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Thread: How to determine value of land when making an offer?

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    Moderator Paul H's Avatar
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    Default How to determine value of land when making an offer?

    Every once in awhile I start looking for various lots on the net. Well I found one I'm pretty interested in, the price seems fairly reasonable given the size of the lot, location, trees and view, but then I got a copy of the tax assessment through the borrough. I know tax assessments seldom correlate dollar for dollar to what property sells for, but then again they aren't always that far off. In this case, the owner is asking more than double what the borough has assessed the property at.

    I have a feeling if I make an offer at the assessed value I might just get blown off, but I'd like to have an idea of what factors might drive a seller to ask a price so much over the assessed value. It is bare land, no road access. They are offering owner finance and a minimal down payment, not sure if that's why they are asking so much over the assessed value.
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    Default borough assessment

    I have one neighbor that is now asking WAY over the value of the property as assessed by the borough. I know that her reason is that she bought it for cash (so there was no oversight, as in a required appraisal that might verify the financial sanity of her transaction) and she paid WAY too much, so she's just trying to get out what she's got into it.

    What I see locally here is that sales prices are typically about 80 percent of what the borough assesses them at as their value..... yeah, that seems like a problem to me too.

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    Paul, it is well known amongst real estate folks that the mat-su borough as a general rule grossly under-assesses the value of raw land. I'm not exactly sure why, it would seem to encourage speculators snatching up lots and holding onto them, as the taxes are minimal until the property has improvements. chrony-ism would be my guess. the assessed value of raw land really doesn't mean much, it does factor in the quality of the ground to some extent, but not all that much.


    family man, I think you are talking about the assessed value of improved properties, which is an entirely different subject.

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    Supporting Member Amigo Will's Avatar
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    In truth value is determined by how much you want it or how bad the seller needs to get out of it. The problem with lots is someone can get right next to you and make your property almost worthless
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    Market value is the price agreed upon by a willing buyer and a willing seller. Many times properties are purchased for higher than a taxing authority's assessed value and the purchase price is not given to the taxing authority (who, if they knew the selling price, would make that the assessed value so they could get higher taxes). Who wants to pay higher property taxes? (not me)

  6. #6

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    Brhrdr's answer is the correct one.

    There is no conspiracy on land assessment and there is no cronyism either. The borough assesses the land at the highest price they can get away with. They want to collect as many tax dollars as possible but state law says that it has to be at market value. If they go too high the public will flood them with complaints and completely tie up their offices so there they try to match market value.

    However, since they have a huge borough and thousands and thousands of parcels of land to assess every year they are often off on any particular parcel. They are more often low than high because people complain if they are too high but not if they are too low.

    So using the borough's assessed value is a very rough guide and they could be as much as 50% off on a small parcel of remote land.
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    Moderator Paul H's Avatar
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    Thanks for the input. Certainly when one owns land, being under assessed is appreciated when you get the tax bill.

    I guess the follow question is, for remote land, is there any ballpark pricing per acre one should consider when evaluating a property and making an offer?
    Those that are successful in Alaska are those who are flexible, and allow the reality of life in Alaska to shape their dreams, vs. trying to force their dreams on the reality of Alaska.

    If you have a tenuous grasp of reality, Alaska is not for you.

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    When I bought my piece of paradise on the Yentna the asking price was $25,000, which was just about 3 times the boroughs assessed value. This was about 6 years ago. The asking price was inline with the price on other properties that I had seen in the area over several years prior, so we snatched it up. Since then a nearby parcel sold for about $40K (it did have a 12x16 cabin that was in disrepair and of no or minimal value) and I was contacted by a realtor because he had a buyer and said to name my price, even though it wasn't for sale. Honestly I have no idea what the value of the property is, and I don't care since I don't have any plans to sell it. If the borough wants to think it's only worth $8,900 that is fine by me.

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    Paul, What general area is it located and how big is the lot ? That might help in coming up with some kind of number.

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    It is all about Location, Location ,location. What a seller and wants and what a buyer is willing to pay. The area where my cabin is, there is very little land available, if ever. And it is a very popular snowmachine riding area. the selling prices are many times 2X and 3x times the appraised values, but that is what people are willing to buy for!!!
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    It never hurts to offer the assessed value, or lower. I have bought numerous parcels on the west side. The first one I paid just under the assessed value. The next one I paid 1/2 the value. When a very desirable bluff lot came up I paid full assessed value. I wanted the land as it has a beautiful view and is next to a buddies parcel and has no public access.
    I had written the land owner every year for 7 years on the adjoining parcel. He was never interested in selling as it was part of his portfolio. (rich local banking family) When he died I wrote his daughter, who agreed to sell. At 2 1/2 times the value. She would not budge on her price, being aware of my years of contact. I really wanted that chunk of dirt so I agreed. To me, having 5 acres on the bluff is worth it.

    How bad you want it + how bad they want to sell = market value.

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    Quote Originally Posted by andweav View Post
    I think you are talking about the assessed value of improved properties, which is an entirely different subject.
    Throw the off-topic dart my ways if you must, but it remains a fact that if you're buying real property from a seller that does not owe money on it, that should raise a red flag (and I do not mean to red-flag the sale/purchase, but just be more careful), and it should be further cause for looking more deeply into the whys/wherefores/whens/how-much.

