Landlocked Subject

[Joker]

This is one of many complex assignments I am currently working on (all for the same borrower, btw). A 40 acre parcel of landlocked woodland in God's country. No road frontage, no easement. Parcel can only be transferred to adjacent property owners. An easement would solve the problem, but none exists and I believe the likelihood is slim without exceptional costs. Similar parcels with frontage are selling for $800-$1200 per acre. It may cost half of that or more to obtain and construct (cut path) an easement. Local bank (my largest client) wants it appraised. I explained the legal problem. They suggested appraising it as if it had access.

Is it appropriate to make a SA that it has access and appraise it based on that HC? Isn't the actual market value of that property the 800-1200/acre minus the cost of obtaining the easement? As long as the client has asked to make this SA and I disclose that, is the report misleading? Will I need Otis to write an addendum for me?

 

[wyecoyote]

If you are making it based upon a HC of having an easment to the property. Then you are basing it upon the HC. But explain the HC clearly throughout the report. Or make the report Subject to the gaining of an easment to the property.

 

[Caterina Platt]

Doug,

The highest value for the subject 'As Is' would be obtained from one of the adjacent parcel holders. (have a good grasp for the obvious, don't I? ) Without legal access, your parcel is not eligible for title insurance. I can't tell you what the value effect on that is, but it's typically devastating for sales possibilities. It may never sell unless to one of the adjacent owners.

I did a 5 acre parcel without legal access several years ago. Scared me to death as I felt I was throwing lawn darts in the dark. I polled the folks here on the forum and a very wise member (I hope I'm giving credit to the proper person here, I believe Larry Lyke??) said he'd seen it affect the value as much as 50-75%. There was an offer on the subject parcel from the adjoining neighbor, but my seller wanted an unbiased opinion so I asked not to be advised of the price and he verbally told me the terms as to who was paying what costs, cash deal, etc.

I went with Larry's advice and lopped off 50% of the market value for properties with access with disclosures that this was based on polling other experienced colleagues and had not been tested by our market. The market value with access of my subject would have been $150,000, thus a $75,000 estimate of value. I later sat down with my client to go over this and was very relieved to find out the offer price was $70,000. Holy cow! Larry was right!! Now, one sale does not make a market, but then try and find other sales without legal access. I polled every real estate broker and title person I could find. There was no other data to be had.

This 50% figure also appears to be supported by your estimate of cost to cure. Not entirely scientific, but hopefully this is a start. You have one sale in Central New Mexico that backs up the theory.

 

[DB]

Not trying to be a smart aleck .... but have you checked the deed and the zoning laws on this property? I know that some states, including TN, have laws against land locked properties. Even though an easement may not be recorded, it is law that is allowed. Secondary easements (i.e. through a subject property, where other means of access are available) can either be granted by deed, or granted selectively by the land owner. If it is deeded, it transfers to the new owner. If it is selective, John can allow Bob to cross his property for as long as he owns it, but if Bob sells his land to Joe, John can refuse the easement.

Just something to check into..... may not apply to you assignment.

 

[Tim Hicks (Texas)]

The lender will probably not lend on the property without legal access. Call the client and inform them. My guess is they will require a "subject to" appraisal that furnished an easement access or deeded access. It would be easier to value at "subject to" legal access. Right now, it would seeem it is not worth much more than that new deck of yours.

 

[Walter Kirk]

How is the property accessed? Is there a right of way? Was the lot created by subdivision of an adjacent parcel? Depending on state law the property may be entitled to an easement by prescription.

 

[Stone]

I hope this isn't too basic, these are just some thoughts.

First - you can appraise a property as though it has access. However, make sure you disclose this in more than one location. Repetition of this kind of issue is a key to keeping the report from being misleading.

Second - and this was touched on above - you will have to find out when this parcel was created as an individual entity. If your state has laws that insist on access at transfer, and this parcel was created after those laws went into effect, than the likelihood is that the tract has access by "way of necessity" (Wisconsin term) or something along that line. And, depending on the state, this could mean access for full use of the property (like WI) or access limited to walkin. Or something in-between. This access would be across the land it was split off of.

Third - if this tract really is land-locked, then you have to figure out what to compare it to. Around here, there are sometimes sales of land-locked tracts, though they are few and you have to really look to find them. If you do find one, be sure to speak to at least one of the participants in the sale to verify that there is no access.

If you cannot find any/ or enough tracts that are landlocked, I would try to find some unbuildable tracts. Either due to floodplain or soils or something else. If you find some lowland sales, remember that even if they are sold to a neighbor, they will not be buildable, though your subject could be if sold to an adjacent landowner. On the other hand, your subject will have no access and the sales will. You will need to decide if/how much these factors offset.

Remember, if you treat this as landlocked, you will have to throw out any arbitrary time/distance guidelines that the bank usually insists on. They do not apply here.

I hope that helps, and if I just told you a bunch of stuff that you already know, sorry.

 

[Judy Whitehead (Florida)]

Florida has a law that says everyone has the right to legal ingress or egress. But that doesn't mean that the adjoining property holder has to "give" it to you. In fact, if the adjoining property holder (s) say no, then you have a hire an attorney, go to court, and the judge will decide who has to grant access, and then you must pay them (if they want pay :rofl and you have to clear the roadway yourself.

I know someone who just went through this procedure as listed above. I would bet most states have a similar law. But - the cost to cure can vary greatly, as you can see above and certainly could be as much as 50% of the value of parcels with legal/cleared access.

I had to do an appraisal on a 20 acre parcel located right in the middle of property owned by a mining/cement company (limerock) and the attorney ordering it said that he "thought" he found an old recorded legal access. The guy from the mining company in charge of taking me to the site was real snotty, as the owners of the property had been trying to get the mine to buy it (of course). Their contention was they had thousands of acres left to mine and didn't really need that measly little 20 acres anyway. I then reminded him that perhaps they didn't want the owner of the parcel to cross their property legally (it was completely surrounded by their property) and they might want to think long and hard about buying it. In other words, a court could make the mine grant access, even if the owners had to pay for that access. I never looked it up to see what happened - think I'll look at it today!

 

[Bobby Bucks]

Doug on a related note if you personally know or know of a timber cruiser in your area, they can be a virtual gold mine of information on these type of properties. They might know of sales highly similar to the subject and they may have even "cruised" the subject in the not too distant past. They'll also know more than the average bear about easements.

 

[Randy Beigh]

Doug B brought up my question. Is it legal in your state to have landlocked property? If it isn't, then I would do it as HC. If, you have sales that are landlocked and that is legal, then you have options.

In Washington, it is not legal to have landlocked property, so you are by law guaranteed access. Now, sometimes, you have to sue for that access, but you will get it. I have never heard of a case of someone being denied access to their property. Probably has happened though.