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RE: [LandCafe] Re: Calculating the value of residential properties, separate from land parcels

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  • Edward Dodson
    ... Roy Langston responded: No, the market could not care less about replacement cost. The value of improvements is the difference between what the property
    Message 1 of 102 , Jul 2, 2011
      I wrote:
      > The basic calculation of the value of a residential
      > property that does not have some unique historical
      > or architectural value (i.e., value -- as Harry
      > Pollard would say -- because it is a collectible)
      > is replacement cost less depreciation.

      Roy Langston responded:
      No, the market could not care less about replacement
      cost. The value of improvements is the difference
      between what the property would sell for with them
      and without them. The "land-residual" value
      calculation Ed described above is what leads to
      anomalies like the aggregate value of all the
      corporate-owned land in the USA being negative.

      Ed Dodson here:
      I do not pretend that markets are easy to understand, and I tried to provide
      a few comments that affect what a given buyer will pay for and a given
      seller will sell or a given property.

      It is seldom that a property buyer hires an appraiser to evaluate a property
      prior to making an offer. The appraisal is generally required by a mortgage
      lender, and the interest of the lender is to know with reasonable certainty
      what probably selling price would be if the property was put back on the
      market. The appraiser does a cost approach to determine what the cost would
      be to reconstruct (but not necessarily replicate) the property. The
      appraiser then searches for sales of comparable properties and makes
      adjustments for differences.

      I stress that this methodology for property appraisals is relied upon by
      mortgage lenders when the property type is residential and consists of one
      dwelling unit. Properties that include more than one unit are also
      potentially income-producing. Properties with five units or more in them are
      not generally valued by appraisers by using comparable sales, as they are
      considered investment properties.

      Generally speaking, in most communities residential lots are small and
      relatively uniform in size, particularly where zoning and other development
      restrictions (e.g., setback requirements, off-street parking, height
      limitations, etc.) are enforced. In rural communities, property owners may
      own very large lots but the value of "excess acreage" above the common lot
      size is likely to be much lower per square foot because of minimal potential
      for development. Some parcels are land locked with no means in ingress or
      egress, for example.

      The property market Roy is referring to -- business-owned property --
      operates under very different dynamics. And, as we know, such land is
      generally greatly under-assessed. The presence of sprawling automobile
      parking is a good indication the land is under-assessed and taxed at a very
      low effective rate of taxation. This observation applies to suburban
      shopping centers and malls as well. Use of a "land residual" calculation of
      land value in such circumstances results, as Roy points out, to huge
      property tax subsidies to owners of large tracts of vacant or underutilized
      land.
    • roy_langston1
      ... I don t recall him saying that, and it certainly isn t true. Many people will lose, especially in the transition period. That is why we must design the
      Message 102 of 102 , Jul 18, 2011
        --- In LandCafe@yahoogroups.com, "John" <burns-john@...>
        wrote:

        > Henry George was adamant that full Land Value Tax,
        > the Single Tax, would mean all would gain, no losers.

        I don't recall him saying that, and it certainly isn't
        true. Many people will lose, especially in the
        transition period. That is why we must design the
        transition to be as painless as possible for the great
        majority of landowners: those who own only the land
        under their dwellings. And that is why restoring the
        equal individual right to liberty through a universal
        individual exemption (or, second best, a CD) is crucial
        to our success. This is something Henry George either
        did not understand or did not give enough weight to, or
        the exemption would have been a central feature of his
        Single Tax advocacy.

        > All boats rise on the same rising tide.

        Er, those who can't be bothered swimming or walking are
        drowned by a rising tide.

        > * Will the corporations still be loyal to the US?

        Is a tapeworm loyal to its host?

        > * Will they do everything to get the LVT
        > implementing government out?

        Yes. And that will include assassination. Let's not
        kid ourselves on that score. This is serious business,
        and the vital interests of some very powerful and
        deeply evil people are at stake.

        -- Roy Langston
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