This situation sounds to me like the one taught in the AI course for general appraisal advanced sales and cost approach. When a property has value to only two possible market participants(one buyer and one seller), the text refers to it as a bi-lateral monopoly. In the case where there is only one possible buyer and one possible seller for one property that only has utility (use) for the one buyer, a point-value cannot be credibly concluded. The best that can be done is to conclude a value range where the minimum might be what it is worth to the seller and the maximum is what it could be worth to the buyer (the reverse order could be true, but if the subject has no utility for the seller and some utility for the buyer, typically the utility is what creates the value).
And, as Lee points out, in such a case as the above, the typical definition of market value that most of us work with doesn't work well because it assumes that there is competition among buyers/sellers and substitutes for the subject. Not the case here. Bi-lateral monopoly means there is no substitute and no competition.
If the owner of the property doesn't have the ability to use the property for anything, then that value is very limited (may be zero, excluding taxes) for him/her. Therefore, the low point in the range might be zero.
The buyer's use is parking (or could be just a larger yard). You could start with an income approach for parking spaces, determine a value as-finished and rented (stabilized), deduct the cost to build such an amenity, and come up with an as-is value. Therefore, the high point in the range might be that.
But the following is why economic theory breaks down: There is no competition for the subject because there are no other potential participants except for this specific buyer and seller (of course, the buyer is the only participant because of his property and not because of anything else; if he sells, dies or vacates, there still remains only one possible buyer for the subject). So although an income approach might conclude value $X in the market, the buyer can say
"They get $X because there are competitors for that property. There's no other buyer for this property. So I'm only willing to pay $X-50%."
The AI course on this topic ends with a comment that beyond the range of value, the actual agreed upon sale price is more a function of the bargaining abilities of the two participants vs. the market forces.
If I had this type of assignment, I'd probably tell my client something along what I posted here, and add that the best I could do is give them a value for the subject which is based on a similar use (parking) but that presumes competition. I'd add that the subject does not have any competition except for the specific buyer & seller, so that they can use my valuation as a starting point for their negotiation (and they could take it from there).
I'd probably spend more time describing the situation and writing about the valuation problem itself versus actually solving the value question.
Good luck!:new_smile-l:
(and remember: bi-lateral monopoly presumes only one possible buyer and seller. If the parcel had some other reasonable use to another buyer, then this situation is not what I discussed above.)
