Appraisal Articles 2018 Free Appraisal Articles for Appraisers and the Public
Once you leave the city and get away from the main, municipal and County water service providers you find out just how valuable water is. If you have a property that is 40 acres in size but you have no water rights or water service you usually have a single home site. You may have zoning that will allow 20 or 40 homes on it but if you can’t provide them all with water you can’t develop the property for all of those homesteads.
Water rights are even more important to properties with commercial or industrial zoning, because those properties can never be used for their zoned or planned use without a legal water source. So, you may have an absolutely perfect site with high traffic, visibility and accessibility but if you don’t have the water you can’t develop the property.
There are some properties that have rights to many acre feet of groundwater and it is not unusual to find that someone who has a property that is more valuable for its water rights than for its remaining surface and mineral rights.
Water rights are property rights that generally run with the land. Some water rights are transferrable and you can divorce the rights from the property they are associated with. Transferrable rights are the most desired because the owner can transfer them to another site that has a greater value than the subject with the rights included.
In some areas there are different types of water rights, and some areas like Moapa have private corporations that own water rights that are shared by a number of members.
One Acre Foot (AF) of water is equivalent to about 325,851 gallons and 1 AF per year is approximately enough water to support 1 home with up to 5 people. A typical motel with beds and toilets uses about 40 gallons of water per day per bed.
Appraising water rights is relatively straight forward, as long as you are comparing apples to apples or the same kind of water rights, you can use the sale of the rights that you find as comparable sales. The problem for appraiser is that many real property sales are transacted where the water rights have not been separated from the remaining fee rights and an appraiser has to analyze (when possible) how much was paid for each right. This allocation is not always possible.
Water rights are at times conveyed separately from the remaining real property rights and it is important for appraisers to ascertain that the water rights exist on the property being appraised. There have been many water rights conveyances made when the water rights have not been proven or authenticated by the State. Like title insurance, there should be some guarantee found, usually via the State, that water rights exist and that they are owned by the party representing them for sale. An appraiser doesn’t want to value a water right that doesn’t really exist.
Data on the sale of water rights is often available by searching real estate sales databases and by checking with real estate offices in the area where you are appraising. There are also water rights specialists in Nevada who can be contacted and they are often aware of recent transfers.
There are appraisal standards that apply to the valuation of water rights, and I suggest that you consult as a reference text; “The Appraisal of Water Rights,” Steven J. Herzog, MAI (Chicago: Appraisal Institute, © 2012)
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/
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