Value of electrical service and utility access?

[Confused in the West]

I am trying to purchase a rural acreage, and the appraisal the seller ordered has raised questions.

The property has no public road frontage. Access is provided by an easement across the surrounding land. That easement document has no language providing for utilities installation.

There are no utilities present on the property. After much searching we were provided with a recorded survey map showing a utility easement for electrical, but no document to go with it specifying usage requirements or limits. Communications cable can't follow that route, though, and there is no easement to install it along the access road.

In the Site Utilities section of the appraisal form, the box for public electricity is marked, with a note of "overhead." To me, that indicates specifically that electricity is already available on the property from a public grid. The fact is, the nearest power pole is more than 200 yards from the property.

Complicating the issue further is the fact that all the comparable properties have public road frontage, or have the same owner as an adjacent parcel with existing utilities. There is nothing in the sales comparison analysis to address the value of utilities, or lack of.

Can anyone explain this to me?

 

[Metamorphic]

Based on the information you've provided it sounds like the report is not accurately describing the property and the comparables are not sufficiently similar to the subject to permit understanding of the potential value impact of the limits on utilities at the subject.

That said, those may be the best comparables available. Properties with the utility limits you're talking about do not transfer often and many times when they do the specifics of the transfers are not known to appraisers because the land transfers occur outside of normal market channels. However, the absence of market data to support some important aspect of the valuation does not give the appraiser a pass on recognizing, reporting and doing what they can to analyze the impact of the issue.

I would ask the appraiser to "try again", and provide a very specific list of what you believe to be the errors and omissions.

I wouldn't get broken up about the communications issue. Between cellular service (boosted perhaps with a large outdoor antenna) and satellite service, most people can get the communications service they need without running hardline to the site. That's not free though, so it would likely impact the market value of the property. Also, off-grid solar electric systems are a very reasonable choice for side stepping the kind of access problems you're talking about. Again, workable but not free, and so may impact value.

 

[Ken B]

Have you contacted the utility company to inquire about the cost of running electrical service to the site? It could be quite expensive or it could be on the zero side of cheap. When you have your answer, you can then ask the seller or the appraiser why the cost was not considered, if it is on the expensive side.

 

[Confused in the West]

Thank you both for your fast replies.

Yes, this property is definitely one that truly comparable properties would be hard to find.

We have looked into off-grid solar, and were given a price tag of $25k or more. The power company sent an installation quote for using the easement. That price is more than $12,000.

We have researched satellite/cellular options. Maybe future technology would make that plausible, but my work requires high bandwidth consumption that would currently be impossible on those methods. There is fiberoptic available at the public road, if we had the easement to bring it in.

 

[hastalavista]

Depending on whose land (and what is located on that site) the current easement runs through, it may be possible to have the easement amended to include whatever additional utilities are necessary.
The neighbor (I'm assuming there is only one parcel) may want something to modify the easement, or may agree to give it to you for nothing. Have you explored that option yet?

Your plans for development next to the parcel where the current easement exists may enhance the area (and, presumably, his/her property); he/she may be willing to give it to you for nothing to establish a good neighbor relationship. On the other hand, the neighbor may not want any development; in that case, your chances are slim unless you pay a significant price.
Or, they may want some fence or some kind of improvement on the easement (compacted roadway, for example) which would enhance both properties. This additional cost could be a negotiation point with the seller of your parcel.... "Look, this is priced at a point that reflects a parcel with full utility access but it doesn't have that access. To get it, we have to spend $X; we are willing to pay your price, less $X, to get it to the full-utility-access condition."

Unless you are buying farmland, or some other, well-traded income producing land, there is a lot of negotiation variance in the price of vacant land; the more rural or less amenable to development, the wider the variance.
Don't hesitate to enter a long negotiation process to get the best price you can given the conditions of the parcel.

Good luck!

 

[Mike Garrett RAA]

I would strongly suggest you consult an attorney with your questions. While many on this forum are well qualified as appraisers, issues concerning easements are best answered by the legal profession.

As to your question about the value of utilities...it depends! Good luck and best wishes.

 

[Terrel L. Shields]

I would never purchase a tract of land that is only accessible by an easement. If it ain't deeded, I don't want it. Too many times I've seen people attempt (and occasionally succeed) in closing off access to a property. I recall one in NE Oklahoma where the family who inherited it leased the place to a neighbor. It was accessible by a county road that dead ended on the place. The renter simply closed off the access past his house and landlocked it. After 20 years, the elderly woman had never returned to the place and her heirs found out the hard way that the road was closed. It sold for $500 an acre and should have sold for $800 or more per acre in that area.

 

[Confused in the West]

Thank you all for your input.

My main reason for starting this discussion was to figure out why the lack of installed utilities, and easements for them, is not reflected in the appraised value. We did consult an attorney about the easement items, and received information that was adequate for us to still want to buy the property.