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What is 1 development right worth for a residential lot??

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Elliott

Thread Starter
Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
This is a real assignment. Homeowner with an extra,
buildable lot, wants to give the development rights
to the city, but retain use of the property which
includes garden and view protection.

The vacant lot is worth $80,000, fee simple, and
very marketable. I imagine if I look at house sales
with double lots, the contribution of the extra
lot (50x100) would be about $10,000, where
someone has put the house smack dab in the
middle of two lots and can only sell one site.

So is the development right, as a big stick in the
bundle of sticks, worth about $70,000, less the
view protection value?

Your views are welcomed.

As a side note....should the city accept the development
right, since it would be losing a bunch of taxable
revenue, and not getting a hell of a lot?

elliott
 
A

Anonymous

Guest
It sounds like you are on the right track. The state of New Jersey is buying development rights to lots of land, I would assume that someone has published a formula for the market value of development rights.

Should the town accept the gift, probably since most governments actually loose money when a new house is built ( more children in the schools) . Mt question is why would a property owner want to give up his developmement rights when he can just leave the land vacant?
 

Elliott

Thread Starter
Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
Walt,
I asked them that too. They were helping the city
on a drainage/road problem, and they think they'll
get a big income tax deduction (I don't give legal/
accounting/tax advice).

elliott
 

Jim McGrath

Junior Member
Joined
Jan 25, 2002
Professional Status
Certified Residential Appraiser
State
Florida
It sounds like you are on the right track. The state of New Jersey is buying development rights to lots of land, I would assume that someone has published a formula for the market value of development rights.

Should the town accept the gift, probably since most governments actually loose money when a new house is built ( more children in the schools) . Mt question is why would a property owner want to give up his developmement rights when he can just leave the land vacant?
Simple, to save on taxes!

Jim
 

Jim Bartley

Senior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Virginia

The vacant lot is worth $80,000, fee simple, and
very marketable. I imagine if I look at house sales
with double lots, the contribution of the extra
lot (50x100) would be about $10,000, where
someone has put the house smack dab in the
middle of two lots and can only sell one site.

So is the development right, as a big stick in the
bundle of sticks, worth about $70,000, less the
view protection value?
You are confusing things. If this is a completely separate lot that can be sold off and developed then the value is $80,000. The contributory value you speak of for "double lots" (i.e. one house that staddles two lots) is really a measure of functional loss due to design. One has nothing to do with other in the scenario you describe. In other words, with the one house on two lots you would have $70,000 in functional (uncurable) loss.
($80,000 + $80,000 = $160,000 (market value unimproved) less $80,000 + $10,000 contributory value = $70,000 functional loss or $90,000 land value as improved.)

I really don't know what the development rights are in your area, but I would imagine one solution could be to capitalize the loss of development rights over a certain period.
 

jtrotta

Senior Member
Joined
Jan 16, 2002
simply put, don't know if any tax advantage would happen or how it would affect this particular individual;

don't know if the city would actually accept it as a "Development Potential" - as it may in the future not fit within the ever changing Planing & Zoning changes and may then pose a problem (it being owned & controlled by the city - that controls Zoning) ; in our area, the municipality generally deems it "Open Space" to be utilized for the benefit of the people of the town.

8)
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
Sounds to me like the same thing we run into when an owner gives an easement to a Conservancy.

What you have to appraise is the loss of use. Two appraisals are necessary. One as is, vacant, buildable, highest and best use, etc. Second is as an unbuildable vacant lot.

The difference is the "loss" the owner suffers in transferring certain right to the city that he can then use for tax purposes. This is what happens when an owner gives an easement over a piece of property to a nature conservancy. They own the rights over that property and therefore, nothing can be built on it. The owner retains title to the property and has use for hiking, walking, bird watching, etc. but since there is an easement over the entire property, nothing can be built on it. The owner can claim the loss in the transfer on his taxes.

This is what your situation sounds like to me. Just don’t cut yourself short in fee. You are going to do two appraisals in this one. Also make sure that the owner understands the fee does not include court or audit time.
 

Rlong

Member
Joined
Jan 31, 2002
Professional Status
Certified General Appraiser
State
Colorado
I agree with Richard. I have done a number of Conservation Easement (CE) Appraisals, Most often for tax purposes (They want "Fair Market value", very similar) and some to negotiate with the city/county/land trust to purchase.

The two appraisals indicate the value "Before" the taking/sale of the right and "After" the taking/sale of the right to build. Hence this is called the "Before and After Method", it's sometimes tuff to find comparable sales of lots/chunks of land that could not be built on, but generally I find something. These are narrative reports (could generally be complete summary to a restricted report) much depends on the city's requirements (if it's to sell it to them).

These assignment generally require analyzing what may still be done on the property (the terms of the Easement in the case of CE) does the owner retain the right to build a fence on it? a shed/barn? go cart track? set up a wet bar and have parties? The "rights" being given up must be thoughrouly considered.

I have been waiting for 4-5 months for the parties (City and County and Property Owner) to hash out the details of a Conservation Easement of a very prime piece of wildlife area/development ground (best lots going for $300,000 to $350,000). I was the one who got them all worked up...:what is the owner going to be able to do on "his" land, under the conservation easement? Hunt the wildlife? : ) , run a riding stables? (could keep improvements on adjacent land and ride city slickers all over it), etc etc etc. that was 4-5 months ago. We called em last month..."hows it going with the details of that easement??" "Oh were still working on it". I'm already probably 20-30 hours into the project...I wish they would HURRY!!
 

Jim McGrath

Junior Member
Joined
Jan 25, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Sounds to me like the same thing we run into when an owner gives an easement to a Conservancy.

What you have to appraise is the loss of use. Two appraisals are necessary. One as is, vacant, buildable, highest and best use, etc. Second is as an unbuildable vacant lot.

The difference is the "loss" the owner suffers in transferring certain right to the city that he can then use for tax purposes. This is what happens when an owner gives an easement over a piece of property to a nature conservancy. They own the rights over that property and therefore, nothing can be built on it. The owner retains title to the property and has use for hiking, walking, bird watching, etc. but since there is an easement over the entire property, nothing can be built on it. The owner can claim the loss in the transfer on his taxes.

This is what your situation sounds like to me. Just don’t cut yourself short in fee. You are going to do two appraisals in this one. Also make sure that the owner understands the fee does not include court or audit time.
Richard, I have seen small strips of land turn into gold mines. We have a county tax sale every year, where the properties with unpaid taxes are auctioned off to buyers. There is at least one buyer here who will buy certain strips of land for a few hundred dollars. Then if this strip borders a lake or water, he will put up a large wood fence blocking everyones water view. Then he offers to sell them the piece of land in front of their property for from $20,000 to 30,000 per lot. It creates an uproar, but it is legal. He also does this with other properties with other needs, like access the owners didn't know they needed.

Jim
 
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