How to appraise undevelopable residential land?

[Dragana]

Hi,

My husband and I live in a 2-house condo association. Adjacent to our driveway is a strip of common-use land that belongs to the association. We are interested in purchasing the neighbours' share of part of that land, about 600 sq ft, to fence into our backyard and use as a vegetable garden. That piece of land gets more light than the rest of our backyard, hence our interest in it.

The neighbours have no direct access to it, except from the street.

Now, the neighbours think this piece of land, which sits on a steep slope where no further development is permitted, should be valued at the same rate as the rest of our lot, about $30 per sq ft.

We have received verbal opinions from the city assessor and a couple of appraisers that undevelopable land in our area goes for $2-3 per square foot.

The appraisers have both told me that to do a formal appraisal would cost more than what we'd pay for the lot we are seeking to buy, as it's quite complicated to find that information, much more so than a regular residential appraisal.

The neighbours have said all they want is a real market value for that lot.

What should we do?

We are located in Massachusetts.

 

[PropertyEconomics]

The question is how much is the land worth to you? The owners want $18,000 for it and you want to pay $1,500 ... you are quite aways apart. I would guess that were you to "prove" your point would cost you $2,500 or more so you have a decision to make.
Pay the owners their price, negotiate to more middle ground, or simply not purchase it. Sorry but thats really what it boils down to.
Land as you describe can often be used for landscaping requirements, for set back requirements, etc which essentially often gives it the same value as the developable land .. thats not quite the situation you describe, but I just wanted to present an argument that can be made.

Good luck.

 

[Dragana]

Thanks for your reply. They want $10,000 while we're offering them $5,000. Again, this is only for their 45% share of this piece of land.

According to the city assessor, the land should not be worth more than $2,000 - so we really should be offering them no more than $1,000.

So we're really making a generous offer, because we do want this.

They are telling us they'd be happy to take whatever is its actual value, based on some real data.

Is it possible that it's so hard to determine this value based on the data?

 

[Dragana]

Thank you very much also for presenting a potential argument for the other side. While it indeed doesn't apply, I do need to see all the potential aspects that could inform how this land will finally be valued.

For what it's worth, the neighbours don't use this land right now, nor have any wish to use it. In fact they have stressed several times that they are not even interested in maintaining any of the landscaping as they plan to sell their home and move in the next two years.

 

[jay trotta]

you brought up the issue of the Town Assessor; my question would be, how does the Town apply the "Taxable Interest" to the land itself ?

Because it's a Condo (2-unit) they need to separate out the Land Value from the dwelling also; you both are being Taxed on a portion of the Land, I would assume. The assessor's breakout is done in that fashion for Defense reasons for the court (State Statute). There may be (2) land breakouts, one being for the dwelling itself and establishing a higher value and then one for the "excess or common" area. This could possibly provide you with a basis of value to work from.

If it is broken out that way, the excess land will be valued Less than the main parcel and you can use that as your negotiating tool. Would they prefer to pay more in Taxes (higher value to the excess) or less ? Just don't forget, you are buying a portion of Common Ground and will need to have your attorney record it correctly or you could loose it in the future. Sometimes you just need to spend a little more now, then alot more later trying to Defend your action. Condo.s are of common rights & interests (even two units OR 1/2 of the whole) and those rights need to be spelled out......thus, the attorney.

Good Luck

 

[Calvin the Airedale]

I haven't heard any consideration for the expense and bother of redrawing the HOA agreement which defines the common area for the condo deeds.

Your neighbor likely has a mortgage lien on his property. Any change in the HOA agreement, or dimunition in the value or share of that unit's common area ownership will need approval of his lender.

In better days, it may even have triggered balance due clause, but in any case, it creates a situation wherein the lender can direct any proceeds of the sale toward paying off the debt. It puts the neighbor in a position where he may have no immediate financial incentive to go ahead with this deal. The lender will likely want that expensive appraisal to demonstrate what is being lost in terms of his collateral value.

Your lender may want the same, depending on how your loan was written.

 

[jay trotta]

Calvin good points, but I don't think the Mortgage has rights to "Common Ground" only that % of ownership interest; therefore, the need for the attorney to draft the paperwork on the Common Interest Ownership Rights and % of ownership interest in the common ground area.

Although I think this can become a complicated issue, it depends on how much anyone wants it. Perhaps an easier solution would be to add in a "Rights of Use" addendum to the "Common Interest" for the purpose you intend to use it. Have it drafted for "Your" use until your "Ownership Interest" changes by Sale and then it reverts back to it's orginality. It may be easier to add an addendum, than to change the entire document and be less expensive in the long run.

Good Luck

 

[Ken B]

Why not seek an exclusive-use easement instead of an outright purchase?

 

[CANative]

Agree with Jay and Ken. Calvin too.

The bottom line is that there is no market value for the portion of land because there is no market for it. You and the neighbor are the only ones that can control the lot (e.g. it's respective portions) so the rights to it's use have value only to you and the neighbor.

You have to pay what the neighbor wants no matter what anyone else thinks or says.

 

[Mike Boyd]

Why not seek an exclusive-use easement instead of an outright purchase?

There ya go! That was going to be my response, also. Payment for the easement could be a share in the garden products. How many zuccinis and tomatoes can any single family consume?