What are Water Rights in Nevada Worth?

Per my last water rights article I noted that one (1) 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.  While the water that you need for your latest project may be in the ground beneath your feet, if you don’t have the rights to take it you just can’t start to remove the water for your use.

Appraisers are beginning to see the sale of more vacant land parcel without any water rights associated with them.  The water rights have either been sold and are no longer associated with a parcel or there was no home site or farm with rights at the subject location in the past and the current rules may not allow a homestead a water right without the owner purchasing it in the open market.  In the past, new homesteads were always allowed 1 or more acre feet to support a new home.  That “free” homestead water rights is gone in some locations.

The value of an acre foot of water varies from location to location.  In Amargosa / Amargosa Valley you may be able to find someone who will part with an acre foot of water for $ 2,000 to $ 5,000 per acre-foot.  Pahrump has a higher range that generally runs between $ 2,000 and $ 10,000 per acre-foot.  The demand for water in rural locations is not however strong.  If there are only a handful of real property conveyances in a given year how strong can the demand for water rights be?

As I have discussed in other water-rights articles, there are different types of water rights and the generalizations that I am making may not always apply.  There are also instances when significant discounts to water rights have been applied, at times for the transfer of a large number of acre-feet or when the government gets involved and artificially increases the demand.  There are many real property sellers who simply include the water-rights with the sale of the fee estate interest in a property.  How valuable can a property be without any water-rights? 

The water-rights represented as being owned by someone may or may not actually exist.  There are often permits, certificates, claim numbers and / or notes on deeds.  It’s important that the water-rights that are claimed by an owner or his agent have been approved / proven by the Nevada Division of Water Resources (NDWR), see www.water.nv.gov, and it may take a much longer time to transfer the water-rights (if they exist) than to transfer other interests in the real property.  You can however do an immediate online search if you have an application number or a certificate number, but again until you have written verification from the State of Nevada you really have nothing.

Since water rights are necessary to utilize a real property they are extremely important and should be confirmed / verified by NDWR.  The worst possible scenario that I can imagine is purchasing a parcel or parcels of land and then finding out that the real property cannot be put to a productive use because no water rights exist for it.

Appraisers can value your interest in water rights but they cannot verify that the rights exist and that they were correctly transferred.  It’s like title, as an appraiser I can value a real property but I can’t tell you for sure who owns it.  The Title company makes its money guaranteeing that the rights reside with one party or another not the appraiser.  Most appraisers will advise you immediately when you contact them that they can make hypothetical assumptions about water-rights ownership that if true will provide a value, but if the hypothetical condition or assumption is not true the value does not exist.

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, IFAS, ASA who is a Las Vegas / Henderson Nevada based broker and 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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