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When Legal Permissibility Doesn't Matter

by Administrator on Apr 7, 2018 Market Conditions Articles 25 Views

When everyone on your block has rezoned their property commercial and your property is still zoned and planned residential it’s “reasonably probable” that your property will also be approved for a commercial use. Commercial zoning doesn’t exist for the site, so clearly commercial zoning is a hypothetical condition, but for appraisers it’s not taking a giant leap to realize that uses have changed, and the use of the subject will also likely change.

There are other situations in the real estate world that can test an appraisers ability to make the right value decisions. Say you are appraising a low-density residentially zoned lot that is set back off the road, behind constructed single-family homes, but large and small vacant parcels surrounding it (including the homes) have been acquired by a speculator. So you are appraising what is effectively a “spite strip” or an “island” like parcel that you know the speculator must have. It appears to a casual observer that nothing has changed but in reality the property has become quite valuable to one party.

If you are appraising market value you are usually looking for the price that a willing buyer and a willing seller would agree to pay, but how does an appraiser deal with the fact that a property has suddenly become special? Most buyers would not be willing to pay a premium for a lot that is now isolated by ownership by a single individual but that one buyer is always going to be banging on your door wanting to buy it.

It’s my opinion that you can’t ignore the fact that the now isolated (by ownership) site is surrounded by one owner of a much large tract and that it now effectively commands a location that makes it worth more to him than a typical residential lot. The question that an appraiser must answer is how much more is it worth?

Some would answer that question with “whatever the adjoining owner will pay.” But if you talk to him (the adjoining owner} he will tell you that the lot is not worth a dime more than a typical lot located anywhere in the neighborhood. So who is right about the value of the site?

If the adjoining owner is not compelled to acquire the site there can be a long-term stand-off that favors the party willing to wait, but if the owner decides to develop the site the adjoining owner will have to pay considerably more to acquire it. In my opinion that a motivation should exist on the part of the adjoining owner to acquire the property even if he has to pay a premium for it.

When you lose the flexibility to develop your entire property to its optimal use because of one hold-out site owner you can in my opinion effectively damage the entirety. Delaying dealing with the acquisition may end up costing the adjoining owner a great deal of money. Besides a negative impact to development flexibility, selling the property to a third-party would be much more difficult with one piece of the puzzle missing.

Rezoning a property with one or more pieces missing can become a nightmare. A property slated for a rezoning hearing can find the surrounded owner or owners being there and taking staunch exception to what can be an expensive process. When you can’t get your rezoning completed you may start to appreciate how much of a premium should be paid to acquire the property.

For more appraisal information contact Glenn J. Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada based appraiser who can be contacted via email or via his business website known as Appraiser Las Vegas  (http://www.appraiserlasvegas.com), or http://www.horizonvillageappraisal.com, or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/

Article source: http://www.appraisalarticles.com/General-Appraisal-Articles/Market-Conditions-Articles/4695-When-Legal-Permissibility-Doesnt-Matter.html

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