. It is the only one in existance that can make the neighbors property have any value. How much should he pay his neighbor for allowing him to collect $60K from his potential custormers?

Also, check around, what are buyers paying per square foot for commercial properties for parking lots, etc. in the community. This is not a residential appaisal, this guy is selling a parking lot. It just happens to be in a residential area. A reasonable amount of that parking lot selling price, less the costs involved in creating it should accrue to the potential seller.

Consider this. The potential buyer has this property which could likely be considered surplus land. It only has value to the tax assessor, and the owner has to maintain it. In order to sell it at any price, he needs to have this property.

Consider that your client really needs a consultant in his decision on what to charge instead of an appraisal. What will the market bear.

Just rambling in the early morning.

Wayne Tomlinson,
Illinois State Certified Gerneral Real Estate Appraiser

Find the units of comparison that