"Forever Wild" Conservation Easement

[Nancy in Friday Harbor]

Hi All,

Am looking for any sales or instances that you know of to prove a market value discount for land encumbered with a "Forever Wild" conservation easement.

Scenario: Owner of 180+/- acres with approximately 2/3 mile of spectacular rocky, windswept shoreline, open fields and uplands woods in an area with a land use designation allowing a maximum density of one SFR per 5 acres. He wants to retain a total of 5 development rights (5 SFR with allowable outbuildings) and donate a conservation easement on the rest. The easement would extinguish all development rights in perpetuity, allowing only the creation and maintenance of walking trails through the woods and along the shoreline (trails actually protect the fragile shoreline environment by keeping any disturbance to a limited area rather than tramping willy-nilly over everything). Can't cut trees, can't harvest firewood or mow hay, can't graze livestock.

The land doesn't go away and certainly, there is the aspect of increased privacy for the existing/retained homes. The current market value of this property is over 8 figures--and that's to the left of the decimal point.

I only have 2 examples in San Juan County where the market showed a reduction in value of approximately 80%. Since this will probably get scrutanized by our friends, the IRS, I would love to be able to cite other sales/examples, even if they are in other parts of the world. The more "proof", the better.

Any of you doing CE appraisals? Any and all help is appreciated!!!

Cheers,

Nancy

 

[Tom Hildebrandt]

Nancy

If you have two good data sets, you have one more than I do.

I have an actual sale of a farm bought to have conservation rights placed on it (not a market exposed sale but one based on fee appraiser value) and a resale to a party after conservation easement with similar residential limitations imposed, agricultural uses and some timber cutting was permited.

Several appraiser have used this data, and have determined various "conclusions" regarding the quantification of the appropriate adjustment, the problem being on how they viewed the "real market value" in the before and how they allocated values within the property as a whole.

Ah, but nothing is simple in appraising, it... , well the correct answer sort of is it just "depends..."

Let me know if you want the data set, and I will dig it out of the archives, it is easily 4-5 years old. I have pretty much given up on doing these because nobody wants to pay the fee required and further, they do not want realistic answers. Sound familiar?

Regards

Tom Hildebrandt GAA

 

[Nancy in Friday Harbor]

Thanks, Tom.

If you wouldn't mind digging that out, I could use it as an additional reference.....
My two sales are a 5 acre piece which had a forever wild easement on it, but did allow grazing. Was purchased by the adjacent property owner for $10,000 -- appraised market value prior to gift of fee simple to the Preservation Trust was $50,000.
The second was a sale of 3 5 acre parcels to the Land Bank and the Preservation Trust at about 25% of appraised market value with the seller taking the rest in a charitable gift deduction.
Neither of these sales are "squeakly clean" because they rely upon an appraised value for "before"....appraisals that I didn't do. And both of them are about 5 years old, too.

Anybody else? I show you mine, if...........

Desperate in Friday Harbor
www.islandcam.com

 

[jtrotta]

Haven't had any input on these, our area the Forever Wild parcels are takem by the municipalities as land conservation. The last few big parcels were donated (1 was 250 acres) and appraisals were done so the doner could use against income for the next ten years. Sorry that's all I have to offer 8)

 

[Rich(VT)]

Nancy,

We have conservation easements here in Vermont. The Vermont Land Trust purchases the development rights from the owner. The owner agrees to restrictions including timber harvest, land management, no development, and whatever they (the Land Trust) can dream up. I have seen restrictions concerning repairing the dwelling (180 years old) indicating what repairs can and cannot be done-interior and exterior.

I have seen some of these properties re-sold after the development rights were removed. One of the things I have found is that transferring the development rights in many cases seems to make almost no impact on the property's value. The underlying thought for people who purchase these encumbered properties is that they want a large parcel and would have no intention of subdividing whether the development rights were intact or not.

I have also seen some homes on smaller lots (3 to 5 acres) where the development rights were transferred. On these it makes no difference because the zoning is for 3 to 5 acre lots, so there is no development anyways.

I have a list of sales in Microsoft Word I could email to you. It just lists seller, buyer, when the rights were transferred and the price the Land Trust paid for the development rights. The list was supplied by the Land Trust to me.

Rich in VT

 

[Jacob S.]

This is very common here in SE PA. Many land owners who want to preserve their farm or other property ease development right or partial development rights, or donate conservation easements to various land trusts Typically what happens is that when this concept is new to an area the value may decline of the eased property, though over time as it becomes more common values stabilize. On re-sale these properties may sell for less than non-encumbered propertied, as it removes the developer market. But many rich individuals like to buy these properties for the privacy they afford, and built very large estate type properties. Unfortunately I havn't collected any recent data on the subject, but I would reccoment contacting land trusts and conservation groups in your area that have recieved such donations, as they are typically a good source of info.

Jacob S.

 

[jt]

Nancy

Why are you trying tp PROVE a discount, why not just read the market. If you are having a problem trying to prove a discount, maybe there is none. My research of similar property indicates that some prospect purchasers may actually pay more for the type of property you describe. How did you derive at the value of the 180/acres? It appears each home site would be worth $300,000+.

jt

 

[Nancy in Friday Harbor]

JT,

You confuse me a bit......

What I was asking for was market evidence to prove how the market reacts to severely restrictive encumbrances. I am perfectly willing to accept market evidence of any kind for this type of encumbrance. Just asked if you had actual evidence or proof....not just PFA. If you have examples of sales of 30+/- acre parcels with spectacular waterfront that is restricted in perpetuity to only one single family residence with no use of the remaining land other than walking trails for the enjoyment of nature, please share. That's what I'm looking for. Market evidence, ie proof.

And I'm not sure where that $300,000 per lot number you quoted came from. I never quoted an actual value for the property other than a number of digits. So what's $300,000?

 

[Anonymous]

can you research deed restrictions? If a seller puts in a covenant barring future development, and the land sells along with it, that would be your 'evidence' of market value of a restrictive easement. I've found only 2 of those in about 200 land sales in this corner of Pa. It is tough to hunt down those. The other course of action was rear land sales only, with no hope of development due to no septic, electric, and no access (granted acces could be gained by court action).
Good Luck.