Negative Value?

[Ray Miller]

Seems this is following the same line that my questions on the subjects did. Some yes and some no.

I think a property can have a negative value. Cost to cure is more then what someone will pay for it with in a reasonable time frame.

It just so happens I was by two properties with in the last four days that I did as REO Appraisals. One last year and one four years ago. My golly gee, they are still vacant.

The banks wanted a 90 days sale value. I gave them a 90 day sale value, D-8 the homes into the basements, set them on fire and fill in the foundation after the fire. Cost to cure around $5K lot value in small rural town $3K. Value of lot -$2000 as she sits.

Nice thing about it two other appraisers gave them both a 90 day selling values in the five figure range. I just can’t figure out why they didn’t sell. They both still have for sale signs on them. One now has a tree across the yard and part of the roof has caved in. The other a tree is lying on the house and weeks are as high as the second story. woohoo

Now some time someone will come along and buy them maybe, but not yesterday or today.

So what are they worth??? What is the market value today on these properties?

 

[Peter LeQuire]

"Once you get to zero, you have no market value, because no typically motivated buyer can pay you less than zero for the property.

You have a negatively performing asset that does not have market value."

Begging to differ, and considering only the mundane world of residential properties: there are sales of properties where there is no value ascribed to the properties being sold, the consideration being payment of unpaid taxes or liens. A hypothetical example might be: assume a property that has been taken for non-payment of property taxes.

Site value $5,000
Improvement value -0-

Value $5,000
Cost to remove improvements $5,000

Value -0-

Unpaid taxes -$300

Value -$300

 

[Stephen J. Vertin MAI]

I have not read the entire string so if this has been said then who ever posted it first "me too". I was taught there is no such thing as negative value. It can only be zero. I have never read this in an authoritative text or paper just a lesson passed on by another appraiser.

But I also had one last week. A nursing home tear down where back taxes were greater than the value. At that point most owners (in this case the bank) let the property go to the county. The information sometimes let owners make good decisions.

 

[David Mescon]

I have turned down offers of "free" property in the past. A former chief appraiser for a large bank used to make me such offers once in a while. Just for fun, I used to check and see what it would cost to remediate the toxicity and tell him that's how much they would have to pay me to take the property.

Without addressing the specific possibility of whether or not the OP's subject property may be worth anything, I am of the opinion that yes, a property may have a negative value; i.e., the "seller" would have to pay the typical "buyer" to take the underwater, (pun intended), property off their hands. I am, of course, assuming full disclosure on the part of the "seller," and the transference of any existing liability/adverse conditions to the new owner.

 

[CANative]

How can anyone post an opinion whether or not something has value without defining "value?"

If there is no market for something then there is no market value... but that does not mean that it has no value to someone.

 

[Elliott]

What's the value of the property rights for a site with a oil well that is
producing 10,000 barrels of oil per day?

What's the value of the property rights in BP's Macondo site, given
it has resulted in BP losing $100 Billion in capitalized value?

Before and after the blowout?

 

[ValuMan]

I just viewed a similar tear down candidate - three units built in 1934 - in total distress with most fixtures/appliances ripped out and trashed, and a sagging tile roof.

The owner's relatives living in the larger detached unit are living in (this week) 115 degrees with no electricity (the power company won't hook it up - as a condemned property) plus they have two dogs and heaven knows how many cats - the conditions unbelievable, though they do have water turned on, for the two taps and one toilet still half-assed working.

It is worth the value of the vacant lot less the cost of tear down. Tell that to the owner who claims he got a $275,000 appraisal value in 2006. ???????? I'd love to read that work of fiction. Arrgh.

 

[The Warrior Monk]

I disagree that a property can't have negative value. I am not aware of any value theory that states if market participants view the value of a property as being negative, the appraiser must ignore that information and assign a value of $0 or greater.

There are plenty of situations where the value to a buyer is negative. The simple example is deals with a contaminated property, where the costs of remediation exceed the value of a property as remediated. The property may transfer at a positive value, but chances are the remediation has been addressed, or there are contractual issues involved where liability isn't being transfered. However, those are after-the-fact actions that change the real property from what actually existed as of the date of value.

 

[Terrel L. Shields]

I think a property can have a negative value. Cost to cure is more then what someone will pay for it with in a reasonable time frame.

Ray. Have you ever auctioned a piece of property and the SELLER write the BUYER a check? I've never seen it.

What's the value of the property rights in BP's Macondo site, given
it has resulted in BP losing $100 Billion in capitalized value?

Before and after the blowout?

Since Macondo is part of a larger lease and there are many other locations within that lease and we KNOW now that perhaps no less than 5 million bbl of oil was consumed and more remains.....they could easily sell it... A half BILLION dollars worth of oil has been wasted, but what remains in that reservoir and the extent of that reservoir could be 1 billion barrels or more...some $80 billion worth easy. BP will have to pay what they pay for their own stupidity. They can still sell what is left.

 

[Couch Potato]

Can you provide some sales where the sellers paid the buyers as evidence?

Yes. Such sales are quite common these days in the timeshare market. :new_all_coholic: