How would you describe the Rights Appraised?

[Terrel L. Shields]

I have a parcel to be appraised that is encumbered with a permanent conservation easement. How would you summarize the rights being appraised? This is my best stab at it.

The Fee Simple estate, encumbered with an easement restricting development rights, is appraised. See easement discussion.

Anyone with better verbiage.

I talked to the original appraiser of the parcel when the easement was taken and he did lead me to two other properties where I discovered all 3 had before and after appraisals which used 40% as the deduction. And there are no sales of any, not to mention the individual properties all relate to a single creek and water supply watershed for the city of Tulsa. PITA.... anyone with better ideas how to make an adjustment raise your hand.

 

[NHvalues]

Our office has always referred to that as a 'burdened fee estate'. Note the link below.

Burdened fee estate references

Not sure that it's much different in substance than yours but we saw it in a lot of the legal literature.

 

[Austin]

I don't understand a deduction of 40%. The highest and best use is a parcel of land with no development rights so the comparable sales are land parcels with no development rights. A good idea would be land that could have similar uses from other areas. It may be 40% less or it could be 40% more. Deductions and adjustments give me a headache. Highest and best use is what it is. Why complicate things with deductions and adjustments? When I appraise farm land I don't make adjustments because it can't be developed so why make adjustments to development land that can only be farmed?
I see it as fee simple interest under the highest and best use resulting from the easement restriction. It is simply a legal restriction to uses. It is not burdened any more that zoning burdens a parcel of land.

 

[H.B. Userman]

In the last appraisal I did for eased land, it was a WRP easement. Some easements state which rights are taken away, and the WRP easement only states which rights remain. Which included the Title, quiet enjoyment, control of access, recreation and subsurface resources. That specifically is what I stated was the "rights appraised". The comparisons were only made to other land with similar restrictions.

As a response to Austin, lands that fit well into the intentions of the conservation practices are often marketable to land trusts, government agencies, local municipalities or counties, etc. Once the land is permanantly eased, the possibility to market the "conservancy" rights goes away, or at least leaves very little left. The presence of the easment itself eliminates the potential to further capitalize on those "conservancy" benefits.

Changes in value to the eased land ranges significantly with the level of restrictions. i.e. building rights, subsurface rights, private enjoyment, management & easement compliance responsibilities, billboards, forest management restrictions, and the list goes on for long time. I wish I had an answer for you about the % adjustment/discount, but it really matters on the impact made to the bundle of rights. I suggest making a bundle of rights table, assigning numerical amounts to each category, two columns (without easement & with easement). The % of rights left over can be used to provide support for your adjustment. Even though the Bundle of Rights analysis is subject to a high amount of subjectivity, it can be a useful tool for providing support nonetheless.

 

[Jerry Dell]

Terrell


During the late 1980's and 1990's Fish and Wildlife Service placed wetland conservation easments on land that Farmers Home Adm had in inventory. This easment was very restrictive and the only thing the owner could do was hunt it. You may have some of these type properties in Arkansas, thus you may want to look for sales.

During 2009 I did an appraisal on a property that had a recreation easement and my derivation of the adjustment (very rural property was much less than 40% and more like 10%.

Seems like many appraisers over appraise so the owner can take a large tax writeoff.

HBU before easment and after easement is most important.

Jerry Dell

 

[The Warrior Monk]

Funny you mention this...the project I wrapped up today involved determining the value of the development rights.

In short, I would describe the rights as "Fee with No Development Rights," then describe in further detail as necessary. Locally we call it reserve area.

The latest direct market evidence I have indicates that the reserve area is worth approximately 20% of the value of the property in fee simple. This is specifically for farmland, which can continue to be farmed. In some cases they can be improved with certain types of agricultural buildings, but no living quarters of any type. I should note that the highest and best use of these properties are for subdivision, and is very expensive relative to the rest of the country. In the case mentioned for which there is direct market evidence, the price per acre (fee simple, 80,000 sq.ft. min lot size) is approximately $500,000.

 

[Terrel L. Shields]

Land in E. Arkansas where ducks are hunted would likely have little if any problem so long as hunting rights were preserved. Duckland is the most expensive land in the Delta country as best I can tell.

This is different. The Ozarks are known as flint rock country... The way to grow grass on flint rock is to cover it in chicken poop. The only economic agriculture in this rocky ground is either to sprout grass for cows or sprout chicken houses. Either way you have chicken poop.

The issue I am concerned about isn't so much the value. Really more about the rights appraised ..how best to describe them.

IMHO your data has to be fairly local. Just as recreational land in Colorado or duck land in E. Arkansas might actually be worth just as much, or taking the water rights would impact is even more....maybe 80% of the value in irrigated country...this relates to the uses it is put to and the uses left.

The city of Tulsa wished to protect its watershed. It wants no chicken houses. In the case I was working on, the tract 438 acres more or less, you cannot even build a single family dwelling, a barn, a corral...nothing. Along Spavinaw Creek, a riparian area would not even allow grazing, so some significant portion of the property is rendered unusable for anything but hunting morels and in the fall hunting deer.
About half the rest is woodlot which has little value for the one allowed use...grazing. That means it can run some limited amount of cattle and you can apply some limited and regulated amount of fertilzer to the grass.

This property was worth some X dollars...for the record it was listed 2 years ago after the easement was first taken, and the price was dropped by over $600 per acre from the value is appraised at "before", and just at the price valued "after" and still did not get a taker. An adjacent parcel sold which had a dwelling on it. Other nearby properties sold with improvements and no easements.

In other words, the property is so negatively impacted I am beginning to suspect the conservation easement was too "cheap". Of course, most of you probably know the IRS will allow up to 50% as a write off, but appraisers who did that certainly have been pinched by the car loads in Colorado and elsewhere....and the IRS went back on the landowners over it.
But since this is a direct payment, I assume the IRS wasn't involved. But it strikes me that perhaps 40% wasn't large enough "haircut"... One of the other parcels was a woodlot and drew the largest "haircut".??? I don't know why since it was the least impacted. A steep hillside isn't good for much but hunting or huckleberries anyway. The third property has pasture and a homestead on it in the first place, therefore someone buying it might at least have a place to stay or could rebuild (they tend to cut that one acre out of the easement according to the USDA guy). Had the guy at least carved a few acres out in a desirable area on the 400+ acres for a house, then the property might not be so affected. I am guessing.

Thanks Don for sending me some E. Arkansas sales, but I don't think that will help ... the HBUs were so different...