Valuing An Easement - Methodology

[Elliott]

I think Steve got it right....its a before and after situation.
You just go out and find a half dozen 160 acre sales with
no easement and another half dozen with easements *wink*.


The other methodology I've used is to figure out how much
an acre is worth, how many acres are envolved, and how much
of a reduction an easement makes on the bundle of rights
(egress is a pretty much a full taking).

elliott

 

[Doug in NC]

Steve,

Where did you learn to do easement valuations? I know the IRWA has coursework on this, but is there any other institution that does?

I am interested in learning how to do this work. I checked into an IRWA course, but I found their offerings to be in far off locations. Something on the east coast would be great.

 

[Stone]

Doug - the best way to learn this type of work is from someone who has experience. Barring that, you may have to travel some to get to a course involving easement analysis. I think the AI has one? Also, if you are looking to do easement work for non-profits or government agencies, you may wish to look into taking a Yellow Book course. That will help you understand the needs of many of the users of these types of appraisals. Even if you don't plan on doing any work for users with governmental funding, it is a good course in terms of understanding the issues involved with the government.

But, IMO, the best way really is by working with someone who does this.

 

[Serge Paquette]

Quick thoughts:

I suspect that easement would be worth a lot to the owner of the landlocked parcel, and the party selling the easement should recognize that.

I think you can come up with two numbers here. One for what it's worth to the party needing the easement and one for what the easement is worth to the one selling the easement in terms of lost utility, income, value per acre...

AI addresses such a scenario in the course Advanced Cost Approach and Direct Sales Comparison Approach.

 

[Ross (CO)]

I too had a recent informal proposition to be considered for certain easement appraisal work when I met an in-law family-member of the new bride at a wedding my wife and I attended here in June. This gentleman mentioned that he had "future needs" for appraisals for easements and he was connected to those persons who will be getting those matters underway.....and asked that I give him my business card. There was no follow-up time then and there to glean any other details.

My thoughts then were......I've never done easement work before, I hope I don't get a call next week to start "quoting fees" ! I have since learned from him that there "needs" are not for another 6 to 12 months......and surely giving me that window of opportuntiy to gain the info, the book-work, the networking perhaps....to still remain a contender.

My questions now are: ...with whom do I mentor ?, how can I keep my name in this future client's on-call Rolodex ?, how can I be assured that I can share this (possible) mentored work relationship with a mentor of my finding ?, how can I creatively suggest that this possible future client "assign" my assistance to another experienced appraiser they may already be considering ?, how can I ask that I be "hired" to serve this client entity in such a manner that I gain the experience and the knowledge.......and the economic opportunity to receive larger paychecks than this marketplace seems to be rendering in the course of one month to the next ?

I did a search on Google, which steered toward an AI offering (but, out-of-stock) called "Appraising Easements : Guidelines for Valuation" , a publication by the Land Trust Alliance and Nat'l Trust for Historic Preservation.

Anybody know this book ? Does it have application to easements for utilities....and not just historic buildings or natural land preservation ? Thanks.

 

[Willie]

Richard, two things come to mind.

1. Look for sales of easements. Not likely to find much, but who knows?

2. Look for sales of regular tracts which have easements, versus tracts which do not, and extract the difference.

If the tracts with easements are bringing $2,000 an acre versus $1,500 an acre for those with no easements, you will have a $500/Ac value of the easement. That is just an example, of course.

 

[Fred]

There is no single formula. Everyone has posted something that is a potential solution.

The way I think of it, is that the real estate problem has to be solved. There are several possible agreements (voluntary or enforced) that the parties can reach and each one has its own valuation. The law or a court may have a solution – some mentioned prescription. The appraiser can mediate a solution. Just tossing stuff out here, they can agree in principle to transact in a variety of combinations – someone mention giving multiple numbers. Potential agreements include the grantees gain or the grantor’s loss, or the sum of those, etc.

Things to watch out for include not jumping to a conclusion that causes you to spit out a single number and make a market and realizing that some of those linear methods (paired sales including before and after) might not work if someone wants to argue that different parts of the property contribute differently to overall value.

 

[Steve Owen]

Where did you learn to do easement valuations?

I learned it from working with a couple of pretty good mentors.

Elliott, I didn't say you had to have comps with easements. It would be nice if you did, but the method I was thinking about was to first appraise the property as is, then turn around and appraise the property subject to a hypothetical condition of the easement being in place. For each appraisal, you need comparable sales that are similar enough to the characteristics of the property being appraised to come to a credible opinion of value, but you do not necessarily need properties with easements crossing them, depending on where the easement is and how it changes the characteristics of the subject property.

The question was for a simple (realtor friendly) explanation of how this would usually be done. As other posters pointed out, there are also more complexities and other ways to consider doing it. Also, as one poster pointed out, there are other easement types rather than access easements and those can involve different considerations, such as whether the easement is above or below ground.

Finally, my answer, based on criteria implied by the question, was for valuation of an ingress-egress easement for the owner of the property only. If the easement was public, there could also be other value influencing factors (such as, who is going to maintain it).