Wetlands, conservation easements, waivers, and more

[FlyingJenny]

Actually, $1,000 is still 'cheap' for a property as unique as yours. I would love to see copies of the appraisals you already have and would be happy to help you.

I live in Brevard County and have looked up your property. My email: pec514 @ yahoo. com (remove the spaces)

Thanks Pam, I am going to email you now, so please look for it in your inbox in a little while.

 

[Kevin A. Spellman]

Have you exercised a tax credit for the conservation restriction? I believe the tax credit program for conservation restrictions was extended till the end of 2008 as it did expire last year. To receive a tax credit, a valuation service is needed for the before and after conservation restriction. The cost of this valuation service is more than an appraisal for a lender, but it may be economically beneficial to you if you could receive a tax credit in excess of the valuation service and for an account to handle this credit. I know this post does not help your situation for a mortgage, but I just had to pass this information along to you.

 

[FlyingJenny]

Have you exercised a tax credit for the conservation restriction? I believe the tax credit program for conservation restrictions was extended till the end of 2008 as it did expire last year. To receive a tax credit, a valuation service is needed for the before and after conservation restriction. The cost of this valuation service is more than an appraisal for a lender, but it may be economically beneficial to you if you could receive a tax credit in excess of the valuation service and for an account to handle this credit. I know this post does not help your situation for a mortgage, but I just had to pass this information along to you.

Kevin, thanks; I was not aware of this at all. I am not sure if it would apply to us, though. The overall value of our property should have increased by dedicating the conservation easement, because prior to that we were unable to build on it at all. Sure, if we just considered the 6.36 acres that was dedicated as a CE, that portion of our property's value has certainly decreased, but the buildable part has increased more than enough to offset it (or should have). Do you know what the rules are on this? I looked at the IRS code but it is very vague.

 

[Restrain]

Have you looked at "build on your lot" builders rather than doing the contracting yourself? Even in bad times, these builders have connections that an individual doesn't have. They can build to your specs, but they take the financing problems instead of you having to deal with them.

 

[FlyingJenny]

Have you looked at "build on your lot" builders rather than doing the contracting yourself? Even in bad times, these builders have connections that an individual doesn't have. They can build to your specs, but they take the financing problems instead of you having to deal with them.

No, we haven't, but we have been working with our builder for over two years now and he has stuck by us through it all. He has gotten the house all permitted and everything- we could start tomorrow if we had the cash.

 

[FlyingJenny]

Update

In case anyone was wondering, I just wanted to post an update on what happened with this situation. The credit union had us pay $1000 and get another appraisal, and it came back $135,000 lower than the one we had done late last year, and $50,000 lower than the one done last month. We will never be able to get a mortgage.

So, what we are doing is that we are going take the maximum loans from each of our 401Ks and use it to build the workshop that was going to go with the house. We will live in it. Maybe one day we will be able to build a real house, until then we will live in cramped quarters, if all goes well.

I am really interested in the tax credit for conservation easement thing now, as our property value is severely reduced according the the high priced appraisal we paid for. Does anyone know if it is possible to use the appraisals we already have of the land before and after the conservation easement was dedicated to show the devaluation?

 

[Dennis J. Black ASA IFAS]

$1000 is not a high price to pay for an appraisal performed by a well educated compentent appraiser. Plus your property is not some cookie cutter appraisal in a subdivision. I am willing to bet that a minimum two days went into the assignment and considerable mileage. If your mechanic put in two days of labor on your car what would it cost? What about two days of a plumber?

 

[FlyingJenny]

$1000 is not a high price to pay for an appraisal performed by a well educated compentent appraiser. Plus your property is not some cookie cutter appraisal in a subdivision. I am willing to bet that a minimum two days went into the assignment and considerable mileage. If your mechanic put in two days of labor on your car what would it cost? What about two days of a plumber?

Dennis, I don't understand- I am not complaining about the price. Way back several weeks ago I stated that I did not know why this appraisal was "worth" so much more, and I accepted the answer that was given. Otherwise I wouldn't have paid the money for it. That is not the issue at hand.

I was merely giving the update that we cannot under any circumstances get a mortgage and have stopped trying. Since the appraisals we have received show a marked decline in the value of the property after dedicating the conservation easement, I was simply asking if it is possible to use the appraisals we already have (one before the conservation easement was in place, and one after) to prove the value for the purposes of gaining tax credits for the conservation easement. As long as it has hurt the value of our property as much as the appraisers are saying, we may as well get some relief on our taxes.

I have done some research and finally found something that leads me to believe we will need the same appraiser to do the before CE and after CE values. Does anyone know of an appraiser in my area that has done this kind of work before?

 

[The Warrior Monk]

I was simply asking if it is possible to use the appraisals we already have (one before the conservation easement was in place, and one after) to prove the value for the purposes of gaining tax credits for the conservation easement. As long as it has hurt the value of our property as much as the appraisers are saying, we may as well get some relief on our taxes.

I have done some research and finally found something that leads me to believe we will need the same appraiser to do the before CE and after CE values. Does anyone know of an appraiser in my area that has done this kind of work before?

I haven't read back through all of the posts, but here are some general comments.

If you donated an easement, and the easement is worth more than what you were credited, you may be able to get an additional writeoff. I would speak to you accountant about that.

As far as the appraisal for such a writeoff goes, I would hire an appraiser that knows how to deal with such assignments. The appraiser would have to be familiar with the IRS regs (fair market value versus market value, etc.). The appraisers that deal with such assignments are typically general certified.

 

[Louis Pompeo]

"Before and After" Appraisal Methodology

If I read and understand your original post correctly, the area that has been donated as Conservation Easement was classified as Wetlands to start with.

As wetlands, they were not buildable. Land that is not buildable, at best, has a nominal value. In order to determine the value of these unbuildable areas, the appraiser cannot use buildable lot sales as comparables. The appraiser would use other wetland sales as comparables, and those wetlands will have a value that is but a small fraction of a buildable lots value. This would provide the "Before" value.

Then the appraiser would establish what the "After" value is by again using comparable sales that are not buildable (e.g. wetlands and lands with CE's on them that were sold in "arms-length" tansactions). In other words, the appraiser would be utilizing the same sales that were used in the "before" portion of the analysis.

The value of the Conservation Easement (this is the amount that you would be claiming for a tax deduction or write-off) is the difference between the two values.

That difference would be zero or close to zero.

In essence, you did not give anything away when you placed a CE on the property.

What appraisers value is Property Rights: the right to use a particular peice of real estate - to occupy it, to rent it, to build upon it, to mortgage it, to further improve it, etc.

Many of those rights didn't exist prior to placing the CE on it due to their wetland status and they don't exist now that they are eased.

Save your money. A properly done Before and After appraisal will not provide a value worthy of a significant tax deduction.

And if you get an improper B & A appraisal that claims a significant value, it will still have to be reviewed by an experienced IRS Appraisal Reviewer that will more than likely disallow it. That is certain.

You bought a pig-in-a-poke.

A knowledgeable buyer (the one that is described in all definitions of "Market Value", which we appraisers MUST define in every market-value appraisal that we do) would have bought the property "subject to" receiving all approvals and commitments for financing prior to taking possession of the property or would have taken an "option" on the property, subject to all approvals. You didn't - and based upon your experience, there is no way that you would ever purchase another similar peice of real estate without these fail-safe contingencies.

A good education is expensive. You played Russian Roulette with a non-mainstream parcel of ground. So far, you've only shot yourself in the foot. Get out of it before you shoot yourself in the head.

Good luck,

Pat Murphy