Market Value Adjustments After a Golf Course Failure

When golf courses are constructed, often surrounding and adjoining residential development, it never occurs to most home buyers that 10 or 20 years later the golf course may financially fail.  Buyers pay a premium for their golf course frontage, which is often why the golf course was constructed.  The builder usually had no market study that indicated that the adjoining golf course could remain financially viable.  The developer probably didn’t care, the cost of putting in the golf course was minor when compared to the profits from selling the “premium” golf frontage lots and homes. 

The problem is that golf courses since the 2008 recession have had a rocky road.  There are fewer people playing golf, and they are spending less than they used to on golf, and that’s one of the reasons that many golf courses are failing.  Yes, the golf industry may make a comeback, but it’s too late for many courses. 

In Las Vegas we have seen Silverstone Golf Club fail and it was then sold to a developer.  The fact that there is usually no guarantee in place that a golf course will fail never occurs to adjoining golf course homeowners.  It comes like a bolt of lightning out of the sky when you find out about an adjoining golf course failed.  Especially if you have been a long-time owner who has been benefiting from the amenity of having the course.

Imagine owning a $ 5 million-dollar custom home on a groomed green or looking across a fairway scene to a beautiful water feature.  Then the golf course fails and the party who acquires it announces the development of homes, thousands of multi-family units and a hotel development.  Besides the loss of the awesome view you would lose your walk-on golf course access and your golf course community status.  Yet this is exactly what is happening to owners adjoining the Badlands Golf Course in Las Vegas. 

While it is hard to assess a loss before it occurs, since the best proof of loss is actually evidenced by sales prices, it is possible that losses from golf course redevelopment to adjoining homes may be large.  Depending on what the new view becomes a decrease in value from 10% to 40% is possible.  Just imagine the difference between that amazing green or fairway and water feature view and having the view of one or more adjoining neighbor rooftops.  Or maybe you will have a view of a high-rise condominium or the back of a casino / hotel?  Any way you look at it its devastating.

It’s becoming a fact of life that more golf courses are reaching the end of their profitable lives.  In Las Vegas the cost of water is increasing, labor costs are now going up dramatically and as discussed, the golfing business is not booming.  It’s not a formula for success in the golf course business.

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 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/Real-Property-Appraisal/Golf-Course-Appraisal/4652-Market-Value-Adjustments-After-a-Golf-Course-Failure.html