Property with Negative Value

[prasercat]

While it appears very unlikely now in our weak economy where new construction is limited, even in such "negative" or zero value situations, quite often builders and buyers of new homes see inexpensive tear-downs with basements as opportunities to save on future taxes, which can more than offset the cost of the tear down and clean-up (sometimes, bricks or other items can be reused).

Typically, they only have to save the basement (they can add to it) and part of an exterior wall, and their brand new spanking house will be given a tax age of the original home, thereby, reducing the tax valuation and taxes - I guess that depends on the tax laws in your state. The point is, such MV=O sales may be occur for that reason.

 

[incognito]

Dont forget about an incoma approach. Certainly the property could be rented to someone for something? Hay storage? Motor home or boat storage? $100/month for rent to a down and out family. I have seen few properties that couldn't be rented for SOME purpose. With income, you usually have value...

 

[Michigan CG]

The property that I valued at a negative value was in the "bad" part of town. The home was down to the studs with no interior improvements, no flooring, no ceilings.

The surrounding area is homes with sales of $15-$25,000. In my Highest and Best Use analysis I determined that in order to make the property livable it would cost more than the home would be worth after that capital investment. In other words after everything is done, it would not sell for the cost to cure.

I determined a land value of $500. I subtracted the cost to raze the property and came in at negative $$$$.

Many years ago in Iowa my mentor valued an apartment building at negative $2MM.

 

[Riick]

The property that I valued at a negative value was in the "bad" part of town. The home was down to the studs with no interior improvements, no flooring, no ceilings.

The surrounding area is homes with sales of $15-$25,000. In my Highest and Best Use analysis I determined that in order to make the property livable it would cost more than the home would be worth after that capital investment. In other words after everything is done, it would not sell for the cost to cure.

I determined a land value of $500. I subtracted the cost to raze the property and came in at negative $$$$.

Many years ago in Iowa my mentor valued an apartment building at negative $2MM.

Now just wait a minute, that sounds like you and I appraised the exact same property, in the same neighborhood, with the same land values, but in different States.
My value was (-) $15,000 if I remember correctly.
The owner was unhappy, but, the Bank was happy to walk away from a losing proposition.

.

 

[prasercat]

I determined a land value of $500. I subtracted the cost to raze the property and came in at negative $$$$.

Many years ago in Iowa my mentor valued an apartment building at negative $2MM.

So, I can imagine the owner walking down to the assessor with the appraisal stating a negative multi-million dollar sum, and asking for an appeal. "I am extremely upset, Mr. Assessor, and I'm submitting an appeal. According to this appraisal, it is not I whom should be paying you taxes, but rather YOU paying me! You know where to send the checks!"

 

[Couch Potato]

So, I can imagine the owner walking down to the assessor with the appraisal stating a negative multi-million dollar sum, and asking for an appeal. "I am extremely upset, Mr. Assessor, and I'm submitting an appeal. According to this appraisal, it is not I whom should be paying you taxes, but rather YOU paying me! You know where to send the checks!"

Sort of. Typically they just don't pay the taxes, and make the government take it. :new_smile-l:

I have a client refusing to accept a report because it has a negative value.

House is in terrible condition, I estimated over $30,000 of repairs and would be worth about $20,000 repaired.

I found one vacant lot sale for $3,000 last year and researched the cost to demolish the subject - about $10,000 - $12,000

My math returns $-10,000 either way. What should I do?

The value is only negative if they are required to demolish the residence and cannot avoid that cost even by deeding the property to the government. Typically that situation only arrises with environmental contamination issues. The land around the house can be used even if the house cannot.

 

[Terrel L. Shields]

I'll give $1 for the deed sight unseen provided there are no back tax liens.

 

[HF Mudd]

Is there a mortgage on the property? If so, the borrower could potentially "sell" the property to the lender by not paying the mortgage, resulting in a $0 value. However, you could argue that such a course of action has other financial consequences (such as a lower credit rating, etc. which may not be easy to quantify) resulting in a net value below $0.

I guess that I can see that both sides of the discussion have merit.

 

[prasercat]

There was a discussion on this topic in 2009 and Webbed on post #4 was particularly impressive in his interpretation. I think it belongs in an appraisal textbook.

http://appraisersforum.com/showthread.php?t=156863

 

[Michigan CG]

So, I can imagine the owner walking down to the assessor with the appraisal stating a negative multi-million dollar sum, and asking for an appeal. "I am extremely upset, Mr. Assessor, and I'm submitting an appeal. According to this appraisal, it is not I whom should be paying you taxes, but rather YOU paying me! You know where to send the checks!"

It was a government owned property. Go figure.