Property with Negative Value

[Terrel L. Shields]

The argument that property has no value because it has no market is a red herring and the U. S. Supreme Court caught on to that decades ago in the Tishman decision.

“The fact . . . that a valuation reached has in it baffling elements of speculation and surmise does not mean that it should not be employed. One guess may be better than another guess, since not all guesses have in them the same element of intelligence. The realization that a considerable amount of conjecture is involved should not paralyze the function of deciding, but it should induce humility. Dogmatism is clearly out of order in a modern valuation case.”

They recognized that lack of MARKET is not the same thing as lack of MARKET VALUE

 

[Webbed Feet]

Ahhhhhhh.... ; ) Well in that case I'll stick with the liberty the Supreme Court gave me to arrive at opinions via baffling guesses and stick with my earlier opinion of "No Value," as in meaning "Null Value." Of course, as on that effective date! You and the Supreme Court may then go on comparing apples to oranges as you both debate how and when a well informed buyer intends on exchanging tradable dollars for land with "incurable" deficiences carrying costs more than the value of the land vacant. And, that is before even considering holding costs. So for the "intended use" of the analysis (as I think it was), I feel the result should probably not be zero, the result should propably not be negative, it should probably be null based on the definition of value to be used.

For all I care, the Supreme Court can stay baffled, as I didn't tell them lack of a market = lack of market value. It means that market value cannot be determined for real estate with a H&BU of reverting back to government ownership via a form of strategic foreclosure/bankruptcy for non-payment of taxes and fines. A heresy for an appraiser to communicate, I know. But riddle me this, what do you think the "Market Value" for the land under those nuclear reactors in Japan is today?

 

[AnonApprsr]

************88

 

[Matthew Schwartz]

Hi, this is an extremely pertinent topic because it is so paradoxical. I had a situation like this in Watts, CA an extremely impoverished area and the only thing that allowed me to give value to this teardown was that even here an empty lot was worth $50K so the 10 grand to rip it down and clean it up still left value. My mentor gave me his insert on this and it was very interesting and instructive. Essentially, this becomes an economic issue and even a philosophical one. Unless the property has instability or toxic waste issues, you need to ascribe AN INTERIM USE to such a property - it is the only thing that makes sense. Somewhere, SOMEBODY will find value in such property at some INDEFINABLE period in the future. I would NOT appraise such a property AS-IS.
"They recognized that lack of MARKET is not the same thing as lack of MARKET VALUE" That's it right there.

 

[jimmyfrank]

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...

Gross income...$100 less expenses ($110) = minus $10 N O I. We still have a negative value regardless of the approache(s) used.











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[Terrel L. Shields]

But riddle me this, what do you think the "Market Value" for the land under those nuclear reactors in Japan is today?

I would bet that there is any number of investors, persons knowledgeable to boot, that would be willing to buy into a risky investment like this. They are called speculators, short sellers, hedge fund traders, etc. Risk reward is the issue... I'd put a $1000 buck down if in the end I could earn the rents under those plants even though I might lose my investment.
Under your insinuation, no one in their right mind would ever drill an oil well knowing that wildcat wells are successful only 13% of the time. Are they 87% stupid? Or understand risk and reward. I reiterate. I will give a buck for the deed under that property the OP alludes to and bet I stand a very good chance of making money. Nothing says that someone buying a property, a business, a farm expects to do so risk free and without the possibility of losing their investment.

 

[jimmyfrank]

I would bet that there is any number of investors, persons knowledgeable to boot, that would be willing to buy into a risky investment like this. They are called speculators, short sellers, hedge fund traders, etc. Risk reward is the issue... I'd put a $1000 buck down if in the end I could earn the rents under those plants even though I might lose my investment.
Under your insinuation, no one in their right mind would ever drill an oil well knowing that wildcat wells are successful only 13% of the time. Are they 87% stupid? Or understand risk and reward. I reiterate. I will give a buck for the deed under that property the OP alludes to and bet I stand a very good chance of making money. Nothing says that someone buying a property, a business, a farm expects to do so risk free and without the possibility of losing their investment.

"I will give a buck for the deed.............." But can you support that in the market? Expenses greater than income...Terrel, what does that tell you?

 

[Ken B]

"I will give a buck for the deed.............." But can you support that in the market? Expenses greater than income...Terrel, what does that tell you?

Speculative reversion value. If not the next year, perhaps the next decade or century.

 

[sconway]

I really wish we could push a like button on some of these comments!
I have been laughing out loud at some! I wish I could talk to the tax man about negative values, J. Hey Moderator, give us a ‘like’ button.
Personally, I have yet to see any residential land here in Texas with a negative value. I see land with floodway, fault lines, and dozer baits get sold all the time. Maybe for pennies on the dollar, but not negative values. Also, the market, at least my market, tends to buy this stuff emotionally not logically. Example would be a piece of land littered with junk, with significant flood plain. I have seen the market pay money for it, even though they have to stare at the ‘junk’ and not build due to flood plain, just to have the land for recreation purposes.
I think the post at the beginning was correct. Find me a couple sold properties with negative sales prices....

 

[VegasWayne]

There are places in Nevada that have craters from underground nuclear tests. They aren't for sale but how much would a lot with crater be worth?