RE: [LandCafe] Re: Calculating the value of residential properties, separate from land parcels
- I wrote:
> The basic calculation of the value of a residentialRoy Langston responded:
> 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.
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
- --- In LandCafe@yahoogroups.com, "John" <burns-john@...>
> Henry George was adamant that full Land Value Tax,I don't recall him saying that, and it certainly isn't
> the Single Tax, would mean all would gain, no losers.
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 LVTYes. And that will include assassination. Let's not
> implementing government out?
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