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    Quote Originally Posted by FamilyMan View Post
    Throw the off-topic dart my ways if you must, but it remains a fact that if you're buying real property from a seller that does not owe money on it, that should raise a red flag (and I do not mean to red-flag the sale/purchase, but just be more careful), and it should be further cause for looking more deeply into the whys/wherefores/whens/how-much.
    FamilyMan, Could you give a little more info on your reasons for a red flag ,you make it sound like if there is no mortage on a property there is reason to dig deeper. It is more likley that a peice of remote property will be mortage free than not.

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    Location and ease of access are the main factors in remote land price. You can buy very cheap remote land but getting to and from is very costly. What are the details of the land?. Price , location, size, access,proximity to other lots. On lots in the wasilla area I have bought all mine at of below tax value. But remote land is usually sold for much more then tax value. They are just assesed differntly

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    The best way to figure an offer is by getting comparables of the area within 5 to 10 mile radius. The borough will have that information or you can get it on line. When property is bought or sold and there is a loan the title company has purchase price which will go to the borough.

    Itís very difficult to base an offer off of what the borough assessment is; but, the worst that will happen is a declined offer.

    When researching for comps they have to be comparable to what you want to buy. I.E unimproved, limited seasonal access, power, view, trees, and easements etc. You can also use those as tools during negotiations with the seller.

    Sometimes the seller may be in another state Ďnot sure if that is what you are up againstí and they are getting unrealistic information from a local realtor that is in hopes of getting there business and will inflate the asking price.
    The best way to start is by getting an idea of what the land is worth in your area by see the comparables.
    Hope this helps a little and good luck.

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    I have a little over an acre near four corners in Wasilla. It is a corner lot across from finger lake. The borough had it pegged at 24,500 for a number of years for tax assessment. Contacted a real estate agent who did a market analysis and she came up with other properties around there selling for 42,000 so that is what she just posted it as in the MLS. BTY, it's paid for.
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    Default why to take extra precautions when there's a clear title

    Quote Originally Posted by Big Bend View Post
    FamilyMan, Could you give a little more info on your reasons for a red flag ,you make it sound like if there is no mortage on a property there is reason to dig deeper. It is more likley that a peice of remote property will be mortage free than not.
    I will a little bit, having already been gotten after for being off-topic here, I'll try to make it quick:

    In any real estate transaction in Alaska there are some basic facts:

    - There are no overall State laws that give any buyer any guarantee as to fitness for any particular purpose (for instance, there is no guarantee that the land is not toxic to merely walk upon), nor that it can be resold to someone that needs financing (because financiers have a strict set of guidelines that it must pass).

    - There are ALWAYS two parties to a real estate transaction. The guy that knows more (Guy A) , and the guy that knows less (Guy B). Quite often, I think it to be the buyer that knows less, but of course this can vary.

    Land that is highly financed (vs. being held in the clear) has been scrutinized by quite a number of 3rd and 4th parties, and it passed (you know that, because it was finananced).

    Some examples from real life I can tell you:

    - Some acres on the Parks about a mile or less north of Sheep Creek Lodge last summer: The neighbor had bought it, not knowing that it had been the site of one the largest meth labs in the borough. Both the buyer and his wife contracted cancer and were dying, from their exposure while spending time there after their purchase of it. The dying buyer told me he had not been told of the meth lab until after he had bought it.

    - A nice house in chugiak on beautiful property. It passed water inspection, was surveyed, was appraissed, all passed. But when the 2nd home inspector came thru he found two nasty faults that made the property unfinancible; the first inspector had "missed" both. So, legally, this 4 bdroom house was a zero bedroom house for finance purposes. Sale fell thru. Realtor with full knowledge it was a zero bedroom house put it back on the market as a 4 bedroom house and sold it quickly. The buyer used the first home inspector's report, and didn't have to pay for a surveyor, appraiser, inspector, or nuthin - - - the realtor made it "easy" for them. Let they try to sell it to someone that has to finance it, and good luck; better pick a bad inspector.

    I could go on, but won't. My point is, sometimes having oversight is a good thing (especially if you're "Guy B"). Financing provides oversight because financiers don't want to lose money and have no emotional attachment to the transaction.

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    The value of any piece of land is what a willing seller and willing buyer agree to.

    The cost increases with every individual who has a hand in the sale.

    Each of us value land depending on our needs and wants and are willing to pay more for something we like.

    Window shop and get on the ground to see and get a feel for what is available, talk to people in the area to find property history and check court, sate, tax and Borough information for possible problems.

    Word of mouth is a good way to find a piece.

    There are pros and cons to every piece of property...just know which are which before making an offer.

    Some areas do not have comparable sales...my recently purchased piece had no local sales since 1997.

    Good luck with your search PaulH!

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    And make sure that ANY piece of land you buy that you record the Quit Claim deed in the areas recorders office. Alaska is non compliant and does not require recording but it is your Proof if you loose the original quit claim deed. I talked to one lady who had bought a chunk of land, the seller told her he would record the quit claim deed. She paid cash, he never recorded it and 2 weeks later the seller had the property back up for sale again. Last I talked to her she was having to take him to court and was going to have to prove that the money she claims she gave him was for the property.

    (Good reason to use banks / credit unions escrow services)
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